Flexible Work Contracts in the Gig Economy: An Institutional Analysis

Abstract

The rise of the gig economy has fundamentally reshaped traditional employment relations, particularly in Indonesia. This article analyzes flexible work contracts in digital labor platforms through the lens of Institutional Economics and New Institutional Economics. The study adopts a literature review approach, drawing on academic publications, labor law and policy documents, as well as empirical reports concerning ride-hailing and food delivery workers. Findings reveal that while flexible contracts offer scheduling autonomy and additional income opportunities, they also transfer significant economic risks to workers, including operational costs, income volatility, and limited access to social protection. Indonesia’s legal framework, which continues to rely on a binary classification of employees versus independent contractors, leaves gig workers outside the scope of minimum wage, severance pay, and social security coverage. In response, informal institutions such as driver associations and online communities have emerged to provide solidarity and advocacy, yet remain fragmented without formal recognition. The article proposes a hybrid co-regulation framework that combines basic protections guaranteed by formal regulations, formalized representation of worker associations, and algorithmic transparency at the platform level. Such an approach is expected to balance operational flexibility with worker protection, enhance long-term efficiency, and foster a more equitable distribution of benefits within Indonesia’s gig economy.