Some of the features of industrial relations in Indonesia's post-dictatorship phase are that they are liberal, flexible, and decentralized. A flexible labor market policy was implemented to create a "friendlier" pro-business environment. Since the enactment of Law No. 13/2003 which legalized contract work and enabled labor outsourcing practices to take effect, employers turned more workers into casual and contract labor, hence there is a more precarious workforce. Since 2003, it has been the norm for companies to have three groups of workers: permanent, contract, and outsourced (agency) workers. Each has a different employment status and consequently different wages and benefits, despite their doing the same work. An outsourced worker is hired not directly by a company, but through an employment agency. The worker remains the employee of the employment agency and is temporarily contracted to work for a company. Thus, the company is not responsible for the worker's social security payments or for providing medical insurance, paid holidays, paid sick leave, or any other benefit provided to regular workers, as required by law. And importantly, in practice the employment agency that contracted out the worker does not provide them with any of those benefits either.

A contract worker, which is one level "better" than an outsourced one, is higher by the company, but unlike a permanent/regular worker does not receive any benefits--they just receive wages that are a little higher than the wages of outsourced workers, and are hired directly. Therefore, outsourced workers are paid less than contract workers, who in turn are paid less than the permanent workers, who receive minimum wages and several benefits such as transport allowances and annual bonuses. The practice of using a large number of outsourced workers, contract workers, and recent graduates (such as apprentices and trainees) as full-time workers who are usually paid less than the minimum wage puts tremendous downward pressure on the wages of all workers. Numerous sources indicate that the typical composition of labor in an Indonesian company is 20 percent permanent, 30 percent contract, and 50 percent outsourced (agency) workers. [...]