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Background Checks and Employee Screening

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The rapidly growing economy in Indonesia has created new opportunities for the expansion of existing companies as well as the establishment of new companies to supply the demands and needs of the Indonesian business community, both in the metropolitan centers of Jakarta and Surabaya, and also in the industrial centers in Tangerang. With the opening of new businesses and the development of new business relationships the history of the company, its employees or its owners are not always known. In situations like this, a background check or screening of the company or individual prior to starting or closing a business deal could prevent significant financial losses or negative situations from occurring.

Who could benefit from Employee Screening?

With the recent history of terrorism in Jakarta and Bali it has became more important for large companies in Indonesia to be sure that employees on their payroll don’t have ties to terrorist groups. Hotels, shopping malls, and office buildings need to be aware of vendors that have access to delivery docks and potential entrances to the buildings. As always, banks should be aware of the background of individuals that have access to large amounts of money. Airlines need to be extremely cautious with their personnel that have access to ground venues and/or access to planes. Insurance companies need to do conduct background checks prior to taking on large insurance policies to mitigate undue risks. In all of these industries, as well as for other multinational companies, the people that they employ have access to information and the physical structures of the firm that could allow an employee access to a potentially high target location.

Although terrorists look for the high priority targets offered by larger companies or well known brands, the small business owners should also consider conducting background checks on potential suppliers or employees. If a background check is conducted on a company prior to placing an order with them, or request a pre-screening of an individual who claims to be an agent for a larger company, many problems and financial losses can be avoided due to the prevention of fraud. Background checks could also expose fraudulent practices in existing companies in Indonesia, such as employees embezzling profits or altering the financial records of the company to cover up fraud. Prior to hiring a new employee, a background check might also disclose that the individual is in severe financial difficulties. Just as in western countries, knowing this kind of information prior to making a new hire decision can save the company money in the short and long run.

What is involved in a Background Check?

In the US or other countries that have a large amount of personal information accessible online, it is common to be able to pay a fee and get a credit report or background report on individuals and companies. Many businesses take advantage of these services for loss prevention.

In Indonesia, however, these online services are not available. Record keeping is mostly manual, or held on individual computers and not shared within companies and organizations. Government files are in disarray, police departments don’t readily share information within various police districts, and employers are reluctant to share information about their reasons for firing former employees in an attempt to avoid Manpower Department involvement. All of these factors, as well as other factors, make it very easy for individuals to hide their past misdeeds, to the detriment of a potential new employer or customer.

The only way to conduct background checks in Indonesia is to have people on the ground which can visit the alleged business location to meet the specific parties so that they can confirm that information given to a potential foreign customer/employer is authentic. If you are in located in Indonesia, this might be a feasible option, but for overseas companies or individuals, making an in-person verification visit is very costly and difficult due to language limitations.

In situations like this it is best to rely on an Indonesian-based security company who can investigate the company in Jakarta or person in question and provide an independent report on their findings.

Background Checks for New Employees

Human Resource departments can ease their decision making process by working with a security firm to get a consensual background check as well as a medical examination on shortlisted employee candidates during the interview process; it is more likely that candidates will give more accurate information knowing that information that he/she is submitting will be investigated for confirmation.

After reviewing the background check the potential employer or business partner can feel more confident about making an informed decision. International banks operating in Indonesia are required to do a ’Know You Customer’ check. This is now a standard banking procedure for large account holders, persons that are doing personal banking offshore as well as people or companies that are asking for large extensions of credit. Without local consultants to assist them, overseas banks would have limited ability to conduct these checks from their overseas headquarters. Contracting with an Indonesian-based security company for background checks has become an essential element in the normal due diligence process before major business decisions.

Background checks also allow responsible employers to have accurate data on all their employees so that in the case of an emergency next of kin can be easily contacted or employees can be easily located. It’s surprising to find that many Indonesian companies lack accurate contact information and current place of residence for all their employees.

What information is contained in the report?

Different companies will have different requirements and specifications for information that is needed for their background checks. It is important that the security firm has the flexibility to customize a report to contain the type of information needed by each company. Depending on the need, the reports may be very basic. If large amounts of money or a court case are involved, a comprehensive detailed report may be required to protect the company’s investment.

Reports could contain information such as the:

  • confirmation of the physical location of a business
  • pictures of the location and any vehicles that the company is using
  • verification that the company is registered with the Ministry of Justice
  • verification that the paperwork required for the company’s legal structure has been completed
  • verification that the company has a production capacity and/or inventory of products that they claim to manufacturing or selling

Reports on individuals could contain information on:

  • prior employment
  • internet and social network search
  • police background check for cities they’ve lived in previously
  • visit to their place of residence
  • interviews with neighbors
  • confirmation of legal marital status

Although Indonesians may not typically report information unsolicited, when asked about specific situations or activities they can be quite forthcoming.

Vendor Background Checks

Companies that have frequent deliveries by multiple vendors also can benefit from background checks. Basic checks can eliminate fictitious vendors and uncover potential problems in the purchasing department and procedures. To speed up the delivery process delivery vehicles, license registration, and drivers ID can be checked prior to delivery off site. Security personnel are then informed which vehicles and which drivers/staff should be expected during routine deliveries. Deviations in scheduled staffing can red flag an alert. If the company needs to conduct background checks on large numbers of personnel, a specifically designed application and procedures can also be developed to help keep the investigating costs to a minimum.

Indonesian Manpower Law states that all Human Resource reports on file in Indonesia must be in Bahasa Indonesia, so, depending on what the report is for, it is important that the security company can comply with this request.

With society relying more and more on the accuracy of information obtained online, it is becoming easier for companies to appear bigger than they actually are or for individuals to appear to be someone they are not. Unscrupulous businesses and individuals use this fact to take advantage of trusting parties. Because of this it is important to have comprehensive accurate information prior to conducting a business transaction or a detailed background check prior to employment so that costly business losses can be avoided.

Our thanks to Eric Gerstein for providing information which was used to write this article.

Housing and schooling information for expats in Indonesia expatriate website for Indonesia Indonesian language translation of article

Practical Information for foreigners, expats and expatriates moving to Indonesia - find out about housing, schooling, transport, shopping and more to prepare you for your stay in Indonesia

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