Practical insight from NBK Indonesia

As Indonesia continues to attract foreign direct investment, more and more Chinese enterprises are accelerating their overseas expansion by setting up companies and seizing market opportunities in Indonesia. However, during the initial team setup and day-to-day operations, we’ve observed a frequently overlooked yet costly issue: Hiring the wrong person at a high price.

On paper, the candidate may appear impressive bilingual, experienced, and with a good background. But once in the field, the reality sets in: a mismatch in skills, weak professional foundation, and lack of accountability. These “high salary, low ability” hires often become the most expensive pitfalls for newly established operations.

Real Case: Impressive on the Surface, Risky in Reality
NBK once assisted a Chinese manufacturing company in a setting up subsidiary in Jakarta. At the early stage of the project, the company quickly hired a local administrative manager based on a friend’s recommendation. This manager was touted as “Fluent in Chinese and English, with rich experience” and was paid-to-high market salary.

At the same time, a “jack-of-all-trades” was brought in to handle financial matters. Despite not having a professional background, the person claimed to be familiar with Indonesia’s tax system.

Problems soon followed:

• HR Issues: The manager failed to prepare employment contracts in accordance with Indonesian labor laws and neglected to implement a proper probation evaluation system. Worse, they misled the management into adopting non-compliant HR policies high triggered employee complaints and legal arbitration risks.
• Finance Issues: The so called financial “expert” submitted incorrect tax fillings and omitted key data, resulting in fines amounting to tens of millions of Rupiah.
• Administrative Issues: Due to errors in key licensing documents, a crucial business permit was delayed by two months. This postponed project delivery for clients, directly impacting revenue.

In the end, with NBK’s support, the client terminated the underperforming staff and rebuilt a more professional HR and finance system, allowing the business to gradually get back on track.

Why is “High Salary, Low Ability” So Common?

Here are some root causes we’ve identified:

• Overemphasis on language skills, while neglecting professional competence and accountability
• Lack of local hiring experience; relying on referrals instead if structured recruitment
• A disconnect between company culture and local employment environment
• No internal check and balance system; unclear division between HR and Finance duties

HR and Finance: Two Sides of the Same Coin

In Indonesia, where regulations are strict, enforcement is detailed, and employee protection is strong, HR and Finance must work hand in hand. If HR signs the wrong contract, finance might bear the compensation. If finance miscalculates, HR could take the blame.

That’s why we advise clients to:

Before Hiring

• Conduct proper background checks and practical assessments
• Base salaries on actual capabilities not on a polished resume

During Employment

• Set clear KPIs and performance standards- avoid informal favoritism
• Use the probation period to run multiple evaluations don’t commit to a long-term contract too quickly
• Conduct regular cross check between HR and finance to ensure policies are properly implemented

How to Avoid the “High Salary, Low Ability” Trap?

Here are four actionable tips:

1. Partner with consultants familiar with local labor laws and talent markets
2. Use structured interviews and technical assessment
3. Align compensation with capabilities, responsibilities, and job risk
4. Establish joint supervision mechanism for key roles (HR, finance, compliance)

Management Details Determine Business Success

In Indonesia, hiring and managing the right people in your business’s best shield. Beneath a seemingly stable HR system, one non-compliant or unprofessional action can lead to serious consequences.

NBK has years of experience helping Chinese enterprises set up and operated in Indonesia. We’ve seen enough real-life cases to fill a whole book and developed tested methodologies to prevent and resolve these issues.