Running an Indonesian PT: Basic Licenses and Hiring

We are currently running a series on the basics of establishing a company in Indonesia. The articles are written by Bakhtiar Yusuf, Managing Partner at Loys & Co. The first part of the series which discussed about the creation of a legal entity for a company was published last week. This week the topic is on acquiring business licenses and hiring employees.

Now that you finally had your company established, what should you do?

Normally, the next step is to open up a bank account, and the following basic licenses will be needed :

• SKDP (Surat Keterangan Domisili Perusahaan)

This is a typical letter from the local kelurahan, saying that your company exists and you have a business running. The problem is that your kelurahan may not want to issue this letter if your business is located in a residential area. A possible solution would be to adopt an address through a serviced office in the middle of the city or other assigned business districts;

• TDP (Tanda Daftar Perusahaan)

This is a license that is issued by the Provincial Government as a compliance to the old 1982 Law on Company Registration;

• SIUP (Surat Ijin Usaha Perdagangan)

I know, I know. Why do you need a SIUP when won't be selling anything? As ridicoulus as it may sound, the fact that any bank will require this license for you to open a business account means that you must own one. It may come in handy if you’re going to bid for projects.

• NPWP (Nomor Pokok Wajib Pajak)

This is a actually not a license, it is a tax number and as such a compulsory identity for each and every company.

A good notary will usually bundle the service for getting these licenses along with drafting deed of establishment so you don’t really have to worry about getting these licenses (unless you have a foreign investment on your company, the process is going to be a bit different) on your own.

The next big step is hiring people. There are many types of employment condition, but our discussion will be limited to two types of employment (per Indonesian law):

1. Indefinite employment; and
2. Definite employment.

Indefinite employment, or as Indonesians usually call it “karyawan permanen”, means that a person is bound to a company permanently. Typically, an employee with an indefinite employment will be someone with managerial capabilities and if the company loses the person, it’s losing a major asset. Terminating this type of employee is a lenghty process.

While definite employment, or as many Indonesian people usually call “karyawan kontrak”, means that a person is bound to a company for a (a) certain period of time or (b) certain project. Typically, an employee with this type of employment will be someone with a general/administrative skill. However, it is pretty common that the Board of Directors (Direksi) is bound with this type of employment as they have specific targets to achieve. Terminating this type of employment is an easy task since you just have to wait until the employment period is over.

Bakhtiar Yusuf is a Managing Partner at Loys & Co Law Firm. You can find him at http://loysco.com or send him an e-mail directly at bakhtiar@loysco.com 

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