Migrant Workers' Recruitment Fees And Debts: A Brief Primer

5 July 2017

Migrant workers often face job discrimination, long hours, poor work safety, low and unequal wages, poor living conditions and other restrictions on their fundamental rights and freedoms. The exploitative working conditions they face are often exacerbated by high recruitment fees. In the worst cases, the debt burden they carry from excessive recruitment fees exacerbates their vulnerability and can lead to debt bondage, trafficking in persons and forced labour. HOME has seen cases of recruitment fraud where workers are charged fees for non-existent jobs or for jobs which are significantly different from what was originally promised. Migrant workers often have little choice if they wish to provide for their families: they either have to pay illegal recruiters or pay exorbitant fees, or go without the job altogether. Illegal recruitment practices are so prevalent that they have become the norm. HOME runs a help desk and helpline for workers in the construction, marine, and services industries. We also run a shelter and support services for domestic workers. Our observations and insights are based on our experience providing assistance to these workers who approach us for assistance. We house an average of 800 domestic workers a year and receive up to 20 calls a week on our domestic workers helpline. An average of 900 workers from workers in other industries approach us for assistance.

How recruitment fees are financed

The workers whom have assisted often resort to the following means to raise money for work abroad:

a) Life savings

b) Mortgage their homes or land

c) Borrow money from relatives and friends

d) Borrow from banks or illegal money lenders

Cost of recruitment fees

Some of these loans may come with high or illegal interest rates, which makes it difficult for them to pay back. From our experience, construction, marine sector and HDB conservancy workers from South Asia may pay between $7000 to $10,000 to a recruiter in their country of origin (usually Bangladesh or India). Construction workers from China often pay substantially less, which usually range from $1000 to $5000. Workers from China in the services sector often pay substantially more of between $4000 to $6000 than their counterparts in the construction industry. How the fee rates are set is not known. With basic salaries which range between $400 to $600 a month, most workers in the construction, marine, and cleaning sectors will have to work up to 12 hours a day, and some even more, to earn close to $1000 a month. Some employers may deduct up to $200 for rent and food. Taking into account incidental expenses such as phone, and transport, this leaves very little for the worker to survive on. The rest of what he earns goes to re-pay his recruitment debt. If he is lucky, he can pay it off within a year. But most will take a much longer time to do so.

Kickbacks

These are fees which a worker has to pay an employer in order to get or stay employed. The Ministry of Manpower has said that employers should ‘not demand or receive any sum or other benefit from an employment agency or any other person in connection with the employment or change in employment of a foreign worker.’ In our experience, kickbacks are often paid when a worker’s work permit has expired and needs to be renewed. A portion of the worker’s recruitment fees given the an agent which is in turn given to the employer is also considered a kickback. These fees range from anywhere between $500 to $2000. Even though this practice is outlawed, it is often difficult to prove as there is no evidence that money has changed hands. However, HOME has successfully assisted in the prosecution of some of such cases by teaching workers how to gather evidence.

Legal protection

According to the International Labour Organisation (ILO), the Government of Bangladesh, has not yet assigned any official cost structure for labour recruitment and migration to recruiting agents. However, from time to time, the government has set a maximum cost ceiling that recruiting agents may charge the workers they recruit for overseas employment. An example of this is a bilateral agreement that Malaysia has signed with Bangladesh, where each worker pays no more than BDT40,000. No such agreement exists in with Singapore.

In India, a report states that maximum recruitment fees that registered recruitment agencies can charge migrants were 2,000 rupees ($43) for low-skilled workers in 2008, 3,000 rupees ($64) for semi-skilled workers and 5,000 rupees ($107) for skilled workers; amendments to the 1983 Emigration Act in 2009 substituted a maximum recruitment charge of 25,000 rupees ($537) or 45 days foreign wages, whichever is less. However, Singapore also does not have a bilateral agreement with India, and this makes it difficult for fees to be regulated.

China has ratified the International Labour Organisation’s (ILO) Private Employment Agencies Convention. The Convention stipulates that agencies are not allowed to charge any fees to workers going abroad. However, many are paying up to $6000 to the recruiters there. While workers are able to show evidence in the form of bank transfer slips, receipts or contracts issued by agents in their country of origin, they are unable to show evidence that substantial amounts of these fees are transferred to agents and employers in Singapore. From our case work experience, workers often tell us that their agents in China have transferred money to to the agents in Singapore but refuse to show evidence that these transactions have taken place.

Singapore’s Employment Agencies Act was amended in 2011 to limit how much fees recruiters here are allowed to charge. A maximum of two months of a worker’s salary is allowed for a two year work permit. The Ministry of Manpower says that since the fees that workers pay are in their countries of origin and therefore, outside of their jurisdiction, there is little they can do to prevent workers from paying exorbitant amounts. However, this ignores the fact that large amounts of money which are paid in the workers’ countries of origin end up in the pockets of agents and employers in Singapore. Jurisdiction and oversight over these transactions should be possible.

Domestic workers

Unlike migrant workers from the construction, marine and services industries, domestic workers do not pay upfront fees in their countries of origin. Instead, the fees they pay to agents are deducted from their salaries when they arrive in Singapore. This can range from between $2000 to $4500. As domestic workers earn an average of $400 to $600 a month, the debt they incur can be up to the first 6 months of their salaries.

The Indonesian government does not have any bilateral agreement with Singapore to limit the fees of its nationals coming here to work. As a result of this, they are vulnerable to overcharging and unethica recruitment practices. To mitigate this, the Indonesian embassy in Singapore partners with banks and employment agencies to lend domestic workers money to assist in paying off agency fees. Under this scheme, an Indonesian domestic worker will take up a personal loan of about S$1,700 from Maybank Indonesia to cover the cost of training, passport applications, medical checks, and placement fees for the Indonesian agencies. MDWs who choose this option still need to pay Singaporean agents a separate service fee capped at S$1,000, but are not supposed to be charged transfer fees if they change employers.7 While this scheme was implemented to cap costs and improve transparency, the family of domestic workers may still be at risk should she breach her employment contract and/or default on her loan. HOME has encountered numerous reports of domestic workers and their families facing threats and harassment by Indonesian agents for failing to fulfil their loan obligations.8 MDWs who wish to circumvent the exploitative recruitment system are not allowed to do so because the practice of ‘direct hiring’ is not allowed under Indonesian law.

Domestic workers from the Philippines, also known as the Household Services Workers receive more protection from their government. The Philippine Overseas Employment Administration (POEA) regulates the employment rights and welfare of its employees going abroad through a standard contract which all employers, recruiters and workers have to sign. This includes a policy that agents and employers are not allowed to charge any fees to workers and this includes prohibiting such fees to be deducted from their salaries. However, this regulation is widely flouted because the Philippines POEA regulations cannot be enforced here. The Philippines also does not have a bilateral agreement with the Singapore government to regulate fees. As a result, there is a widespread trend of contract substitution. Despite the safeguards contained in the POEA standard-form employment contract for Filipino migrant workers, almost all workers will be asked by their employer or agent in Singapore to sign a new contract once they arrive in Singapore. This second contract contains conditions less favourable to the worker, such as lower salary and higher agency fees. 

Even though the Employment Agencies Act only allows local agents to charge no more than 2 months of a worker’s salary for a 2 year work permit, the Ministry of Manpower allows local agents placing domestic workers to collect fees over and above the stipulated cap, on the pretext that any fees beyond 2 months salaries are transferred to the agents overseas. However, HOME is not aware if any investigations or prosecutions have been made for agents who fraudulently claim that such fees are remitted to agents abroad. A more important question is why the Ministry of Manpower is allowing agents in Singapore to collect fees on behalf of overseas recruiters.

Why it is important to regulate recruitment fees

When workers become trapped in a cycle of debt, it increases their vulnerability to other forms of abuse such as physical, sexual and verbal abuse. They are also reluctant to report other forms of exploitation, such as excessive working hours, poor living conditions, work site safety violations, and other employment violations. Anxieties about being repatriated without being able to repay their debts lead to poor mental health. They are also less likely to assert their rights and ask to be treated with dignity for fear of losing their jobs and being in debt. This may lead to forced labour and other slavery like conditions. Trafficking in persons and forced labour is a global issue which affect many countries around the world are starting to tackle and take seriously. Exorbitant recruitment fees is one of the key indicators of trafficking and exposes the vulnerability of migrant workers. Tackling it effectively is important if we wish to address it.

Our recommendations to the Singapore government:

1) Work with civil society to do an in-depth study of the recruitment processes among the major countries which have migrant workers in Singapore with a view towards putting measures in place which disallow recruiters from profiting from over charging.

2) Explore the possibility of signing bilateral agreements with countries of origin to limit agency fees workers have to pay.

3) Monitor monetary transactions from agents transferring money from countries of origin to agents and employers in Singapore with the view of prosecuting those in Singapore for accepting kickbacks

Image acknowledgement: Amnesty International