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Report providing insights into recruitment costs in Malaysia
Report providing insights into recruitment costs in Malaysia
News Feb 12, 2020

Read the report here.

An Indonesian single father remits money to his hometown in East Lombok every month to cover daily expenses for his two sons. Like many others from his town, the 2018 earthquake prompted him to seek jobs further afield to rebuild their lives. An added burden to him and many other migrant workers is the initial recruitment costs. These costs are billed by recruitment agents who help migrant workers get jobs in other countries and are often opaque in terms of what they cover.

Sadly, his story is not unique. Unethical recruitment practices and excessive recruitment fees are common worldwide and can lead to forced labour indicators such as debt bondage and other forms of labour exploitation. Migrant workers often pay excessive amounts of money to recruitment agents and sub-agents, often having to sell property, borrow money from relatives and friends, or take out loans from money lenders in the hopes of finding a good job in another country.

Globally, there are growing expectations for companies to commit to ethical recruitment practices. Employers, regardless of their size of operation and economic sector, are expected to bear the full cost of recruitment and placement of their migrant workers – often above and beyond national legal requirements.

With this in mind, we have undertaken a snapshot study to understand recruitment practices among small and medium sized companies in the Malaysian palm oil industry. The study covers recruitment of migrant workers from Bangladesh, Indonesia and Nepal, and highlights both employer and migrant worker experiences and costs during recruitment and post-arrival.

An important finding is that employers and migrant workers appear to have paid for overlapping items in the recruitment process. While workers were not aware of the exact breakdown of fees paid, they were broadly aware of what items were covered. The study found that some costs paid by employers in Malaysia – such as airfare, visas, working permits, service fees for recruitment agents, as well as medical and insurance fees at the country of origin – were also believed to have been paid by the workers in their country of origin.

An Indonesian worker harvesting oil palm fruit in Peninsular Malaysia.

This suggests potential unethical practices by intermediaries in the migrant workers’ country of origin, in charging workers recruitment costs that had already been covered by employers in Malaysia. This situation not only increases the actual cost of recruitment, but also complicates efforts to understand and estimate accurately the cost of recruitment for all parties.

Some key challenges for small and medium sized companies emerge from a lack of understanding of the recruitment process, both in Malaysia and the countries of origin of their workers. These companies lacked formal policy commitments relating to responsible recruitment. They also relied heavily on recruitment intermediaries such as management consultancy companies to hire workers on their behalf and relied on agricultural contractors to manage sub-contracted workers. Moreover, these companies lacked comprehensive documentation relating to recruitment. In this context, transparency in processes and accountability for costs and fees remain challenging.

On the side of migrant workers, there was a lack of awareness and knowledge on the recruitment process. There were discrepancies in data and information related to the actual cost and process of recruitment. This opacity may be a factor in the cost increase, as well an indication of possible unethical practices by intermediaries in the workers’ country of origin.

While there are multiple challenges, the study also found some opportunities for improvement that go beyond dollars and cents. These include the increased awareness among employers to eliminate the legacy practice of withholding migrant workers’ identity and travel documents, and increasing interest in putting in place more comprehensive post-arrival induction programmes for workers. There is also recognition of the potential role of recruitment agents in worker grievance processes.

We strongly recommend that companies play a leadership role in exercising ethical recruitment and undertake regular due diligence to better understand risks in recruitment, design mitigation measures and monitor the conduct of recruitment partners such as agents and intermediaries. The implementation of ethical recruitment requires close collaboration between employers and recruitment partners, as well as the inclusion of workers and other stakeholders, to improve transparency and accountability in recruitment processes.

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