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Report providing insights into recruitment costs in Malaysia
Report providing insights into recruitment costs in Malaysia
News 12/2/2020

An Indonesian single father remits money to his hometown in East Lombok every month to cover the daily expenses of his two sons. Like many others from his town, the 2018 earthquake prompted many of them to seek jobs further afield in order to rebuild their lives. What becomes an added burden to him and many other migrant workers are the initial recruitment costs – often opaque in terms of what is being covered – that is billed by recruitment agents that facilitate their job hunt to other countries.

Sadly, his story is not unique. Worldwide, unethical recruitment practices and excessive charging of recruitment fees and costs are common place and could lead to indicators of forced labour such as debt bondage and other forms of labour exploitation. Migrant workers often have to 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, Earthworm Foundation has undertaken a snapshot study to understand employer practices amongst small and medium sized companies in the Malaysian palm oil industry with respect to the recruitment of migrant workers from Indonesia, Nepal and Bangladesh in the palm oil industry in Malaysia. The study highlights both employer and migrant worker experiences and costs paid during recruitment and post-arrival.

An important finding from the survey is that both 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 their fees paid, they were aware of what items were covered. The study found that some cost items paid for by the employers (in Malaysia) such as airfare, visa, working permit, etc., were also believed to have been paid for by the workers in their country of origin.

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

Some of the key challenges for small medium sized companies emerge from the 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 conduct recruitment on their behalf and also relied on agricultural contractors to manage sub-contracted workers. Moreover, these companies lacked comprehensive documentation and record-keeping relating to recruitment. In this context, transparency in processes and accountability for costs and fees charged remain challenging.

On the side of migrant workers, there is also a lack of awareness and knowledge on the recruitment process. There were also discrepancies in data and information with respect to the actual cost and process of recruitment, and this opacity may be a factor in the cost increase as well as possible unethical practices by the intermediaries in the migrant 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 recommends that companies should 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, in order to improve transparency and accountability in recruitment processes.

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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