The Hidden Cost of Employment: Tackling Illegal Recruitment Fees

Many companies employ migrant workers somewhere in their operations or supply chains, a number of whom may have paid fees to secure that work. Initiatives such as the Employer Pays Principle seek to eradicate worker recruitment fees by encouraging the employer, rather than the worker, to bear the costs of recruitment.1 There is also a strong financial case for businesses to do so, as demonstrated by the case of WRP Asia Pacific (WRP), a glove manufacturer found to be employing workers who paid recruitment fees. 

What are recruitment fees? 

Illegal recruitment fees are charges imposed on job seekers by recruitment agencies or intermediaries that are prohibited by law or violate international labor standards. These fees are typically required to be paid by workers in exchange for securing employment, and they are considered exploitative and unlawful. These fees may cover costs including the recruitment itself, travel, visa and administrative costs, and other unspecified ‘fees’ and ‘service charges’. These fees are often substantial and are sometimes set up as loans with high rates of interest. This means that many workers are already exploited and made vulnerable before they even arrive at their place of work.

Recruitment fees might include, but are not limited to: 

• Pre-employment training costs 
• Work finding fees 
• Travel to the country of work 
• Medical fees 
• Food and accommodation in transit to the country of work 
• Visa/ work permit costs

In many cases, recruitment fees lead to debt bondage as workers have money deducted from their wages to pay back fees amounting to over a year’s wages. Debt bondage is one of the ILO’s forced labour indicators3 and, as will be seen in the case of WRP, can have serious implications on businesses failing to combat them. 

Case Study: WRP Asia Pacific 

Manufacturers of disposable gloves, WRP, launched a recruitment fee remediation program for around 1,600 of its foreign workers in what is believed to be an industry first in Malaysia. The $5 million remediation program represents half of the total reimbursed to workers in Malaysia across all industries.  

The reimbursement process came as a result of a lengthy negotiation with U.S Customs and Border Protection (CBP) after the US agency issued a ‘withhold release order’ on WRP’s products. The withhold release order meant that any shipping containers within U.S ports would be held there (at the expense of WRP) until the order was lifted. During this time, no further imports were permitted. This remained in place for approximately six months, until the CBP were satisfied that the company had eradicated forced labour from their operations.  

Under the U.S Tariff act, the CBP can withhold goods and levy civil or criminal penalties on companies importing goods produced using forced or child labour. This comes after the 2015 U.S Trade Facilitation and Trade Enforcement Act repealed the ‘consumptive demand clause’ in the Tariff Act which authorised the import of such goods if they were deemed essential to the U.S. Until 2019, the Act had seldom been applied before there was an increase in withhold release orders in 2020.  

Mike Scaglione, VP of Sales and Marketing at WRP, discussed the implications of the withhold release order on their business. It was clear that, even though adhering to the Employer Pays Principle would increase costs, the financial implications of acting too late were far greater. He said “business management’s mindset has to start realising that it’s much better in the long term financially to get this fixed than not”.4 Between legal fees, container storage costs (up to $1000 per day), and loss of U.S sales (50% of their overall business) for six months, it would be far cheaper to cover recruitment costs in the first instance. This is without considering the unquantifiable impact on customer relationships and reputational damage. 

What can companies do? 

Illegal recruitment fees are a serious violation of workers’ rights, leading to financial exploitation and increased vulnerability. By adhering to legal and ethical standards, and taking proactive steps to eliminate these fees, stakeholders can protect workers and promote fair and just employment practices. 

It has been widely noted that a no fees recruitment policy alone is insufficient, although it is a good starting point. Beyond this, efforts should be focused on remediation, rather than relying on preventive measures alone. There are numerous ways in which workers might be charged fees before even reaching their new job, all without realising anything illegal has happened. Therefore, it is important that site managers take steps to communicate the prohibition of recruitment fees to the workforce and have an adequate grievance mechanism in place. Then, when cases are reported, a formalised procedure should be followed to reimburse workers fully for any illegal fees charged to them.  

With an ever-increasing number of withhold release orders being issued, access to the American market could depend on ensuring workers are either not charged or refunded for recruitment. 

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Ardea International has been researching and developing recruitment fee remediation procedures for clients to ensure they are legally compliant, and their workforce are treated fairly. If you have any questions about the service or the contents of this post, please contact us at hello@ardeainternational.com.