Recruitment fees belong on the employer's cost sheet

Southeast Asia's food industry depends on people who have travelled a long way to do the work. In Malaysia, a large share of the people in factories, kitchens and plantations come from elsewhere in Asia. In Singapore, work-permit holders form a meaningful part of the workforce in food manufacturing and services, within quotas tied to how many local people a company employs. Most employers I know treat these workers lawfully and many treat them well. Fewer have asked what a worker paid before arriving at the factory gate.

For most of my career I did not ask either. At Rumbia we paid licensed agencies to find workers for our Senai kitchen, signed contracts that met the law and believed the matter of recruitment was settled when the agency's invoice was paid. In November 2020, after a Covid-19 outbreak in a hostel near the kitchen, I asked an independent auditor to interview our migrant workers in private and in their own languages. Of 560 people, 412 had paid fees to get the jobs we had advertised, on average about RM5,000 and sometimes much more. Most had borrowed the money.

We repaid RM2.06 million by May 2021 and have paid every recruitment cost ourselves since. This essay is not about that decision as a moral act. It argues that recruitment fees are an operating cost, that leaving them with the worker distorts how a plant runs, and that operations leaders, not only compliance teams, should own the remedy.

How a worker arrives already in debt

The chain that brings a worker to a kitchen in Johor can have four or five links. A sub-agent in the worker's home district finds candidates. An agency in the home country arranges documents, medical checks and pre-departure training. A licensed agency in Malaysia handles the employer and the government's procedures. Flights, transport and accommodation on arrival sit somewhere among them. Each link has costs, and several have charged the worker for them, sometimes several times over and often in cash without receipts.

The employer sees only the last link. Its invoice from the Malaysian agency is real and lawful. It says nothing about what the worker paid in the home country, and the employer rarely asks, partly because the answer is uncomfortable and partly because nobody in the business has been given the job of finding out.

The result is a worker who starts work owing several months' wages to a lender at home, with interest. That debt does not appear in any account the employer keeps. It appears on the production floor.

Why the cost belongs to operations

A worker in debt behaves differently. He accepts overtime he is too tired to work safely. He does not report a guard missing from a machine or a cold room that has been warming all afternoon, because he cannot risk being seen as difficult. He does not leave a bad supervisor, because he cannot afford a gap in pay. From the manager's office this can look like loyalty and diligence. It is fear, and a kitchen that runs on fear hides its problems until they become incidents.

Our own figures persuaded colleagues who were not moved by the principle. Annual attrition among our migrant workers fell from 34 per cent in 2020 to 11 per cent in 2023. People stayed long enough to become skilled, and first-pass yield on our production lines rose from 93.1 to 96.4 per cent. Near-miss reports from the floor rose sharply, which is what a plant manager should want: people who are not afraid tell you what nearly went wrong.

The cost is real and should be treated like any other. We now pay agencies between RM3,200 and RM3,900 per worker for the whole recruitment chain, and that figure sits in our standard product costing beside flour, butter and electricity. When it sits in a sustainability budget instead, it becomes discretionary, and discretionary costs are the first to be cut in a difficult quarter.

There is an honest objection. An employer that pays recruitment costs while its competitors do not carries a higher cost base, and in a sector with thin margins that matters. I accept the point. Our Malaysian operating margin fell 0.8 percentage points in 2021, and two agencies stopped working with us. My answer is that the competitor's lower cost is borrowed from its workers, will show up as attrition and error, and carries a growing risk with buyers, lenders and the authorities of importing countries who are paying closer attention to forced-labour indicators.

The other objection is evidence. Workers rarely hold receipts, and some claims cannot be verified. We dealt with that through structured interviews, agency records and a cap of RM9,000 on any single repayment. The method was imperfect. It was better than refusing to repay anyone because we could not repay everyone exactly.

Questions a board should put to management

Directors do not need to visit hostels to govern this well, although they would learn a great deal by doing so. They need management to answer a short list of questions, regularly and with evidence.

What share of the company's migrant workers paid any fee in order to be hired, and how was that established? A figure produced by asking agencies is not the same as one produced by interviewing workers without supervisors present.

Where does recruitment cost sit in the accounts? If it is not in product or service costing, it is probably not being paid in full.

Do the workers employed by the company's contractors, its cleaners, security staff and logistics providers, enjoy the same protection? Ours did not until a year after our own employees, and I regret the delay.

Who holds the workers' passports and work documents? The answer should be the workers.

How does a worker raise a grievance without going through the supervisor he is complaining about, and how many grievances were raised last year? A channel that produces no complaints is usually a channel nobody trusts.

What is voluntary attrition in the second year of employment, by nationality and site? That figure tells a board whether the job described at recruitment is the job people found.

None of this replaces the law, and none of it is unique to food. Hospitals, cleaning companies, construction firms and logistics businesses across the region rely on the same recruitment chains. The fees are the same everywhere: a cost that someone pays. The only question is whether the company that benefits from the labour pays it openly or leaves it with the person least able to carry it.