Guest post by Verité, originally posted on Verité’s website

Migrant workers are frequently confronted with a choice: pay illegal or unethical recruitment fees for employment abroad or go without work altogether. To finance these exorbitant costs, they may take out loans that leave them vulnerable to debt bondage, a form of forced labor.

When workers pay their own recruitment fees, not only do those workers spend weeks, months, or years paying off that debt, but their employer altogether avoids incurring these costs. This is an improper benefit that accrues to the employer and, indirectly, to the employer’s customers or clients. For employers that need to recruit large numbers of foreign workers on a rolling basis, due to the limited duration of guest worker visa programs, the ongoing cost savings derived from the exploitation of migrant workers can be substantial — literally amounting to hundreds of thousands of dollars annually. Until there is a business consequence to externalizing these costs via illegal and corrupt arrangements with recruitment agents and government officials, debt bondage will continue to be widespread.

For more than a decade, Verité has worked with global companies in diverse sectors to ensure their suppliers and business partners absorb the true cost of recruitment and prohibit the charging of recruitment costs to workers, in accordance with international standards and regulations. Remediation involves the prompt reimbursement of the full amount to workers when they are charged. These ongoing efforts have repaid millions of dollars to thousands of workers annually.

Fortunately, a growing number of companies are adopting this practice. Getting their suppliers to achieve sustainable compliance is another matter.

Reimbursing workers for recruitment costs can be a contentious process involving large sums of money. Suppliers resist or delay implementation because they have not factored the cost of ethical and legal recruitment into their business model. Depending on a buyer’s commercial leverage, suppliers may flat out refuse to reimburse workers.

Even when suppliers agree in principle to comply with the demand to repay recruitment fees following an audit or investigation, it can be difficult to reach agreement on the initial lump sum amount to be reimbursed. Should it be determined by worker nationality or recruitment channel? Must every worker be interviewed to determine what each specifically paid or is it acceptable to reimburse the average or median fee paid within a range identified during an audit or investigation? Does the employer have to reimburse in a single payment or can the reimbursements be spread across multiple installments to avoid financial distress? Are all workers reimbursed or just those on a particular “line” or hired after a certain date? What about workers that have already returned home?

In developing a reimbursement plan, there are unintended consequences to consider, such as the potential resentment between worker nationalities, and the possibility that recruitment agents compensate for reimbursement costs to one worker group by passing along the payments as higher recruitment fees to another. Throughout the process, calculations must be validated and payments must be verified to ensure workers are fully reimbursed. There is no easy, one-size-fits-all template for a reimbursement plan. Each situation is unique.

Reimbursing workers is an important remedy and deterrent, but more needs to be done to address the systemic root causes of noncompliance. At this point, repayment is the expected “solution.” In reality, repayment is a short-term fix to make up for a broken system; the end goal itself is for employers to pay the costs of recruitment so that workers don’t need to be reimbursed.

Unless employers of foreign workers change their business model for foreign worker recruitment, plan for and pay the legitimate and reasonable fees and expenses related to international labor migration, and hold their recruitment agents accountable for complying with international standards — including ensuring workers are not charged for their jobs — these issues will persist. Only by shifting the burden of proof to their business partners and holding them contractually and financially accountable for paying the full cost of foreign worker recruitment can buyers cascade real solutions to the persistence of debt bondage down into their supply chains.

The most reliable predictor of whether an employer is meeting its commitment to ethical recruitment is its relationships with the recruitment agents in both their migrant workers’ receiving and sending countries. Commercially and ethically sound relationships between these entities diminish risk, as any exploitation of workers is also a fraud on the employer, and if those suppliers are paying the true cost of recruitment, they won’t find that acceptable.

How do you convince or incentivize suppliers and contractors to adopt ethical recruitment and flow it down to their business partners’ recruitment agents? Verité is seeing increased use of contractual obligations expressly related to the payment of recruitment costs that are underpinned by penalty, liquidated damages, and indemnity clauses in supply and recruitment agent agreements. In some sectors, surety bonds are being used to underwrite “employer pays” obligations and the prohibition on recruitment costs being passed on to workers. Promising early indicators demonstrate that these mechanisms can succeed and workers do not get charged — or, at the very least, that the issues are confined to easily identifiable bad apples that must choose to comply or ultimately be eliminated from a supply chain.