Excessive recruitment fees are an omnipresent burden and decade-long forced labor risk for many of Taiwan’s over 700,000 migrant workers, as they incur substantial debts to pay home-country recruiters for jobs. Vietnamese pay by far the most.
In 2022, we reported on workers paying the equivalent of three to four years’ wages at home in Vietnam for jobs at Taiwanese suppliers of multinational companies including – at that time – Bosch, Continental, Hella, Magna, Visteon, Dutch State Mines (DSM), Dupont, and Walmart. We can add General Motors and Opel to the list.
Now, two manufacturers have reimbursed over $2.5 million in total to migrant employees for fees paid to recruiters in Vietnam and Thailand. And the manufacturers stopped Taiwanese labor brokers from charging workers almost $1 million in annual service fees. Other forced labor indicators were addressed too.
However, the remediation falls short of many multinationals’ policies. General Motors, Bosch, Hella, Continental, Walmart, and more commit to zero-fee recruitment and worker reimbursements, but the migrants were repaid 20 to 60 percent of their costs. And one year on, recruiters are still charging new workers fees for jobs at one of the Taiwanese manufacturers. What happened?
Partial Reimbursements to Migrant Workers
After landing at Taoyuan International Airport, it is just a short drive to the industrial areas surrounding it. Electronics, car parts, plastics, machinery, textile, and many other consumer goods are manufactured and exported worldwide from here. A major part of Taiwan’s migrant workforce stay in Taoyuan, so civil society groups are just around the corner too. Here, activists passionately explain about the need for proper protection of migrants and legal reforms. Workers in shelters indignantly tell stories of running away from factories and being in limbo because of Taiwan’s strict rules on job transfers, while debts increase.
Workers’ stories differ, but circle around common themes of hardships from arrival and sky-rocketing debts from paying recruiters for jobs. None of the workers we met expected an easy life in Taiwan. They had no illusions. But most of our interviewees said they did not truly understand until days became weeks, and weeks became months, how they couldn’t just leave. Once the debt trap snaps and you are in a bad place, it’s not easy to get out. It doesn’t help that Taiwanese law makes it virtually impossible to change jobs, unless an employer approves.
This is why progressive companies ensure that workers throughout their supply chain are not charged fees for jobs.
For a decade, Bosch and Hella have imported car electronics from Chin Poon Industrial (CPI), whose motherboards appear in many of the world’s biggest car brands. It also supplies General Motors and Opel (both via Bosch), Magna, Visteon, and Continental. Continental has also imported for over a decade from the plastics maker Shinkong Synthetic Fibers Corporation (SSFC), which also supplies Niagara Bottling, which makes billions of water bottles from SSFC’s plastics for customers such as Walmart. Until the end of 2022, DSM and Dupont also sourced from SSFC.
All of these companies – except Opel, Magna, and Visteon – told The Diplomat that they commit to zero-fee recruitment, though we revealed in 2022 that some workers incurred heavy debts to pay recruiters anyway.
Despite years of imports, none of the buyers said they had previously checked for debt bondage risks such as high recruitment fees. Following our report, several buyers addressed the problems with their Taiwanese supplier. Audits were conducted at both manufacturers – CPI and SSFC – to verify what workers told us; the German audit firm TÜV Rheinland did two audits at the electronics maker CPI, while the plastics maker SSFC had at least two audit firms visit.
Then followed remediation.
The two Taiwanese manufacturers agreed to practice zero-fee recruitment from December 2022. Later, they also agreed to reimburse employees for fees paid to recruiters abroad. And by January 2023, migrant workers at both companies were not charged monthly fees by Taiwanese labor brokers anymore, equaling two months of base wage per three-year contract, or almost $1 million per year for the two companies’ migrant workforces.
The reimbursement processes ended in spring 2023. By March, the electronics maker CPI had reimbursed its migrant employees a flat rate based on nationalities, irrespective of what workers actually paid. The reimbursement was $2,100 to Vietnamese and $1,250 to Thai and Filipino workers, said CPI.
By April, the plastics maker SSFC ended its reimbursement process. Migrant employees were reimbursed amounts based on their official affidavits, which for its Vietnamese workers amounted to between $2,400-$4,000 per affidavit, said SSFC.
Workers at both manufacturers confirmed the reimbursement amounts. Some sent us photos of bank books and signed documents. In June, CPI told us that it would reimburse workers who resigned up to three months prior to its reimbursement process began.
None of our 25 Vietnamese interviewees throughout 2022-23 said that they had expected refunds for their fees. Almost all borrowed large amounts to pay the recruiters. Some mortgaged family houses or land; some were still heavily indebted at the time of interview. They paid $3,700 to $6,500 or more in total recruitment fees per contract, while most paid an extra $500-$1,000 deposit, which is lost if they don’t complete the contract period.
Several workers at both manufacturers were charged twice or more by recruiters for multiple contracts over the years. Some paid over $10,000 in total.
“The money helped me repay part of my loan to pay the recruiter,” said a SSFC worker.
“I was surprised. I never imagined getting my money back, although it is far from my total fees,” said another worker from CPI.
When Company Policy and Practice Differ
None of our interviewees was reimbursed in full. CPI – the electronics supplier of Bosch, Hella, Continental, Opel, General Motors and more – reimbursed down to 20 percent of some workers’ costs.
SSFC – the plastics supplier of Walmart, Continental and Niagara Bottling – reimbursed around 60 percent of costs. “My agreement says $4,000, so I was reimbursed $4,000. But I paid $6,400. I know I was deceived by the recruiter,” said a SSFC worker. Several of his colleagues spoke about how Vietnamese recruiters had instructed them to state a total amount on video recordings – a legal amount – much lower than what they actually paid recruiters. The practice continued for years until late 2022.
All our interviewees, who were recruited from abroad, said they paid recruiters much more than they officially signed. Recent audits confirm the picture, according to sources requesting anonymity. Some workers took courage to inform management during the reimbursement processes, but to no avail, as workers were not involved as anything but passive recipients.
Why aren’t workers reimbursed properly, when multinational buyers commit to such reimbursements? Not one buyer admitted that workers weren’t fully reimbursed. The manufacturers were more transparent.
Workers at the car electronics maker CPI received a flat rate based on nationality, no matter how much they paid or how many contracts they had paid for. CPI said that “the same nationality is reimbursed the same amount, this is fair and equal for all foreign workers from the respective countries. Otherwise, any discrepancy between them in the same country is expected to cause more issues among them.”
Flat-rate reimbursements go against most ethical recruitment guidelines, including the standards of the Responsible Business Alliance (RBA), an industry coalition with years of experience in Taiwan, which several of the companies referred to in replies to us. Workers should be repaid their actual costs.
Hella, a long-term customer of CPI, said that “recruitment fees for which there is written evidence (such as the original contracts of migrant workers) and which cover documented fees paid to Taiwanese labor brokers … were reimbursed.” The statement contrasts with the fact that many workers signed multiple contracts and were charged for each one, but received the same as workers with just one contract. Hella did not reply our requests for clarification. Regardless, RBA standards do not require written evidence.
Bosch, another long-term customer, claimed that “CPI complies with RBA standards.” Opel, a subsidiary of Stellantis, said that “Opel and Stellantis are in full support and alignment with the RBA standards” and repeated what Bosch had told The Diplomat about CPI.
However, CPI told The Diplomat that it did not claim to have reached RBA’s standards on fee reimbursements, nor did it claim that workers had been fully reimbursed.
Will it help now that General Motors (GM) has joined the table?
GM wasn’t made aware of the issue until February 2023, when CPI’s reimbursement process had almost ended. GM told us that it “immediately engaged the suppliers and are working towards a resolution … As members of the Responsible Business Alliance (RBA), we utilize their tools, expertise and methodologies to convene stakeholders to develop verifiable resolutions to human rights issues.” GM’s supplier code of conduct is clear that “suppliers will provide full reimbursement to job seekers and workers if they have been required to pay any such fees or related costs.”
The plastics maker SSFC took more responsibility. It reimbursed workers an individual amount for each contract where recruitment fees were paid, based on officially signed affidavits. Interviewees who had signed two contracts, and paid recruiters twice, confirmed to The Diplomat that they were repaid for each contract. However, officially signed documents do not mention fees above legal limits, and SSFC was clear to us that only legal fees were reimbursed.
“SSFC’s zero-payment policy means that SSFC will pay for the fees that are charged legally in the worker’s home country as listed in the worker’s Wage Agreement. The local recruitment agencies in Vietnam and Thailand have been duly informed by Chi-Jian [SSFC’s labor broker subsidiary] that no such fees shall be charged to the workers,” said SSFC.
Are companies inviting recruiters to keep charging illicit fees to workers by not addressing them? Closing your eyes doesn’t make the problem go away. In the first half of 2023, Vietnamese recruiters kept charging workers for jobs at SSFC, said workers. Several, but not all, recruits from Vietnam paid up to $700-1,000 under the table in spite of SSFC’s newly adopted zero-fee policy. Workers were told by two of SSFC’s recruitment partners in Vietnam that the fees covered paperwork and did not get receipts. SSFC replied to The Diplomat that none of its new recruits had mentioned paying any fees during onboarding interviews throughout 2023.
The flat-rate $2,100 payouts to CPI’s Vietnamese workers amounts to around half of even just the legal fee limits when many of them were recruited.
CPI stressed to The Diplomat that its zero-fee policy for new recruits from 2023 complies with RBA, after it had had the auditor TÜV Rheinland “find out the discrepancy between RBA’s rules and our practices.” From interviewing workers, we did not find reason to believe that new recruits continue paying fees in 2023.
Workers Lack Faith in Corporate Grievance Mechanisms
Although CPI and SSFC rejected further reimbursements, it is not uncommon for manufacturers in Taiwan to fully reimburse employees for recruitment fees and related costs when zero-fee policies are adopted, said RBA based on its longstanding experience in Taiwan. Auditors with years of work in Taiwan and Vietnam – who did not wish to be named because of the risks of losing clients – concurred.
Buyers rarely chip in to make workers whole. Bosch said that “we can only refer to the opportunity to submit a compliance report in case your sources see still e.g. violations of social standards or human rights in the supply chain” and linked to its online complaint mechanism, open 24-7 and available in 15 languages (though not Vietnamese). When we passed the message on to workers at CPI, they asked us in return: “Why would Bosch listen to us there, if it doesn’t listen to us now?”
Hella suggested that “workers at CPI can leverage a complaint system at CPI to submit their questions if there are open points.” But interviewees said that CPI did not listen to their colleagues who spoke up, and that they themselves did not want to risk trouble by complaining.
“Grievance systems created as a top-down approach are mostly exclusionary of workers and do not engender the trust, engagement, and legitimacy that is required for workers to believe in and use these processes,” said Archana Kotecha, human rights lawyer and CEO of The Remedy Project, a social enterprise addressing migrant worker remediation in Southeast Asia. “When workers do engage with these processes, the outcome is often poor and not reflecting the harm suffered by workers.”
Or, in the words of the U.N. Guiding Principles on Business and Human Rights, “a grievance mechanism can only serve its purpose if the people it is intended to serve know about it, trust it, and are able to use it.”
Prevention Is Key
Avoiding debt bondage altogether requires proper prevention, not just remediation after the damage is done. Preventive measures should include – according to due diligence experts – that buyers expressly and verifiably require suppliers to pay for recruitment of workers, instead of merely stating in policies that workers should not pay for jobs.
Many multinationals sourced from the two suppliers for years without expressly requiring them to cover workers’ fees until we raised the flag, and they continue sourcing despite the fact the meager 20 to 60 percent reimbursements amounts contrast with the buyers’ own policies. Nor did some of the world’s biggest investors, including the American giants BlackRock, Vanguard and SSGA, and Norway’s State Pension Fund, who are top shareholders of one or both the suppliers, address debt bondage and other forced labor risks until now. There is not much prevention taking place here.
But is momentum gathering? Multinational buyers are increasingly aware of debt bondage risks in Taiwan due to pressure from legislation in countries like the United States, Germany, France, and elsewhere. There is no shortage of research into the pitfalls of tick-box audit approaches and top-down supply chain policing and the promises of properly involving workers and defenders in due diligence approaches. International civil society groups are mapping Taiwanese supply chains. Taiwanese civil society groups continuously campaign for the government to abolish labor broker fees and allow migrants the freedom to change employers. Scholars address the need to reform Taiwan’s labor laws to better prevent forced labor.
As the latest of the growing list of efforts addressing this issue in Taiwan, the United States signed a trade agreement in June with Taiwan, its 10th biggest supplier, from which it imported goods and services worth $105 billion last year. As part of the deal, both parties committed “to eliminate the charging of recruitment fees and related costs to migrant workers.”