Migrant Recruitment Fees and the GCC Construction Sector

While human rights issues faced by low-wage migrant workers in the Gulf region have been widely reported on, the related issue of “recruitment fees” paid by these workers in their countries of origin – central to the experience of so many migrants – hasn’t received as much attention.  

There are legitimate costs associated with recruitment and migration, according to David Segall, a policy associate with New York University’s Stern Center for Business and Human Rights, who researches construction industry migrant labor in the Gulf. “The point is that recruitment is not free; it costs money to find workers, to skills-test them, to process visas, to interview them, and to make sure they’re qualified for the job that you’re hiring them for,” Segall said.

But according to Segall, in the current predominant recruitment model in Gulf Cooperation Council (GCC) states, clients throughout the supply chain do not pay their suppliers for services rendered. As a result, instead of project clients and construction companies bearing these costs, the most vulnerable migrant workers usually pay for their own recruitment—and then some—in violation of GCC and international law.

“Every single player in the chain seems to have leverage over their supplier, and that leads to downward pressure on wages and upward pressure on costs of migration” ultimately borne by migrants, Segall noted in his talk, “Migrant Recruitment Fees and the GCC Construction Sector,” at the Center for International and Regional Studies talk on March 19, 2017. Fatima Al-Dosari, a research consultant at Stern, Qatari citizen, and graduate of Georgetown University in Washington, D.C., joined Segall and shared her insights on migrant workers in Qatar.

What Segall called an “inverted payment chain” has clients (such as a government, a government-sponsored development project, or a private company) at the top of the supply chain and low-wage workers at the bottom. In between, there are layers of employers/sponsors, registered recruiters in South Asian sending-countries, and unregistered local “subagents.” According to Segall, “Clients are not actually paying their suppliers for the services that are rendered . . . or they are getting paid. So it flips the entire chain, such that at the end of the line it is the migrant worker who essentially foots the bill for all of the costs of migration, plus some.”

Segall and his colleagues are trying to understand why this is occurring and what makes it so ubiquitous in the GCC for low-wage construction workers, who mostly come from India, Bangladesh, Nepal, Pakistan, and Sri Lanka. Segall and Sarah Labowitz, co-director of the NYU Stern Center for Business and Human Rights, have conducted more than a year of research in this pursuit, primarily focusing on workers from India and Bangladesh. They will publish their findings in a report in early April.

Segall and Labowitz found that an imbalance of power between multiple economic players leads to an inversion of the normal fee-for-service payment business model. Supply chain pressure begins with intense competition in the construction industry in the Gulf, where companies often submit bids at less than normal market value just to break into the region. In order to keep these bids competitive in such a hot market, construction firms generally do not include the cost of recruitment in their bids to clients, and they do not pay the recruiters that service them. Smaller subcontractors and GCC-based “manpower firms”—which import, employ, and lease out labor for short-term projects—also avoid paying their recruiters.

Why would a recruiter in South Asia take on work if they are not getting paid by the employer? Segall explained that recruitment is also a very crowded market, and the current expectation is that construction clients will not pay for low-wage workers. “Recruiters also have to make a living, and if we acknowledge this is a legitimate service they are providing, it would be legitimate for them to take a service fee [from the employing company] and earn a small profit,” he said. But Segall said that with few exceptions, recruitment firms will agree to take a contract without payment: “We hear time and time again from recruiters, ‘if we’re not fulfilling it, someone else will.’”

In order to keep their doors open and earn a profit, then, recruiters must take money from prospective migrants themselves. “If they are not being paid by the client, they have to get paid by somebody. They have very little leverage to push back if they are not receiving payment from the employer.” Additionally, he said, corruption among recruitment agencies is a major problem. Among the few recruiters who are paid by construction company clients, reports indicate that some charge workers anyway, essentially “double-dipping.”

Recruitment agencies (and therefore employers and their clients) themselves rely on unlicensed sub-agents to access remote populations of inexpensive labor, because they don’t have access to or requisite social networks in certain common regions of migrant origin. The subagents, who are not paid by the registered agents that commission them, in turn charge additional fees to prospective workers. Segall argued that sub-agents should be registered, legalized, regulated, and priced into bids as a legitimate cost to borne by the employer and client.  

Segall said the actual cost of recruitment may be in the range of US$400-700, excluding flight costs. However, Indian migrants end up paying between $1,000 and $3,000, and Bangladeshis can pay from $1,700 to $5,200. The discrepancy is due both to layers of recruiters and subagents throughout the process—each of whom takes a cut of profit—and to markups to the cost due to kickbacks. For example, recruiters are willing to pay significant amounts to representatives of the employer merely for the right to a visa, Segall said—sometimes up to $1,300, a cost ultimately paid for by the worker. Migrants also end up paying for other illegitimate costs and markups, such as kickbacks by recruiters to visiting employer representatives and markups to flight ticket charges.

Finally, migrant workers agree to pay recruiters because of the imbalance between supply and demand for workers and jobs. If a worker doesn’t pay a recruitment fee, many others in line behind him will. Segall argued that opportunities to enter the GCC are actually quite limited. While there are twenty-five million migrants currently in the GCC, and in any given year hundreds of thousands of new workers will arrive, “there are still tens of millions more who would come if they could,” said Segall.

And although there is corruption in most migrant-sending countries—and among recruiters—according to Segall, if an employing company is not paying its recruiters, there must be corruption. “You’re essentially creating a model where there is no option but to charge the workers,” he said. “If ever there is to be a comprehensive solution to this issue, construction companies and their clients will need to adopt a ‘pay and investigate the recruiter’ model.”  

Fatima Al-Dosari works on migrant workers’ welfare, which has taken her to labor camps in Qatar, where she has met with laborers and heard their concerns. She said that attitudes of Qataris toward migrant workers are changing and the Qatar government is increasing efforts toward sustainable change, but many challenges—particularly with regard to social attitudes toward migrants—remain. “Both Qataris and non-Qataris have an obligation and responsibility to create change,” she said, adding that it “won’t happen without collaboration.” 

David Segall is a research scholar and policy associate with the NYU Stern Center for Business and Human Rights. The Center conducts research and advocacy on issues at the intersection of these two realms, pushing for sector-specific, standards-based approaches to the most serious rights challenges in global supply chains. Previously, Segall directed the Human Rights in Iran Unit at The City University of New York, and he served as an Associate in the Middle East and North Africa Division of Human Rights Watch.

Article by Jackie Starbird, Publications and Projects Assistant