Insights on Effective Repayment and Ethical Recruitment in Palm Oil: Towards Robust RSPO Guidance for Indicator 6.8.3

Background 

Collaborative investigations into forced labour issues in Malaysia’s palm oil sector in the last decade have clearly demonstrated that workers who pay recruitment fees face significantly higher risks of forced labour. Hence, incorporating the Employer Pays Principle (EPP) into recruitment systems and providing recruitment fee repayment as remediation emerged as corrective measures. The RSPO took further steps toward addressing this issue by including a new indicator (6.8.3) in the 2024 P&C which states that, “The Unit of Certification shall repay active workers (as of, and from, the adoption date of the RSPO Principles and Criteria 2024) who have paid recruitment fees or related costs.”   

This indicator has been referenced by Certification Bodies (CB) in audits of RSPO-certified companies since adoption of P&C 2024. Notably, the RSPO Guidance for the Repayment of Recruitment Fees and Related Costs was drafted only this year, and public consultation on the draft is currently in progress until May 16th, before it is formally endorsed.

Clear and robust guidance is indeed key to ensuring the proper implementation of Indicator 6.8.3. It is also critical that this guidance is aligned with fundamental parameters that have been adopted globally and across industries (including by a few RSPO member companies), among these are that: workers are a critical source of information in repayment planning and verification; and the recruitment costs and expenses covered in the repayment plan are fully aligned with the ILO general principles and operational guidelines for fair recruitment. Failure to incorporate these elements into the repayment process could result in the harm borne by workers not being effectively remediated, thus also leaving companies exposed to ongoing reputational (and legal) risks.   

DIWA lauds the RSPO’s efforts on the draft guidance for public consultation, and urges all stakeholders to support the RSPO and its members in developing a guidance that is aligned with legal and international best practice standards, such that Units of Certification (UoC) can implement the repayment indicator successfully and address recruitment-related forced labour risks in their operations effectively.   

In this Memo, DIWA shares observations and insights gleaned from our work in the last decade on addressing forced labour issues in the sector and promoting ethical recruitment and the EPP alongside consumer goods brands, retailers, and their suppliers and workers in Malaysia. Our aim is to support the public review of the RSPO Guidance for the Repayment of Recruitment Fees and Related Costs and ensure that Indicator 6.8.3 delivers the positive human rights impacts it was designed to achieve.

Worker Voice and the Employer Pays Principle

Recruitment fee payment is already recognized as a critical part of forced labour (FL) due diligence for companies sourcing palm oil from Malaysia and other countries where the sector relies heavily on migrant workers. Embracing the Employer Pays Principle (EPP), which states that “no worker should pay for a job, the costs of recruitment should be borne not by the worker but the employer,”1 is an effective strategy to prevent and address labour exploitation, and to ensure decent and dignified work for all. It assures employers that everyone in their workforce enters employment freely, without coercion, deception, or debt burdens.2 

However, the widespread practice in the industry for many years has been that workers carry some, if not the full, costs of recruitment, resulting in a cluster of human rights issues in the workplace, and in extreme cases, resulting in conditions of forced labour or modern slavery. There has been a recognition of the need to evolve the recruitment and hiring systems prevalent in the sector, driven in no small part by the forced labour bans and withhold-release-orders (WRO) imposed on palm oil products from several Malaysian companies. In the last decade alone, there has been a wave of recruitment fee repayment campaigns carried out by some palm oil companies (e.g., SD Guthrie, Felda Global Ventures, United Plantations, others) either as a form of remediation and corrective action, or in response to stakeholder action.3

DIWA has been conducting independent research and working directly with palm oil companies in Malaysia to establish ethical recruitment models and to carry out recruitment fee repayment that meets best practice standards, moving away from treating repayment as a procedural or “tick‑box” exercise, but rather a meaningful remedy for workers who shouldered costs that employers should have borne.  

DIWA’s work with companies on this issue in palm oil and other sectors in Malaysia has shown us that when repayment methodologies exclude worker input, the result falls short of addressing the very harm to workers that the standard seeks to address. Moreover, it leaves companies still exposed to potential sanctions and stakeholder action.

Repayment Predicaments in the Palm Oil Sector

Recruitment fee repayment as a remediation step is still relatively new in the sector. DIWA recognizes the challenges that many employers face in implementing a thorough and proper repayment process that effectively meets customer and industry requirements. There are various challenges for CBs and auditors as well, in verifying if repayment practices conform to the standard.  

Some of the common problems and predicaments DIWA has observed are the following: 

1. Excluding worker voice from the equation

In other sectors in Malaysia (electronics, gloves and medical equipment, food, packaging, etc.)  where DIWA has supported companies in developing repayment plans and implementing the remediation process, the main protocol is to calculate repayment amounts based primarily on what workers have declared. Following well-established methodology in determining recruitment fees and expenses covered by workers (e.g., surveying 40 – 100% of the population, categorising workers into cohorts to determine patterns of fees-charging, triangulating information with available reports and accounts from management, recruiters, and other sources, etc.), DIWA has been able to facilitate companies in attaining closure of the recruitment fee issue, by helping them remediate the harm caused to workers through a robust repayment process that puts emphasis on worker voice. Prioritising worker-input and worker-declared amounts in the calculation is a means to account for deception and bloated costs, modes of exploitation used by agents, brokers, and other recruitment intermediaries to carry out fees-charging; and recognizes that informal, unregulated fees, without receipts, are commonly imposed on workers in their recruitment journey.

In DIWA’s experience in the palm oil sector, however, the value and reliability of the information provided by workers has, at times, become the subject of disagreements and debates. Company-led methodology may require documentation or receipts of recruitment fees payment, or the company may simply benchmark against published rates associated with legally-regulated recruitment steps (medical tests, transportation, passport and visa processing, etc.), to determine repayment amount, effectively discounting the actual experiences workers were put through as a result of the lack of risk controls and recruitment oversight from the side of employers.   

Robust repayment programs that DIWA has observed in the palm oil sector and elsewhere, all start with credible repayment plans that are developed with worker input and other relevant sources of information. Similarly, effective verification (to check if the repayment was carried out properly) prioritise worker interviews as primary source of information, supported by clear, detailed, and accurate documentation.

Indicator 6.8.3 intends to restore workers’ rights through repaying amounts that should not have been taken from them in the first place, if only robust ethical recruitment models were in place. Taking workers out of the equation in the determination of repayment amounts, and in the repayment verification process, risks watering down the repayment program and could result to outcomes that contradict the noble intent of Indicator 6.8.3. 

2. Common repayment verification methods that encourage inadequate repayment

Some official audit reports from CBs that DIWA has reviewed show that even minimal documentation pertaining to recruitment repayments can be considered as substantial conformance to P&C 6.8. DIWA observed during multiple human rights focused assessments of palm oil companies that payslips or documentation of recruitment fee repayment are usually presented by companies as proof of compliance, and these have been accepted by CBs without further scrutiny of the repayment calculations used, the scope of fees covered, the process taken to determine amounts and whether this process included worker-input; and oftentimes without gathering sufficient information from workers at all.    

Much of the verification process is limited to review of documents to determine if a repayment had taken place or not, rather than determining if the repayment that was undertaken was fair, complete, or accurate; and whether calculations were based on information provided by the workers. This verification approach risks encouraging repayment programs that do not reflect the full range of fees actually paid by workers during recruitment and leads to under‑compensation or partial remuneration being legitimized as acceptable practice. Such an approach and its outcomes do not only fail to correct the past misdeeds in recruitment and leave workers who suffered the harm unremedied, they also put companies at risk of having to conduct another costly repayment process or otherwise remain exposed to sanctions and reputational risks.

3. Compliance-orientation without technical support and clear guidance 

Even prior to the adoption of Indicator 6.8.3, a few RSPO member companies took their own initiative to determine whether their workers paid recruitment fees, how much these amounts were, and upon validating that fees were indeed charged to workers, proceeded on their own accord to remediate the issue by making repayments based on best practices available and lessons learned from other industries. These efforts of industry players are laudable, given the absence then of a specific indicator, and of clear guidance on how to carry out the repayment.

With the adoption of P&C 2024 and Indicator 6.8.3, DIWA observed that repayment is commonly being approached as a compliance-oriented exercise to meet certification timelines, absent technical support and clear guidance from the RSPO. This poses several potential problems, particularly in cases wherein companies cannot afford to pay for consultants with relevant expertise, and resort to methodologies that may not be aligned with best practice or may be unsuitable in the sector and geographical regions where their operations are located.

Lack of official, comprehensive and clear guidelines has also left the field open to CBs and auditors to determine for themselves the minimum evidence required to verify if repayment has indeed been properly undertaken or not. Ultimately, this poses serious risks to the entire RSPO membership, as these setbacks could be further amplified along the supply chain, limiting the ability of downstream players to assess whether workers are genuinely remedied of issues related to recruitment fees and related costs.

Towards Robust RSPO Guidance for Indicator 6.8.3

The above predicaments and risky practices in repayment that have been observed by DIWA among some palm oil companies in Malaysia clearly point to the need for clear, comprehensive, and practical repayment guidance that meets global best practice and fundamental parameters. Many Units of Certification (and their buyers and customers) require support and resources to carry out repayment and meet Indicator 6.8.3 effectively. The RSPO is in the best position to address this need. 

Case Comparison: Two different approaches that follow best practices 

Responsible recruitment requires companies to commit to understanding worker journeys in their specificity. Each company needs to understand risks in their own recruitment system and channels. However, implementation of solutions can vary depending on what works for the company. 

For company A, implementing responsible recruitment entailed developing a call centre to work with agencies to verify the risk profile directly with a potential candidate over the phone.  However, for company B, a much bigger organization, this approach was not feasible. Rather, for company B, the focus of action was managing and capacitating recruitment agencies through specific performance metrics.  

In both cases, repayment was conducted in alignment with the context of recruitment, including worker interviews to verify that improvements in recruitment systems continue to prevent risks of debt bondage for incoming workers. 

Effective repayment programs that have been carried out by a few RSPO companies followed these important parameters:

  • Worker‑centred data-gathering and verification, where workers are the primary source of information on determining recruitment fees and costs that should be included in the calculation, and on determining whether the repayment that was carried out was fair, complete, accurate.   
  • Comprehensive fee coverage, including actual regulated and non‑regulated costs incurred from origin to destination. 
  • Transparent methodologies, clearly documenting how amounts were calculated and disbursed or released to workers.  
  • Alignment with international standards, including ILO fair recruitment principles, core conventions, and the UN Guiding Principles on Business and Human Rights. 
  • Alignment with internal company policies and systems to ensure that repayment is not used as a condition to hold workers to the job or deprive them of other liberties, and that the full scope of responsible, ethical recruitment standards is integrated into the system. 

The RSPO Guidance for the Repayment of Recruitment Fees and Related Costs should leverage the experience of prior successful endeavours by RSPO companies, and include the above parameters into the guidance, at a minimum. The guidance, moreover, should provide clear and practical steps, directives, and instructions on how Units of Certification can effectively implement the repayment requirement in ways that fully meet the intent of Indicator 6.8.3, and in ways that will not lead to new risks or unintended outcomes for workers and companies.

Since 2019, DIWA has structured its approach to addressing recruitment-related forced labour risks and issues — including the charging of recruitment fees to workers and issues of debt bondage — around the Seven Key Elements for the Successful Implementation of the Employer Pays Principle (EPP). These elements, including steps to “fix the past” and to “risk-proof the future,” are as follows: 

DIWA’s Seven Elements for the Successful Implementation of the Employer Pays Principle 

  1. Written commitment statements, implementation structure and procedures for EPP; 
  2. Definition of recruitment fees and costs; 
  3. Procedures for due diligence, selection, and monitoring of recruitment partners; 
  4. Strong and enforceable contracts and service agreements with recruitment partners; 
  5. Procedures for continuous performance monitoring and improvement of the EPP program; 
  6. Effective worker feedback and grievance mechanism; and  
  7. Procedures to address and remediate recruitment fees issues found. 

DIWA fully supports the RSPO’s efforts and welcomes further discussions on ensuring commitment to responsible recruitment in the industry and enjoins other organizations and companies to learn more. 

For inquiries kindly contact Daryll Delgado, DIWA Senior Director and co-lead of programs on corporate governance and systems for human rights protection. 

To contribute to the RSPO public consultation see: https://rspo.org/public-consultation-guidance-for-the-repayment-of-recruitment-fees-and-related-costs/ 

  1. “The Employer Pays Principle,” https://www.ihrb.org/projects/employer-pays-principle  ↩︎
  2. “The Employer Pays Principle,” https://www.ihrb.org/projects/employer-pays-principle; ”General principles and operational guidelines for fair recruitment and definition of recruitment fees and related costs,” 
    https://www.ilo.org/publications/general-principles-and-operational-guidelines-fair-recruitment-and ↩︎
  3. ”Ethical Recruitment,” https://www.sdguthrie.com/beyond-zero/zero/ethical-recruitment; ”FGV Makes Significant Strides in Addressing US Customs Withhold Release Order,”  https://www.fgvholdings.com/press_release/fgv-makes-significant-strides-in-addressing-us-customs-withhold-release-order-rm72-2-mil-reimbursed-to-workers-strengthened-recruitment-procedures-for-no-recruitment-fee/; UP Annual Report 2023, pg. 37-39, https://unitedplantations.com/wp-content/uploads/2024/02/UP_Annual_Report_2023.pdf ↩︎