Alerts & Updates 24th Apr 2023

Ikea cut ties with its local security services provider over labour breach policy


PV Ramana Murthy Head– Employment and Labor Laws | Mumbai
Retika Yadav Senior Associate | Mumbai

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  • A recent news article in the Financial Times reported that Ikea stores in Malaysia have severed ties with a labour provider after an internal investigation found there had been a breach of the furniture retailer’s own policies.[1]

    By way of background, various security guards secured employment at Ikea stores in Malaysia post paying recruitment fees to the local contractor which was against the Company’s labour policy. Ikano Retail which runs Ikea stores in Malaysia and oversees the brand’s franchise store led the probe after a campaigner reported workers from Nepal had paid fees as high as USD 1,000 to obtain jobs as security guards (according to communications seen by the Financial Times). The probe further revealed “multiple layers of sub agents involved in rural villages for the purpose of recruitment”.

    In the context of global supply chains, employment agencies are rather infamous for charging exorbitant fees from workers for securing jobs. This has been a highly concerning issue especially in the context of developing countries where workers are prone to exploitation. A similar scenario occurred during the 2022 World Cup Qatar/FIFA where exorbitant recruitment fees were charged from migrant workers leading many of them to fall into debt. Unable to leave the job till the contract period ended, many workers were vulnerable  to employer abuse and imposition of unreasonable/arbitrary penalties.[2]

    Given this context, it is important to understand what entails Recruitment fees – These can include but are not limited to, payments made for the following:  Security deposits or bonds

    • Documentation services, including translation or notarization
    • Transport or subsistence costs from point of origin to worksite
    • Visas, work permits, residency certificates or security clearance
    • Pre-departure or post arrival training, skills-testing, or orientation

    In India, the Ministry of External Affairs provides for guidelines under the Emigration Act, 1983 for recruiting agents who wish to engage in business of overseas recruitment. Where, on one hand, it prohibits charging more than the prescribed fee from the applicant workers; on the other hand, the guidelines also provide for the recruiting agents to recover not more than INR 30,000[3] for the services rendered. However, this loophole in law may be used as a disguise by the agents to unlawfully gain more than the prescribed amounts from the applicant workers and lead to worker exploitation.

  • ELP comments

    Businesses should be encouraged to conduct an annual compliance audit across the value chain with the help of a reputed third-party legal firms/agencies to ensure that no such malpractices are taking anywhere in the value chain. Employers should also investigate any human right violations against the workers, such as forced or compulsory labour, worker discrimination, workplace safety etc. and whenever any discrepancies are found, such agencies should be blacklisted

    Further, the Government should institutionalize the process wherein service providers/vendors are given certificates of recognition for following the local enactments in relation to improving workers’ rights or their conditions.

    Government may consider prescribing guidelines for all or any recruitment fees that may be allowed under the law and create awareness programs for the workers so they can make informed decisions and will not be misled by the unscrupulous service providers as well as their sub-agents. Strict penal actions should be imposed by the authorities for violations by the service providers.

    We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at or write to our authors:

    Dr. PV Murthy, Email –
    Retika Yadav, Senior Associate, Email –


    [3] However, this does not include visa stamping fees, GST and any fees imposed by the foreign government(s).

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein