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Levy aimed at moderating demand for maids, not wages

Foreign manpower
  • The Straits Times (18 February 2011) : Levy aimed at moderating demand for maids, not wages
  • The Straits Times (14 February 2011) : Cut maid levy, beef up pay
  • The Straits Times (13 February 2011) : Be prepared to pay more for a new maid
    • Levy aimed at moderating demand for maids, not wages
    - The Straits Times, 18 February 2011

    We refer to the recent article and letter on the cost of hiring a foreign domestic worker (FDW).

    2.   We wish to clarify that the cap on the service fee that employment agencies (EAs) can charge employers was lifted to provide more flexibility for both parties to determine appropriate fees and terms for the service. There is sufficient competition in the market to ensure competitive pricing.

    3.   The salary of an FDW is determined by demand and supply of FDWs, as well as wage trends in FDW source countries and other destinations such as Hong Kong and Taiwan. As wages in these places are higher, FDWs may be increasingly attracted to work in these places instead and there will be pressure on local FDW wages, especially if demand here continues to grow.

    4.   The purpose of the levy is to moderate the demand and inflow of FDWs. There are about 200,000 FDWs in Singapore, equivalent to 175 FDWs per 1,000 household. This is much higher than 122 per 1,000 household in Hong Kong. Without the levy, the growth of FDWs in Singapore will be greater. The levy ensures that only employers who need and have the financial capability to hire an FDW are able to do so.

    5.   To help families with young children, elderly and disabled family members, a concessionary levy of $170 has been put in place for such employers, instead of the full FDW levy of $265. This is a cost savings of about 35 per cent. The Government has also provided a slew of assistance schemes for such families including the foreign maid levy tax relief where the employer can claim tax relief for twice the levy paid, eldercare and childcare subsidies, as well as other marriage and parenthood incentives.

    Cut maid levy, beef up pay
    - The Straits Times, 14 February 2011

    There has been some controversy over the decision by 17 maid agencies to raise the pay of new Indonesian maids from $380 to $450 a month ('Few existing maids have asked for pay rise'; last Tuesday).

    Employers have expressed dismay while some maids who are already working here feel short-changed because their salaries will not reflect this rise.

    Perhaps the Government could consider allowing a portion of the maid levy to be redirected towards increasing maids' wages, to reflect current market rates.

    The Government has maintained that foreign domestic worker (FDW) levies are in place to manage dependence on maids. Yet the maid population has been increasing over the years and we now have about 196,000 FDWs in Singapore.

    It is clear that there is a strong structural dependence on maids in this country. In fact, the recent salary hike is itself a result of such unrelenting demand, as our population increases and ages.

    Without increasing the pool of options for financially strapped families in terms of childcare, elderly care and disability care, and without any attractive incentives and support for Singaporeans who choose to take on the roles of caregivers and stay-at- home parents, the FDW levy - with the normal monthly rate of $265 and concessionary rate of $170 - is not a deterrent.

    Until this situation is resolved, the Government could consider reducing the maid levy. This would alleviate a working family's financial stress and, at the same time, help boost the salaries of maids.

    Singaporeans may be used to paying maids a salary of $380 a month. If the maids work 12-hour work days with no days off, this works out to just a little over $1 an hour.

    We live in one of the wealthiest nations in the world; surely we can do better than this, particularly for a community of workers who are an integral part of many households' everyday life.

    Be prepared to pay more for a new maid
    - The Straits Times 13 February 2011

    Agencies will pass on more of placement fees to employers as a result of new law

    Employers looking to hire maids here may soon need to pay more, once a new law comes into force in April removing a limit on how much they may be charged by agencies. More than half of the 55 maid agencies polled by The Sunday Times said they are likely to make employers cough up more - a necessary move to reduce the burden on new maids and to entice more to work here. These newcomers now bear the lion's share of the recruitment costs.

    Of those interviewed, 14 agencies said they would 'follow the market'. Only one in five said they are unlikely to raise fees.
    Even as it removes a limit on employers' fees, the amended Employment Agencies Act imposes a fresh cap on the amount that Singapore agents can charge maids. It also requires that agencies refund a portion of the amount to the maid if any employer terminates a contract within six months.

    But even before these new rules come into effect, there have already been recent reports about agencies planning to raise the salaries of Indonesian maids, who appear to be shunning Singapore in favour of places like Hong Kong and Taiwan, which offer better pay and perks.

    Mr Edmund Pooh of Universal Employment Agency pointed out that the fees maids have to pay to secure jobs here have increased nearly threefold in under a decade.
    'Agencies would rather make the maid pay than offend potential employers,' he said.

    A decade ago, employers would pay around $1,600 to hire a maid, he said. But over the years, due to the fierce undercutting by agencies to attract clients, some have started charging employers less than $200. Worse, some even charge $1 - or nothing at all. To compensate for charging employers less, agents have passed the costs on to maids. To make matters worse, recruiters in their home countries also started increasing their fees. Employers typically pay these 'placement fees' - the amount a maid has to borrow from them for getting a job here - and recover the money through monthly salary deductions once the maid comes to work for them.

    For Indonesian maids, this sum has risen from roughly the equivalent of three months' pay a decade ago to up to 11 months' pay today. This has proved to be a big disincentive for many maids who thus avoid Singapore.

    Universal has already made a start in increasing the costs for employers. Mr Pooh now charges employers around $1,500 for a fresh maid from the Philippines. As a result, the maid has to take a loan from her employer of only around four months' pay.
    'We plan to eventually cut the loan amount further and charge the employer $2,000 plus,' he said.

    Mr Low Moon Heng from Passion Maid may follow suit and raise his $388 fee by $300 or more. This will enable him to reduce the loan burden on maids and bring in more 'competent workers'.
    'We would thus get better-quality helpers who would work happily and result in fewer problems and transfers,' he said, referring to the fact that many new maids have been running away.

    Significantly, the new cap on the agency fees - at two months for a two-year contract - applies to those charged by only local agents, and not what a maid should pay recruiters in her home country - as Singapore has no jurisdiction there. So if an agent in her home country charges her six months of her salary to get her the job, the maid would still incur that fee. She would have to get it paid by her employer who would then collect it from her in the form of salary deductions once she starts work.

    Some agents like Mr Shaik Alauddin of Nesah Enterprise Employment Agency, however, are standing their ground. 'Some of the employers here don't earn high salaries, but need the maids. If the agency fees are increased, how are they going to afford to keep one?' Most of his clients earn less than $3,000 a month. With a cap on how much a Singapore agent can charge a maid, he said he is planning to source helpers from countries like Sri Lanka, where recruitment costs are lower than those in Indonesia.

    Some employers, meanwhile, are unwilling to fork out higher salaries at a time when complaints of underperforming maids are becoming increasingly common.

    Madam Sajitha Nair, 34, hired two Indonesian maids within a span of six months last year. The first one kept breaking things and was 'generally incompetent', so Madam Sajitha asked for her to be transferred. The second one ran away after four days on the job, claiming that she was homesick. 'If we pay more, can the agencies guarantee quality?' said the human resource officer, who lives with her husband and parents in a five-room flat. 'I'd much rather do without a maid.'