Employment Agency (Amendment) Bill 2nd Reading Speech by Mr Lee Yi Shyan, Minister of State for Trade & Industry and Manpower, 11 January 2011, 5:30pm, Parliament

1. Sir, the Employment Agencies Amendment Bill seeks to strengthen the regulatory framework of the employment agency, or EA, industry. The outcome will be an EA industry that is better qualified, more professional and effective in matching employers and workers.
2. As intermediaries that link job seekers and employers, EAs play a critical role in the smooth and efficient functioning of the labour market. A well-functioning EA industry helps match employers with workers with the right skills, ultimately raising the productivity of our work force. It will also support Singapore’s vision of being a centre for talent with fair and responsible recruitment practices.
3. For our EA industry to be effective, we need a regulatory framework that is relevant to today’s labour market requirements. My Ministry had therefore embarked on a review of the EA regulatory framework to ensure its robustness and accountability of all stakeholders. Today, I am pleased to present the outcome of the review in the form of this Bill.
   
   (I-b) Changing EA landscape
4. Sir, the current version of the Employment Agencies Act was last amended in 1984. Since then, our workforce has grown in size and mix. Correspondingly, the number of licensed EAs has also increased by more than seven-fold to over 2,500 last year to meet labour market demands.
5. Where many EAs have conducted themselves professionally, some have been found to be wanting. Malpractices have unfortunately also become more widespread. In 2010 alone, my Ministry took enforcement actions (i.e. ranging from warnings to prosecutions) against 147 licensed EAs. The number of complaints we received against licensed and unlicensed EAs in the last few years has also risen. The need for stronger regulations to tackle errant and unlicensed EAs has therefore become a key consideration in our review.
   
   (I-c) Consultations
6. Sir, this Amendment Bill is the result of many rounds of consultations and refinements with key stakeholders such as EAs themselves, employers, workers and non-government organisations.
   
   (II) NEW REGULATORY FRAMEWORK
   
   (II-a) Objectives
7. The enhanced regulatory framework achieves four objectives. Firstly, to weed out unlicensed and errant EAs that give a bad name to the industry.
8. Secondly, the new framework will hold all stakeholders involved in conducting EA-related work to higher professional standards and accountability.
9. Thirdly, we will update the provisions and processes to ensure their relevance.
10. Finally, we will enhance the flexibility of the EA regulatory framework.
    
    (II-b) Key elements of EA (Amendment) Bill
    
    Clarifying the coverage of EA Act
11. I will first explain who the Employment Agencies Act is intended to cover.
12. Clause 5 clarifies that we wish to regulate all EA-related activities conducted in Singapore, regardless of whether they are for job placements in Singapore or outside Singapore, whether the activity is conducted by locals or foreigners, or on a long- or short-term basis, or whether for gain or otherwise.
13. I would like to assure the House that it is not the intention of my Ministry to penalise persons who make casual recommendations to link job seekers to employers. The new provisions are deliberately kept broad to ensure all types of EA-related activities that may give rise to malpractices are covered. For instance, there are foreigners who earn extra money by regularly linking up acquaintances from their hometown with various employers in Singapore. They are in effect, conducting EA-related work and should be held to the same level of accountability that other EAs are held to, in order to protect the interests of job seekers who seek their help. Yet, it may be difficult to prove whether the foreign workers conducting EA-related work had benefited in cash or in kind. It is thus important to ensure that the Act covers and regulates these activities.
14. Clause 4 empowers the Minister to exempt individual entities, certain classes of persons or EAs from the provisions of the Act. This exemption list will include activities or entities which we clearly do not intend to regulate, such as web-based job portals and job bulletin boards as they are not usually actively involved in the actual placement work.
    
    Tackling unlicensed and errant EAs through new offences, increased penalties and enhanced enforcement framework
15. Sir, the Government takes unlicensed EA activities seriously. They undermine the regulatory framework by competing with licensed, law-abiding EAs. They also tend to exploit vulnerable workers from developing countries by charging them exorbitant fees and may not give them the promised jobs in return.
16. The current penalties pale in comparison to the potential profits from illegal or errant EA activities. The existing maximum penalty for first-time offenders under the Act is $5,000, but foreign workers are willing to pay agency fees of between $3,000 to $10,000 in order to land a job in Singapore, selling land or taking up loans to pay these fees. Moreover, licensed EAs would have to furnish a security deposit of up to $60,000 and the same requirement is there for unlicensed EAs. There would be strong incentives to remain unlicensed if the penalties fall short of the security deposit.
17. To stem the supply of unlicensed agencies, we will raise the penalties for unlicensed agencies to ensure they are commensurate with the potential gains from malpractices. The most significant increase in the maximum penalties under the Act will be for operating an unlicensed EA in Section 6. The first offence will warrant a fine of up to $80,000 and/or up to 2 years’ of imprisonment, and subsequent offences are liable for penalties up to twice that amount. In addition to raising the penalties for operating an unlicensed EA, we will also hold an unlicensed EA accountable for the same offences as a licensed EA under the Act.
18. To stem the demand for unlicensed EAs, the new Section 22A introduces a new offence for persons to engage unlicensed EAs. We will require individuals to exercise due diligence in checking whether the EA they intend to engage is licensed, via an EA directory on our Ministry’s website. The requirement is not an onerous one. However, my Ministry will be reasonable in dealing with employers who have limited access to the internet, such as elderly persons hiring FDWs.
19. The new Section 22B introduces another offence prohibiting licensed EAs from making applications on behalf of unlicensed EAs, or on behalf of EAs which are disallowed from making such applications. We are aware that some licensed EAs allow unlicensed EAs to thrive by submitting work pass applications on their behalf to MOM, since access to the work pass application systems is only granted to EAs that are licensed.
20. Licensed EAs should only make applications on behalf of employers or job seekers. Should they need to make applications on behalf of other EAs, they must verify that the other EA is similarly licensed and allowed to make such applications.
21. To allow for more calibrated action depending on the gravity of offences, the Bill expands the range of enforcement actions. Whereas MOM’s enforcement options is currently limited only to prosecutions and licence revocations, under the new framework, MOM will also have the discretion to compound offences or suspend licences of errant players.
22. Meanwhile, to ensure sufficient deterrence against malpractices, amendments to Sections 18, 19 and 20 will enhance the range of MOM’s investigatory powers. These are largely based on similar powers granted to MOM under the Employment of Foreign Manpower Act.
    
    Increasing professionalism and accountability of industry stakeholders through debarment, disqualification criteria, registration and certification requirements
23. Sir, apart from weeding out unlicensed and errant agencies, we will enhance the professionalism and accountability of EA key appointment holders and personnel. These new features will raise the entry barrier and build confidence in the industry. It will benefit legitimate EAs in the long run.
24. The new Section 7(4) allows the Commissioner for Employment Agencies to debar any person or company deemed unsuitable from obtaining a licence. In addition, the new Section 22C prohibits certain classes of persons, such as those with criminal records, from conducting ‘specific EA work’ as defined in Clause 2. Persons intending to assume key appointment positions such as partners, chief executive officers and directors, or other positions that involve management or administration of EA work, will be held to even higher standards.
25. In addition, Clause 12 requires all individuals who wish to engage in any ‘specified EA work’ to be suitably certified by attending and passing the course identified by MOM. The EA these individuals are affiliated with must also issue them with registration cards in accordance with MOM’s specifications. These requirements will give employers and jobseekers the assurance that their EA and their personnel are properly qualified and equipped to help them.
26. To clarify, it is not our intention to require all EA staff, including drivers or cleaners to be certified and registered. My Ministry will put up guidelines on the kinds of staff who need to be certified and registered.
27. Currently, it is the licensee who takes all responsibility for malpractices committed under the EA’s name. To further increase the accountability of industry stakeholders, the new Sections 28A and 28B will also allow MOM to take punitive actions against individuals other than the licensee to task for the malpractices they have committed.
28. So the next change I will talk about will only affect the subsidiary legislation and is thus not reflected in the Bill. Currently, EAs that place FDWs must be accredited in order to renew their EA licence after 1 year of operation. Mandatory accreditation entails meeting certain service standards. To raise minimum service standards in the industry, MOM will incorporate into subsidiary legislation some of the minimum service standards, such as being explicit about the agency’s dispute resolution mechanism and using standard service agreements. The subsidiary legislation will apply to other types of EAs, not just those placing FDWs.
29. With certain minimum service standards enforced by MOM, accreditation will cease to be mandatory. However, I would like to encourage progressive EAs to adopt standards and best practices beyond the minimum standards in the legislation. Towards this end, MOM will be working with the industry to develop a new voluntary trustmark scheme to recognise agencies that pursue higher levels of service excellence.
    
    Updating provisions and processes such as the office of Commissioner for EAs and fee caps
30. Our new framework will also be updated to ensure it is relevant in today’s context. We will create a new office of Commissioner for Employment Agencies, assisted by Deputy and Assistant Commissioners, to assume the responsibility for the overall administration of the EA Act. Currently, the Commissioner for Labour appointed under the Employment Act has this responsibility. Introducing this new office under Section 3 will ensure clearer accountability of the functions and powers conferred on the Commissioners under the various Acts.
31. At the same time, we have reviewed the caps under the subsidiary legislation on fees that EAs can charge employers and job seekers. We will remove the fee cap for employers as it is not necessary. There are many EAs willing to supply them labour and employers are free to make contracts that protect their interests. We will retain and update the cap on fees charged to workers however, in order to protect vulnerable rank and file workers who have weak bargaining power. In the case of foreign workers from rural villages, they also suffer from information asymmetry and often have no say in choosing their Singapore EA.
32. We will update the fee cap for workers to take into consideration the need to be fair to EAs for the services rendered, and to workers with respect to their income. A worker can be charged a fee not exceeding one month of his salary, for each year of the duration of the approved Work Pass or employment contract, whichever is shorter, subject to a maximum of 2 months’ salary. The fee cap will cover all fees paid to Singapore EAs, including fees paid to Singapore EAs via overseas agents. However, the fee cap will not apply to fees paid for costs incurred overseas, such as the costs of the air-ticket to Singapore. Certain costs, such as the costs of training or medical check-ups conducted in Singapore, must continue to be borne by the employer as mandated in existing legislation.
33. MOM will also introduce a new fee refund mechanism under subsidiary legislation for workers whose contracts are terminated by their employers within 6 months of commencement. This refund will not apply if the worker absconds or voluntarily terminates the contract and aims to encourage EAs to be more careful in matching the right worker to the right employer.
    
    Introducing a more flexible framework
34. To recognise the diverse range of EAs in the industry today, the new framework adopts a risk-based approach. A single approach to regulating headhunters that place only white collar workers, to those that place lower-skilled work permit holder, is inadequate. We are amending Section 29 to empower the Minister for Manpower to vary the security deposit amounts required of EAs. This will enable us to vary the security deposit required, based on the risk profile of the EA. The risk profile of an EA will be assessed on a combination of factors, including its placement volume, the types of workers placed and its track record.
35. The amended Section 29 also allows the Minister to impose different licensing requirements on different EAs, depending on their profile. Executive search firms, which have generally been problem-free, will be regulated with a lighter touch. As such, EAs placing only workers, both locals or Employment Pass holders, earning monthly salaries of more than $7,000 will qualify for a Select Licence which is subject to only basic licensing requirements. EAs that do not wish to limit the type of workers they place may apply for a Comprehensive Licence instead.
    
    (II-c) Transitional arrangements
36. Sir, the new regulatory framework will be implemented on 1 April 2011. We have measures catered to help existing EAs transit to the new framework, which includes allowing EAs up to 2014 to certify all their EA personnel. We will carry out a series of public communications initiatives over the next few months to help the key industry stakeholders fully understand the new regulatory framework and be prepared for the transition.
    
    (III) CONCLUSION
37. Sir, this new regulatory framework is an opportunity to improve the experience and labour market outcomes for all stakeholders – employers, workers and the EAs.
38. Vulnerable rank and file workers, including foreign workers, will enjoy greater protection against the unethical practices of unlicensed and errant players. They will also benefit from measures such as the updated fee caps and the new fee refund mechanism.
39. Employers will benefit from the greater certainty and transparency in the recruitment process. The new regulatory framework will facilitate labour market efficiency and raise the standard of recruitment practices in Singapore. This will in turn entrench Singapore’s global position as a choice destination for experienced and skilled workers.
40. Finally, by enhancing the professionalism and accountability of the industry, the stricter licensing, registration and certification requirements will instil greater confidence in the industry and boost its reputation.
41. I recently met the Managing Director of an EA called PeopleWorldWide Consulting. They bring in many foreign workers for the manufacturing and services sectors. He shared that they put all their foreign workers through a 3 to 7 day training programme. They also have a robust process to ensure these workers do not pay more than the amount that was agreed between his EA and the overseas EA, and then promised to the worker. We would like to applaud their efforts and look forward to seeing more such progressive EAs.
42. I hope the industry stakeholders, who had a large part to play in the development of these proposals, will continue to give my Ministry their support. Together, we can ensure that the new regulatory framework achieves its objectives and full potential.
43. Sir, I beg to move.