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What does Indonesia’s new S$6,000 Performance Bond mean for FDW employers in Singapore?

by ValuePenguin

The Indonesian Embassy in Singapore has put into place a S$6,000 performance bond to ensure the protection of their migrant workforce. Read on to find out how this will affect the employment of your Indonesian domestic worker.

The Indonesian Embassy has recently announced that it has implemented a S$6,000 insurance bond on employers of new Indonesian foreign domestic workers (FDW).

While the necessity of this bond is currently disputed by the Ministry of Manpower (MOM) in Singapore, the Indonesian Embassy believes it is a justifiable move to protect their domestic worker population.

However, is the bond really necessary in Singapore? And who stands to gain from it the most? Below, we examine the new performance bond's terms and conditions as well as how it will affect FDW employers.

Reason for Implementation

Performance bonds for FDW employers are nothing new—in addition to the S$5,000 bond required by the MOM, the Philippines government has required one as well since 1996. These bonds are put in place to protect domestic workers from poor living and working conditions as well as discourage mistreatment by their employers.

Indonesia's decision to implement their own performance bond comes mainly due to the 1,579 migrant worker cases that were handled in 2017, which included complaints of sexual, physical and emotional abuse.

What Employers Should Expect

Indonesia's performance bond operates very similarly to the current MOM and Filipino performance bonds. For instance, you can risk breaching the bond if you fail to give your worker 4 days off per month, don't provide 3 meals a day, refuse to cover her medical fees (which should be covered by your maid insurance), pay her below minimum wage and subject her to life-threatening work.

With a few small exceptions around religious practices, these regulations are pretty identical to MOM's own policies. In most cases, this means that you will only breach the Indonesian bond if you do something that breaches the MOM's bond.

How Does This Affect You Financially?

Currently, you can only purchase a guarantee for the Indonesian bond from two insurers: AIG and Liberty Insurance. Both insurers sell the bond guarantee for S$70, releasing you from the responsibility of making a S$6,000 cash deposit to the Indonesian Embassy.

Compared to the Filipino bond guarantee, which is offered by most insurers the market, this price is almost twice as expensive as the typical S$2,000 Filipino bond guarantee when you hire through an agency but similar to the average price for the S$7,000 Filipino bond guarantee required for direct hires.

Besides the high cost of the new bond being imposed by the Indonesian embassy, there are other factors that are making some FDW employers worried. The main one is a clause in the insurer's terms and conditions that states that any demand or request by the Indonesian Embassy to collect the bond will be sufficient evidence for the insurer to make the payment—regardless of whether there is proof and without giving any prior notice to the employer.

Theoretically, this means that you may not be able to dispute the claim and risk losing S$6,000 even if you're not at fault. If you refuse to pay the S$6,000, you will be subject to an 8% annual interest until you pay it or the insurer can take legal action against you. For this reason, the MOM recommends that you have the funds available should you choose to hire an Indonesian domestic worker.

However, the Indonesian Embassy has recently provided some clarification regarding its new policy. This included guidelines to what would constitute a bond breach and the possibility for a mediation attempt between the employer and the employee. The embassy also mentioned that the performance bond will only be collected as a last resort if mediation attempts fail or the employer refuses to cooperate. If this is the case, then employers may be less at risk for unsubstantiated claims against them.

What Current and Future Employers of Indonesian FDWs Should Do

Thus far, the Indonesian bond is required only by the Indonesian embassy and not by the Singapore government. Therefore, your FDW will still be able to work in Singapore without the new bond, provided she holds a valid work permit. For renewals or new hires, the Indonesian embassy may ask you to sign a new employment contract and purchase the performance bond.

However, it is important to know that the MOM will not penalise you for not proactively seeking to purchase the bond unless you are reached out to directly either by the Indonesian Embassy or your domestic worker's employment agency.

Frequency of Bond Breaches

The majority of domestic worker employers will not experience a bond breach. In fact, the probability of a bond breach is less than 1% in a given year. On the other hand, destructive domestic worker and employer relationships still occur more frequently than anyone would like, so it would make sense that foreign governments would want to protect their workforce.

While the possibility of a bond breach is small, you should still take extra precautions to make sure you are not doing anything that can go against your Indonesian worker's contract. Doing so will help you reduce the chances of breaching the bond on the currently ambiguous terms—at least until further clarification is provided.

This was first published at Value Penguin's website, "What Does Indonesia's New S$6,000 Performance Bond Mean for FDW Employers in Singapore?".