Employer of Record and Sourcing Contractors from Southeast Asia. The Lies, Underpayments and Modern Slavery
Many businesses now have anti-slavery statements, supplier codes, and strong words about ethical sourcing. But when it comes to sourcing workers through third parties in Southeast Asia, good intentions can collapse very quickly if the commercial model is not properly understood.
That is the uncomfortable point of this article.
At Ryoss, we are conscious that poor practice in the market does exist. Sometimes it is obvious. Sometimes it is hidden behind polished sales language, “compliant” structures, and supposedly ethical Employer of Record or contracting models. And sometimes businesses contribute to it without ever intending to, simply because they do not ask the right questions, do not demand enough transparency, or assume that if a provider looks legitimate, the worker must be protected.
That assumption is dangerous.
The scale of the issue should concern every serious business. The ILO’s latest global estimates say 50 million people were living in modern slavery in 2021, including 28 million in forced labour. In 2024, the ILO also reported that forced labour in the private economy generates US$236 billion in illegal profits each year. Those profits do not appear out of nowhere. They are created through coercion, deception, withheld wages, abusive deductions, and labour models that extract value from people who are often too vulnerable to challenge them.
This matters directly for companies using third-party labour sourcing or EOR-style models. The Australian Modern Slavery Act requires certain large businesses operating in Australia to explain how they identify and address modern slavery risks in their global operations and supply chains. That is an important legal signal: the responsibility does not stop at your direct payroll. It extends into the way your people are sourced, supplied, and managed through others.
The uncomfortable truth is that some businesses can be contributing to modern slavery risk while genuinely believing they are doing the right thing. They may choose a provider because it offers a low headline cost, says all the right words about compliance, and presents an apparently clean EOR or labour supply model. But underneath that model there may be recruiters, sub-agents, unexplained deductions, worker-paid recruitment fees, misleading wage promises, hidden subcontracting, or a large gap between what the client pays and what the worker actually receives. None of that is hypothetical. OECD guidance warns that subcontracting reduces visibility into labour standards and that the use of recruitment agencies increases the risk of forced labour impacts, including debt linked to recruitment fees.
That is why legal structure alone is never enough. An EOR can be a lawful and practical solution. A contractor platform can be lawful and practical too. But neither is moral proof. If the worker is being underpaid, misled, indebted, or trapped behind a chain of intermediaries, the use of a neat legal wrapper does not change the underlying ethics.
One of the clearest danger signs is worker-paid recruitment fees. The ILO’s 2024 global study found that recruitment fees and related costs account for about 15% of the illegal annual profits reaped from international migrant labour, or around US$5.6 billion. The same study notes that an estimated 20% of all forced labour cases emanate from debt bondage, much of which occurs through the payment of exorbitant recruitment fees and related costs. In plain English: if workers have to borrow heavily to secure a job, the job may already be sitting inside a coercive system before the worker starts.
This is especially relevant in Southeast Asian labour supply chains because migrant and cross-border workers can be highly exposed to debt, misinformation, and dependence on intermediaries. Guidance from the NSW Anti-slavery Commissioner notes that temporary migrant workers may face indebtedness from recruitment fees, language barriers, limited knowledge of rights, wage deductions, delayed or withheld wages, document retention, and dependence on employer-provided accommodation. The same guidance is explicit that preventing the payment of recruitment fees by workers helps prevent forced labour and trafficking in supply chains.
The warning signs are often mundane rather than dramatic. Australia’s modern slavery guidance says deceptive recruiting can involve workers being promised decent work and pay but ending up working for little or no wages, being misled about the work, hours, location, or debts connected to the job, and being unable to leave because passports or identity documents have been taken away. It also notes that dishonest third-party recruiters and labour hire firms may be the worker’s main source of information about pay and conditions, making deception easier.
The ILO’s own forced labour indicators reinforce the point. Among the recognised indicators are deception, retention of identity documents, withholding of wages, debt bondage, abusive working and living conditions, and excessive overtime. The ILO explains that wages deliberately withheld to compel a worker to remain point toward forced labour, and that debt bondage often arises from loans taken to cover recruitment or transport costs, with employers or recruiters then making it difficult for workers to escape the debt.
This is why underpayment should not be treated as a minor commercial issue. Sometimes underpayment is simply poor compliance. Sometimes it is the front end of something much worse. The ILO’s 2024 forced labour profits report makes a stark point: these illegal profits are, in substance, wages and value stolen from workers through coercive labour exploitation. When a provider’s model depends on opacity, unexplained deductions, or keeping workers financially trapped, the commercial savings enjoyed by the client may be sitting far closer to modern slavery risk than anyone wants to admit.
So what should responsible businesses do?
First, stop treating “ethical sourcing” as a branding exercise and start treating it as a design discipline. A buyer should know exactly who is in the labour supply chain, whether there are sub-agents, whether any recruitment fees are ever charged to workers, what the worker’s gross pay is, what statutory costs apply, what the provider margin is, and whether the worker has a written contract in a language they understand. If a provider cannot or will not disclose that, the risk is already too high.
Second, insist on transparency at worker level, not just provider level. Ask whether passports are ever retained. Ask whether workers control their own bank accounts. Ask whether there are any mandatory deductions for rent, transport, food, laundry, equipment, or placement. Ask whether resignation is practically possible. Ask whether an independent grievance channel exists. Ask whether the provider will certify that no worker-paid recruitment fees or related costs are permitted. These are not “nice to have” questions. They are baseline due diligence.
Third, be very careful with price. If a labour model looks unusually cheap, someone in the chain may be absorbing that cost in a way you do not yet understand. Too many buyers still behave as though ethics sits in one box and procurement sits in another. It does not. Commercial pressure is often where exploitation begins.
Fourth, require auditability. A serious labour supply partner should be able to provide payroll evidence, fee disclosures, contract templates, and a clear explanation of the labour pathway from candidate to active worker. If there is a hidden supply chain, you are not managing risk; you are inheriting it.
At Ryoss, we think this matters because modern slavery risk is not only a legal or policy issue. It is a moral one. Businesses should not be allowed to comfort themselves with polished anti-slavery language while benefiting from models they have not properly examined. If a worker in Southeast Asia is being sourced through deception, paid unfairly, burdened with debt, or held in place by withheld documents or withheld wages, then somebody in that chain is profiting from abuse. And if the buyer chooses not to look too closely, that is not neutrality. It is complicity by omission.