Ikea cuts ties with security services supplier over labour policy breach

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.

Many security guards in Ikea’s Malaysian stores had paid fees to secure jobs, according to the retailer’s investigations. The findings, unreported until now, come as leading western brands face growing scrutiny from regulators and investors over labour issues in their international operations.

Ikea’s investigation was launched after a campaigner reported workers from Nepal had paid fees as high as $1,000 to obtain jobs as security guards in Malaysia, according to communications seen by the Financial Times. The probe was led by Inter Ikea, which oversees the brand’s franchise stores, and Ikano Retail, which runs Ikea stores in Malaysia as well as Singapore, Thailand, the Philippines and Mexico.

Ikano, which is owned by the Kamprad family that founded Ikea, said the inquiry confirmed “many of the security guards working in our Malaysia business had paid recruitment fees”, contravening its code of conduct rules. The group said its probe had revealed “multiple layers of subagents involved in the process in rural villages”.

Campaigners say brokers and recruiters charging fees from workers looking for jobs is an endemic problem in many developing countries. Workers often take out loans to cover the cost. For multinational brands that rely on local agents, such problems in the supply chain are often a blind spot, say campaigners.

Debt bondage is recognised as an indicator of forced labour by the UN’s International Labour Organization, whose guidelines state workers should not be charged “any fees or related costs for their recruitment”.

Ikano said: “After many weeks of negotiation with our supplier, we were unable to resolve our concerns and have subsequently terminated our relationship.” The company declined to confirm its former supplier and the Financial Times was unable to contact it for comment.

Ikano said the incident had been reported to local authorities and the Nepalese embassy. Ikea, whose roughly 460 stores are owned by a sprawling network of franchisees globally, is the latest brand to be caught up in a controversy over recruitment fees.

Activists say Nepal’s numerous unlicensed hiring agencies are among the most exploitative when it comes to charging workers. Nepalese migrants around the world have reportedly fallen victim to the practice, including those working on UK farms and on construction sites for the Qatar World Cup.

Ikano said it had secured a new supplier that will recruit workers directly rather than using subcontractors, adding that it would conduct follow-up audits.

Additional reporting by Richard Milne