Importance Of Foreign Workers For The Economy Management Essay

This chapter outlines the importance of foreign workers for the economy, the statement of problem, reasons for choosing this topic, legal implications, the research questions, the research objectives, some previous study related to the topic and the format of the study.

It is not a new phenomenon that during decade’s the movement of people to other countries in search of work has occurred. Moreover globalization contains many facets; it deals with the global distribution of the production of goods and services among countries, which generally result from reducing tariffs, quotas and other barriers to trade and it also conducts migration between developing countries and developed countries, to strengthen the economic growth. In the wake of the deepening Euro debt area crisis, foreign workers still represent a valuable option for the achievement of competitive edge to face the downside challenges.

1.1 The concept of foreign labour

According to Zehadul Karim et al. (1999) the term foreign workers authorize a group of foreign nationals whose legal right to work in a country where they have been officially recruited. Indeed, the rapid growth in the manufacturing sector in the 1970’s and the 1980’s which directed to the rapid expansion of low-skilled and skilled job creation to achieve the requirement of the EPZ sector which local people refuse to undertake and where the need of foreign workers were vital and as a cheap source of labour which improve the exportation and help achieve competitive advantage. Furthermore, the foreign workers were needed to overwhelm the workforce shortage difficulty and mostly at a low labour cost, this is known as an essential tool which controls the activities within the company.

The lure for leaving behind their countries and families for a foreign place is the relatively high pay that can expect to get in the country they are moving to work in as well as the lack of employment opportunities in their own countries that would pay them wages sufficient enough for them to support their families (Yeoh and Huang, 2000). In fact, the foreigners are motivated by the desire for decent wages and opportunities, and good working conditions.

Taran (2005) Senior Migration Officer at the International Labour Organisation (ILO) claims that “there is a growing body of knowledge that demonstrates that migrants make large contribution to economic and social development in both their host and home countries”.

The importance of foreign labour is due to higher level of work output delivered compare to local people and to ensure financial performance. As a result of foreign workers in the textile industry had been able to have a stable supply of cheap labour, and has been able to maintain its competitiveness.

1.2 Importance of foreign workers for the economy

The Mauritian economy has experienced important changes since the independence. The transformation of a country dependant on the sugar industry alone, it has developed a more diverse economy, now including the textile industry, tourism, IT and financial services. Furthermore, the presence of foreign community is small in size but economically is significant. It has helped to preserve and paved the way for cooperation on the economic front as well.

Table 1.1 shows that the importation of foreign workers is in a number of sectors where foreign workers are mostly employed inter alia the manufacturing, construction and in hotels and restaurants. Moreover Table 1.1 provides a clear view of foreigners whose work permit was issued by the Ministry of labour.

Table 1.1: Number of work permits issued from 2008-2012

Sector

2008

2009

2010

2011

2012

Agriculture, hunting and forestry

42

62

71

86

128

Fishing

22

20

24

28

23

Electricity, gas and water supply

7

8

6

7

8

Construction

2583

3476

5454

5921

6531

Wholesale & retail trade; repair of motor vehicles, motorcycles & personal and household goods

371

308

312

381

382

Hotels & restaurants

631

640

695

642

654

Transport, storage & communications

321

243

205

198

211

Financial intermediation

80

71

80

71

73

Real estate, renting and business activities

195

162

183

229

213

Information technology

133

129

166

124

107

Public administration and defence; compulsory social security

4

4

5

4

3

Education

51

60

65

63

63

Health & social work

143

159

225

285

269

Other community, social and personal service activities

700

664

660

749

774

Private households with employed persons

–

–

3

3

4

Total

31869

26674

33808

33932

35629

Source: Fieldwork

Table 1.2 shows that most of the foreign workers were male who were employed to work in the textile factories together with the female. In the year 2008 the number of male was 13,863 but reduced to 12,784 that were due may be to the recession time but the number of female has fluctuated from 9,001 in 2008 but increased to 9,552. Up to now, the number of foreign workers in Mauritius is 22,336 workers.

Table 1.2: Foreign workers employed in large establishments by industrial group & sex

Year

Male

Female

Total

2008

13,863

9,001

22,864

2009

12,386

7,516

19,902

2010

12,514

8,647

21,161

2011

12,784

9552

22,336

Source: Digest of Labour Statistics

1.3 Statement of problem

The foreign workers contributions during the last decades in various sectors of Mauritius had been remarkable and that helped much towards the development of the country and will contribute to the economy of the country for years to come. However, according to the National Economic and Social Council Report (NESC) 2009, there are number of cases reported that foreign labour worked in inferior conditions, abuse of workers and they are ill-treated by employers or local workers. Newspaper articles about bad treatment to foreign workers are shown in Appendix A. Many of them were given false promises in terms of wages and type of employment from their recruitment agencies in their home countries, but they were disappointed on arrival, being given different sets of contracts, or even some of them do not receive their work permit or their residence permit at all. Moreover, it is worth to note that the Republic of Mauritius has not yet ratify the ILO convention on the rights and protection of Migrant workers.

1.4 Reason for choosing this topic

The author has chosen this topic to investigate about the conditions of foreign workers in the country. Since there were uprising and conflicts with local people whereby foreign workers were involved articles are shown in Appendix B.

The choice for this topic has derived from the utilization of foreign workers thus becoming increasingly essential for many firms, given the recent rise in the industrial market. However the understanding of foreign worker’s requirements, abilities and desire to be treated equally with local workers, though the key of organisation is to apply the right human resource practices.

1.5 Research aim

To assess the working conditions of foreign workers at Aquarelle Clothing Ltd

1.6 Research Objectives

The objectives of the dissertation are:

To investigate problems faced by foreign workers at Aquarelle Clothing Ltd

To understand the assistance organization provides to foreign workers to settle down and deal with problems

To make recommendations within the context of the study

1.7 Previous Study

Table1.3: Previous Study

Title

Author

University/Organisation

Year

Impact of Human Resource Practices on Foreign Workers’ Job Satisfaction: Evidence From a Manufacturing Firm

In Malaysia

Yong Kong Hock

Utara Malaysia University

2011

The Impact of Foreign Labour on Host Country Wages: The Experience of a Southern Host, Malaysia

Prema-chandra Athukorala and Evelyn S Devadason

Australian National University

2011

Chinese Migrant Workers in Singapore: An analysis based on interviews

Lin Mei

Xiamen University

2010

1.8 Format of the study

This study is structured into six chapters:

CHAPTER 1: Introduction

This chapter introduces the matter of dealing with foreign labour, the importance of foreign workers for the economy, the statement of problem, reason for choosing this topic, legal implications, the research questions, the research objectives, some previous study, the format of the study and the conclusion

CHAPTER 2: Literature Review

Chapter 2 reviews literature on foreign workers, the Mauritian economy, the history of Export Processing Zone ,the different issues of HRM such as recruitment and selection, retention, integration, welfare ,motivation ,culture and the legal aspects.

CHAPTER 3: Company Profile

This chapter introduces the company profile and its history, together with its main activities and HR policies used.

CHAPTER 4: Research methodology

It encompasses in detail how the research has been carried out, the target sample and the sample size and comprises all relevant information regarding the research methods to meet the objectives of the study.

CHAPTER 5: Analysis and Discussion

This chapter provides a discussion of results and findings from the survey which has been carried out at Aquarelle Clothing Ltd. Every aspect of the questionnaire has been analysed and interpreted and by means of statistics and the information obtained has been clearly illustrated and commented.

CHAPTER 6: Conclusions and Recommendations

The conclusion about the findings of the research is discussed together with recommendations of the dissertation.

1.9 Conclusion

This chapter has highlighted the situation of foreign workers for the economy and how much the textile industry depend more on foreign workers. Furthermore, the research question, the objectives and the problem statement have been emphasized. In the next chapter the author will review literature of previous study.

CHAPTER 2: REVIEW OF LITERATURE

2.0 Introduction

Chapter two presents the literature review of the study about the definition of foreign labour, the Mauritius economy, the Export Processing Zone (EPZ), recruitment, selection and retention of foreign labour, the legal framework and implications, motivation, culture, benefits of foreign workers, problems of foreign workers and finally the conclusion.

2.1 Definition of Foreign Labour

The term foreign employee is defined as general an employee who is a non-citizen (Rajkumar 2001). Miller (1991) used the term foreign workers as these persons come from a confuse nationality groups, living and working with diverse legal status in a particular country.

In Mauritius foreign labour are considered as guest worker so, according to Section 2 of the Occupational Safety and Health Act 2005 “guest employee” means ‘an employee of foreign nationality who has migrated from his country with a view to being employed on contract, otherwise than on his own account, and includes any person regularly admitted as a migrant for employment’.

2.2 The Mauritian Economy

The Mauritian Economy has one of the highest standards of living in Africa. Since independence in 1968 it enjoyed constant growth and reached Gross Domestic Product (GDP) per capita of Rupees of 267300 in 2012. The traditional instruments of development in Mauritius have been sugar in the 1970s and 1980s, Mauritius has been undertaking economic growth, shifting from an agricultural sector to textiles, and later on the tourism sector. But more recently, Mauritius has diversified into financial services and information technology sector.

Furthermore, Mauritius has the best competitive markets, ranked first in Africa, and 54th worldwide (Global Competitiveness Report 2011). Mauritius is now a middle-income country as a result of good economic performance, and ranks 20th worldwide, out of 183 economies in all in terms of overall ease of doing business (Doing Business report 2011). The economic track record of Mauritius is the product of its sound institutions, good level of human capital and preferential access to the European Union market for its key exports.

Furthermore, Mauritius has aided from trade treaties, such as the Lomé/Cotonou conventions (that give privileged access to Mauritius exports to the European market), the Multi-Fibre Arrangement which has permitted Mauritius to develop its textile industry by limiting the clothing exports from generally Asian countries, and since some years the US African Growth and Opportunities Act .

2.3 Employment of foreign workers

Mauritius confronted to a shortage of workers and companies had no alternative but to the employment of workers mainly to maintain their businesses. The necessity to have recourse to foreign workers was because the Mauritian counterparts were reluctant to work for long hours in a zone they named “zone souffrance”. The table below depicts the foreign workers employed in the textile.

Table 2.1: Foreign workers employed in textile, March 2009 – March 2011

Industry

2009

2010

2011

Male

Female

Both sexes

Male

Female

Both sexes

Male

Female

Both sexes

Textiles

9,564

6,357

15,921

9,046

7,317

16,363

8,759

7,996

16,755

Source: Central Statistical Office 2012

The above are the illustration of foreign workers employed in the textile industry it shows clearly the increase from 15,921 in the year 2009 to 16,755 in the year 2011.

2.4 Contribution to GDP

The EPZ sector has led to countless contribution to the level of GDP since some years. With the changing development of the Mauritian economy, the expansion of the manufacturing sector in the 1980s, caused the main source of revenues that is the agricultural sector GDP to decline.

Conversely, EPZ was only 2.6% of GDP in the 1976, but during years the share of the EPZ sector to GDP has increased to 5.2% in 2011 contrasted to the past years. Hence, this represents the share of the textile sector in the development of the Mauritian economy.

2.5 History of Export Processing Zone (EPZ)

The EPZ sector has achieved good position since its independence in Mauritius, in 1970’s. Moreover, the government had worked persistently to create this sector a compromising one for the economic growth and development of the country. The EPZ sector has attracted two thirds of all Foreign Direct Investments (FDI) inflows, which were mainly concentrated on knitwear and garments production. Generally, the EPZ has provided employment, contributed more value-added and earned more export revenue than sugar. Besides, Mauritius offers a favourable business environment, with strong incentives provided by the state for the rising sectors, and careful demand management. The Mauritian EPZ evolved as a driving force sector to attract foreign workers to work in the textile sector.

The EPZ has helped to transform the economy where manufacturing for export has become the leading field. Moreover, at present the EPZ industries are facing a number of problems such as the vulnerability of the garments industry to demand fluctuations and labour shortage of local to compete with competition in the exports.

2.6 HRM issues

Human resource management (HRM) performs the most important role because of the value of the human resources themselves and the complexities of their management. However, in the following paragraphs carries the HRM issues such as the recruitment and selection process, retention, integration, welfare, motivation and culture of the foreign workers.

2.6.1 Recruitment and Selection

The process through which a company employs their new employees is called recruitment and selection by Francesco and Gold (2005). Recruitment can be defined as “searching for and obtaining potential job candidates in sufficient numbers and quality so that the company can select the most appropriate people to fills its job needs” Dowling and Schuler (1990), (cited in Beardwell et, al. 2007). The selection process comprises of the gathering of information for evaluating and deciding who is best suitable for a particular jobs. The recruitment and selection process is of great importance, and it is often very difficult.

The foreign worker recruitment process is basically launched following a firm request for labour, but the local market is searched first before the recruitment of foreigners. The demand has to fall within the shortage area set up by the Ministry of Labour (MOL). However the recruitment exercise is done through specialized recruitment agencies and their foreign agents. In their own country the candidates are called, interviewed and selected through a foreign agent and the shortlisted ones are sent to the local factory. Meanwhile the application for work permits is sent to the MOL by the employer, with the required documents shown in Appendix C.

After the documents are treated successfully, that is the work permits issued locally, the foreign worker may embark to Mauritius, they are directed towards their workplace.

2.6.2 Retention

The retention plan should be based on an analysis of why people leave and sets out ways in which these issues can be dealt with. This imply accepting the reality, as mentioned by Cappelli (2000), that the market, not the company will ultimately determine the movement of employees.

A study of Holbeche (1998) found that “the factors that aided the retention and motivation of high performers included providing challenge and achievement opportunities, mentors, realistic self- assessment and feedback processes”.

In several organisations, when a foreign worker reaches Mauritius, his passport is being taken and retain for safe custody.

Retention strategy takes into account the particular retention issues that the organization is facing.

2.6.3 Integration

According to W.R. Böhning (ILO report 1995) integration is “a catch-all phrase that gains from being given clear contours at the outset and specification in relation to labour market issues”. Integration is, firstly, a process, it involves two actors: the individual who sets out to be integrated and the society attempting to help the achievement of that goal. Integration is, secondly, the end result, which is a state, usually denoted as successful but it can be otherwise and, like all social processes, it is potentially reversible.

The following seeks to summarize some of the integration policies that the MOL requires in the guidelines for work permit application.

To work in Mauritius the foreign skilled workers work permits are granted for a maximum period of four years. The employer of the company should provide a free of charge, decent accommodation together with water and electricity supply and gas with sanitary and fire protection requirements. The address details and the plan of the lodging should be submitted to the MOL with health and fire clearances.

The employer should make available an air ticket to return to his home country to the foreign worker on the termination of the contract of employment or for any cause of any kind. The salary and the requirement of employment of foreign workers should not be less favourable than those recommended in the legislations.

All the provisions of employment and advantages should be noticeably specified in the contract of employment and should be properly signed by the foreign worker and the employer. The remunerations should be given in Mauritius and received in Mauritian Rupees only.

The fundamental conditions should be specified in a contract of employment between the employer and the foreign worker shall comprise of the specifications regarding the days and the hours of work, terms regarding the payment and overtime to be compensated, time duration for lunch and tea pauses, provision for annual, sick, maternity leaves, money for work accomplished on Sundays or public holidays, condition for end of year bonus, as per the employment legislation, circumstances regarding notice of termination of contract, and added provisions concerning lodging and free ticket.

2.6.4 Welfare

Employee Welfare is an essential aspect in the industrial relations, it gives workers satisfaction especially the foreign workers in such a way that even the monthly income cannot. There are facts that show that it is not only wages and working conditions, but there are also other components, such as retirement schemes, vocational training and education are subject to negotiations between social partners (Haipeter and Lehnhoff 2009, d’Arci et al., 2009). After employees have been hired, trained and remunerated, they need to be retained and maintained to serve the organization better. However, welfare facilities are conceived to assure the comfort of the workers, it is not mainly in the form of monetary benefit. But the governmental and non-governmental organisations and trade unions try to play a role towards employee welfare.

2.6.5 Motivation

Motivation is considered as closely related to the performance of human resources in modern organizations. In management, there are numerous theories about what motivates people, however, it is often neglected that what motivates people is culturally determined. Incentives and de-motivators used in human resource management policies are highly cultural specific.

2.6.5.1 Hierarchy of Needs- Maslow

Figure 2.2 Maslow Hierarchy of Needs

C:UsersFarhaanDownloadsAQUARELLE CLOTHING LTD, SURINAM_files2610290401003.png

Source: Maslow (1954)

The most famous classification of needs is the one formulated by Maslow in 1954. He put forward five major need categories which relate to people or workers, starting from the fundamental physiological needs and leading through a hierarchy of safety, social and esteem needs to the need for self-fulfillment, the highest need of all.

According to Armstrong, Maslow’s theory of motivation states that when a lower need is satisfied, the next highest becomes dominant and the individual’s attention is turned to satisfying this higher need. The need for self-fulfillment, however, cannot be fulfilled whereas psychological development occurs as people move up the hierarchy of needs.

However, foreign workers come to Mauritius with the aim to work and therefore they achieve the physiological needs but since they are far from their family they lack social needs that are belongingness and love needs.

2.6.5.2 McClelland’s theory of Needs / Achievement Motivation Theory

David McClelland (1961) established the theory of needs concentrating on three needs that describe motivation that is the need for Power, achievement and affiliation.

Table 2.2: McClelland theory of needs

Motivator

Characteristics

Achievement

Has a powerful need to position and achieve main objectives

Considers risks to attain goals

Enjoys advice on their improvement and success

Often work solo

Affiliation

Wants to have its place in a group

Wants to be interpersonal relationship

Like teamwork than competition

No risk or indecision is taken

Power

Desires to rule and control others

Likes to success

High rate of competition

Appreciates rank and respect

However, foreign workers are looking for affiliation in the company that is the need for a friendly and peaceful environment to work.

2.6.5.3 McGregor Theory X and Theory Y

In 1960, McGregor established two distinct set of perceptions of how people see human behaviour at work. He assumed that companies follow one of the two opposing approaches and are called theory X and theory Y.

Table2.3: McGregor Theory X and Theory Y

Theory X

Theory Y

Workers dislike to work

Workers like to work

Workers has no ambition, and do not want responsibility

Workers meet their work objectives

Workers do not worry about organisational goals

Workers will be committed to achieve self-fulfillment

Workers resists to change

Workers take responsibility

Workers are susceptible and not particularly intelligent.

Workers have creativity and skill

Source: Fieldwork

Hence, foreign workers can be classified to the theory Y of workers, they accepts responsibility, work together with the overtime and they never complaint.

2.6.6 Culture

According to Hofstede and Pedersen (2002) the national culture distinguishes people from one country from those of another country. The management of culture differences in developing countries is an essential ability that all managers must master if they are to be successful in the market. Thus Managers must make the foreign workers to adapt to the different cultures so as they can work efficiently.

Hofstede (1984) defines culture as “collective programming of the mind which distinguishes the members of one human group from another”. In general people only become aware of their own beliefs while they are challenged by someone of other culture (Gooderham and Nordhaug, 2003). However it is essential to understand peoples’ different cultural origins with cross-national players to be able to recognize the effects for international management.

The international companies has to acquire the knowledge of how to cope with worldwide issues like selecting and preparing people for the assignment and managing in other countries, and conducting businesses abroad, to be able to take advantage of and captivate the learning throughout the international processes. In order to be successful in these activities, expatriate has to understand the effects of culture on routine business operations (Briscoe & Shuler, 2004).

Mauritius culture is well known for its cultural diversities and it is very difficult to talk about only one national culture. Considering the fact that Mauritius has different religion groups like Hindu, Chinese, Catholic, Muslims and Marathi, though Creole is the national language and is spoken by mostly the whole of the population but English is the most main language for national, political, and business communications.

2.3.6.1 Hofstede’s cultural dimensions

Hofstede have identified five cultural dimensions for which every country could be categorized in. The five dimensions are power distance, uncertainty avoidance, individualism versus collectivism, masculinity versus femininity, and long-term versus short-term orientation (Hofstede 2001).

In Mauritius, foreign workers are from different countries, hence their views and mindset are quite different. Each foreign workers have each culture so the belief diverse.

2.7 Legal Framework

During the last decade several laws or legislations has developed governing employer and employee relations and the rights of employees and employers in the workplace In Mauritius the Industrial Relation Act (IRA) and the Labour Act, which have been legislated for about 35 and 33 years correspondingly, have been an active contribution in the economic and social development of the Mauritius. With the challenges caused by globalization, the Employment Relation Act 2008 (ERA 2008) and the Employment Rights Act 2008 (ERA 2008) created important changes in the lawful and institutional framework and responded adequately to the economic imperatives and seems to improve the protection of workers, encourage effective collective bargaining and fortify tripartism and social dialogue.

The Employment Rights Act emphases on the labour programme for laid-off workers and has an intention to relate to the law relating to employment, contract of employment, working hours, the remuneration and the supplementary simple terms and requirements of employment to confirm suitable protection of workers. This initiative of the Ministry follows its ratification of international conventions working for the recognition of the fundamental rights of workers, including their basic human rights.

The last official Report on the Employment of Foreign Workers in Mauritius, made in 2008 by the NESC states that ‘without conferring a right to residence or citizenship foreign workers should be able to enjoy the same status as their Mauritian counterparts thereby bringing more homogeneity in the entire labour force’. However, for foreigners to be able to work in Mauritius, the employers have to obtain a worker permit duly issued by the MOL. Work Permits in respect of foreign workers are issued by the Employment Division of the Ministry of Labour, Industrial Relations and Employment under the Non-Citizens (Employment Restriction) Act and it is to be delivered with a minimum delay of two weeks.

The MOL amended the Labour Act in 2008, ensuring that Mauritian and foreign workers benefit from the same rights, working conditions and have the same basic salary scale. Article 32 of the Employment Relations Act (2008) also gives foreign workers the right to join a trade union. This change in law and policy follows the ratification of international conventions calling for the recognition of the fundamental rights of workers, including their elementary rights (NESC, 2008).

The MOL announced the establishment of the Special Migrant Workers’ Unit to serve the migrants by vetting their contracts and monitoring their work and living conditions. This Unit has 7 members of staff and the work of the officers is divided between administrative work and field work. The Special Migrant Workers’ Unit also has a Chinese interpreter. Officers of this Unit are required to inform workers about their rights, especially to join a trade union of their choice, right to assistance from the Special Migrant Workers’ Unit, right to be assisted by an officer in disciplinary procedures. In fact, whenever an employer decides to termina