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Human Resource Manager,Indian garment factory

Contract workers,Indian garment factory

R e p o r t o n th e ET I I m p a c tA s s e s s m e n t 2 0 0 6

Part 2a: India

The Ethical Trading Initiative (ETI) is an alliance of companies , trade union and non-governmentorganisations committed to improving working conditions in global supply chains. ETI company membersrequire their suppliers to comply with the ETI Base Code, a code of labour practice based on internationallabour standards. After five years of operation, ETI wanted to assess:

• how its member companies were implementing the ETI Base Code;• the impact of members’ activities on workers in the supply chain;• how the impact of members’ work could be improved.

In 2003 ETI commissioned the Institute of Development Studies at the University of Sussex to conduct thisassessment. The study was undertaken between 2003 and 2006 and this document is one of ten repor tswhich, together, give the summary, complete findings, case studies and methodology of the study. The tenrepor ts, published under the series title Repor t on the ETI Impact Assessment 2006, include the following:

This series of repor ts has been prepared by the Institute of Development Studies (IDS) and the views expressed donot necessarily represent the views of ETI or of its member organisations. IDS is responsible for the accuracy ofinformation contained in the document and our recommendations have not necessarily been endorsed by ETI.

© Institute of Development Studies, University of Sussex, 2006

Summary Summary of an independent assessment for the Ethical Trading InitiativeThis six-page document summarises the key findings and recommendations. It is available in print as well as online and is translated into Chinese, Spanish, French and Vietnamese.

Par t 1 Main findings and recommendations from an independent assessment for the Ethical Trading InitiativeThis is the report of the main findings with recommendations and g ood practice examples.

The detailed fieldwork comprised case studies in six countries and the findings are given in six documentsthat make up Part 2 of the repor t. These will interest reader s who want more detailed information on labourissues and code impacts in these countries.

Par t 2A Findings and recommendations from a case study in India (garments)Par t 2B Findings and recommendations from a case study in Vietnam (garments and footwear)Par t 2C Findings and recommendations from a case study in South Africa (fruit)Part 2D Findings and recommendations from a case study in Costa Rica (bananas)Par t 2E Findings and recommendations from a case study in the UK (horticulture)Part 2F Findings and recommendations from a scoping study in China

Par t 3 How and wher e ETI member companies are implementing codes This makes up Par t 3 of the report series and describes the first phase stud y of ETI members’activities.

Par t 4 Research methodologyThis is for readers who want more detail on the research appr oach.

Each of the reports can be freely downloaded from www.ethicaltrade.org/d/impactreport and www.ids.ac.uk/

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Pa r t 2 a [ Fin d i ngs a n d re c o m m e n d a t i o n s f r o m a c a se st u d y i n I n d ia ]

The Ethical Trading Initiative (ETI) is an allianceof companies, trade union and non-governmentorganisations (NGOs) committed to improvingworking conditions in global supply chains. Whenthey join ETI, companies commit to implementingthe ETI Base Code - a code of practice based oninternational labour standards - in all or part oftheir supply chain. But how exactly have membercompanies put this commitment into practice?Has their work on implementing the Codeactually made any difference to workers in theirsupply chains? How can the impact on workersbe improved? In 2003 ETI commissioned us toundertake a study to answer these and otherrelated questions. This document provides anaccount of the key findings andrecommendations from a case study of theIndian garment industry, one of six case studieschosen to give an insight into key issues indifferent countries and sectors.

This document is relevant to all those involved inmonitoring and improving labour conditions in theexpor t garment sector in India, including retailers andbrands, agents and suppliers, auditors, NGOs andtrade unions. It provides an overview of the impacts ofcodes of labour practice in g arment factories in India,and of the key labour issues that remain to beaddressed; an analysis of key factors found to affectimpact; and recommendations for improving theimpact of codes in the Indian garment industr y.

The ETI Impact Assessment was initiated in 2003 -five years after ETI was established - to answer thequestions outlined above. Based on assessing theethical trade programmes of nearly 30 sourcing

companies (r etailers, brands and suppliers), andincluding in-depth case studies in five countries andthree sectors, this has been the most comprehensiveassessment of the impact of codes of labour practiceto date.

The Institute of Development Studies (IDS) at Sussexis well-respected for its research and consultancy oninternational development. The research team hasextensive experience and exper tise in ethical trade,employment in expor t production and labourstandards. For the case studies IDS worked inpar tnership with local researchers who spoke therelevant languages and had experience of labourissues in the industr y in question.

The research findings ar e based on qualitative andquantita tive information collected from all keystakeholder groups, including brands, retailers,agents and supplier s, factory and farm managers,trade union organisations at international and nationallevels, NGOs, and all types of workers (women as wellas men, migrant and contract workers as well aspermanent workers, and trade union worksiterepresentatives).

The findings and recommendations from the ETIImpact Assessment are written up in ten separatedocuments, all of which can be freely downloadedfrom www.ethicaltrade.org/d/impactrepor t andwww.ids.ac.uk. The ten documents, each targeted atdif ferent audiences, are listed on the inside frontcover of this repor t.

By of fering these dif ferent ways of accessing thefindings of our study we hope we are throwing ahelpful searchlight on current ethical trade practicethat will enable everyone involved to enhance theirunderstanding and develop their practice in thischallenging but wor thwhile field.

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We would like to offer our sincere thanks to Dr. AtulSood, Dr. Kanchan Mathur and Ms Savi Mull, ourresearch par tners in India, who conducted most ofthe research interviews in India and compiled aninitial repor t of the findings. We would also like tothank our colleague Professor Naila Kabeer, whoseextensive experience of labour issues in Asiangarment factories pr oved an invaluable contribution tothis case stud y. Lastly, we would like to extend ourthanks to the ETI member companies who agreed topar ticipate in this case stud y, and to all those whotook par t in the interviews, in par ticular managers andworkers at the case study supply sites.

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The Indian garment sector was selected as a casestudy for the ETI Impact Assessment for the followingmain reasons:

• India ranked third after China and the UK in ter ms of number of assessments (242 in total) carried out by ETI companies in 20021;

• India is an impor tant sourcing countr y for garments for several ETI companies and will continue to be despite the phase-out of the Multi-Fibre Agreement (MFA);

• the availability of background information and baseline data.

The research partners for this study were Dr AtulSood from Jawaharlal Nehru University, New Delhi, DrKanchan Mathur from the Institute of DevelopmentStudies, Jaipur, and Savi Mull (Research Assistant).

In order to examine whether and to what extent theETI Base Code has impacted on Indian garmentsuppliers and workers, we selected three contrastingETI member value chains for this study. Two wereretailers, one a brand. One chain was fairly complex,involving intermediaries; one chain was more dir ect,with a social compliance of ficer based in Delhi; thethird chain was even more integrated also with asocial compliance of ficer based in Delhi. One of thecompanies was relatively new to ETI, but had had acode similar to the ETI Base code f or a number ofyears.

The case study traced the selected garment valuechains to Delhi. It also covered adjoining areas withinthe National Capital Region inc luding Gurgaon inHaryana and the New Okhla Industrial DevelopmentAuthority (NOIDA) in Uttar Pradesh. From the three ETIcompany value chains six suppliers were selected.

The main criteria for selection was to ensure a crosssection of suppliers from the three value chainsbased on size, product range, share of buyer volume,and length of association with the buyer. Although wetraced the fir ms through selected ETI company valuechains, between them they supplied a total of sevenETI member companies.

The six units covered by our sample belonged to thebig and medium category in the Delhi garmentssector2. The suppliers in our sample represented thecomplexity of production organisation prevalent in thesector. The production process in our sample unitswas mostly assembly line. Production work in times ofhigh demand was often outsourced to smaller unitscalled the fabricating units. Each supplier had multipleunits, a total of 31 units for the six suppliers in oursample.

Three of the six suppliers were relatively oldcompanies and were established between 1970 and1980. Two of them had been working for the past twodecades. Only one of them was relatively new. All ofthe sample companies were 100% expor t-orientedgarment manufacturing units. The sample unitsrepor ted on had a total of 5,143 workers. All suppliercompanies had other units that were not included inour study.

They supplied up to 30 buyers per company (ETI andnon-ETI), many of whom had codes of labourpractice. Managers generally found it dif ficult todistinguish betw een these different company codes.Awareness of ETI was limited or minimal - only halfthe suppliers in our study had heard of ETI, andawareness was limited to the human resourcemanagers.

The methodology for the impact assessment involvedthe ‘value chain to impact mapping’ approach (seePar t 4: Research methodology for further informationabout this approach).

1 As reported by ETI member companies in their 2002 annual reports to the ETI Board.

2 Units that have a turnover of more than one thousand million Rupees are considered big firms in the market often employing more than 2,000 workers. Units with a turnover of less than Rs. 100 million are considered as small units in the industry.

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The case study involved interviews with:

• the three ETI member companies and keyintermediaries within their value chains;

• human resource managers, senior managers and workers at the six supplier sites3;

• key informants from trade unions and non-governmental organisations (NGOs), and professionals well versed in the garment sector.

In each of the units a total of 25 workers from amongthe various categories of workers were selected forfilling in the questionnair e/schedule. 150 workers wereinterviewed out of a total of 5,143 workers in the mainunits. On each site three focus g roup discussions(FGDs) were held, one each with male and femaleworkers and one with a mixed g roup of workers (bothmale and female). Relatively fewer women workerswere employed in the sample units.

Approximately 15% of the workers in the six units inour study were regular/permanent workers. 85% wereeither temporary or contract workers hired throughthird party contractors. In written documentation wewere not informed of contract workers, however siteinterviews with management and workers revealedthat all but one of the units in our study employedcontract labour. Many workers were internal migrantsfrom outside Delhi who return to their villages forfestivals.

Out of a total of 150 workers, 101 were male and 49female. The lower number of female workersinterviewed reflected the fact that employment ispredominantly male in the Delhi garments sector4.Around 65% of the workers in the sample weremarried. Approximately 50% of those selectedbelonged to the 25-35 years age g roup, around 27 %to the 18-25 age group and 22 % to the 33-45 a gegroups. Most of them were married but had not had

children yet. They were mostly literate with high schooleducation.

The caste profile of workers revealed that 50% ofworkers belonged to the general castes i.e . Brahminsand Rajputs, 22% belonged to what are termed“Other Backward Castes” i.e. Yadavs, Kumhars, Jatsand Patels, 14% to minority groups i.e. Muslims andChristians, and 8.6 percent to the Scheduled castes,mainly Harijan and Kohli castes 5.

For the FGDs, the aim was to select workers who hadspent more than two years in either the same factoryor similar garments units. This was to ensure that theworkers had adequate experience of working forsuppliers to ETI companies, and could comment onimpact. The workers’ perspective was furtherstrengthened by visits to two worker colonies wherethe workers from the sample units and those whopar ticipated in the FGDs were living. The interactionswith these workers took place in their homes. Contractworkers from one of the sample units were alsointerviewed off-site with the help of a prominent tradeunion. To better understand the general per ceptionsof workers working in the garment sector in Delhi andto triangulate information gathered from the workers inthe sample units, a few workers were also interviewedfrom one of the larger worker colonies in Delhi.

This was a case study, and the sample was notstatistically representative of all supplier s to ETIcompanies, or of the Indian garment sector as awhole. While we aimed to include a cross-section ofsuppliers with dif ferent characteristics , not allsuppliers approached agreed to par ticipate in thestudy. Moreover, on two of the sites studied, many ofthe workers were only employed for one year or lessbecause of high worker turnover, thus making itdifficult to identify impact of codes over time. Onanother site, management controlled the availability ofworkers for research (we were restricted to

3 Within our sample two suppliers said that they did not subcontract work because of codes, while the others did. The research team was unable to obtain contact details for subcontractors at the lower levels of the chain, or obtain agreement to car ry out interviews at that level.

4 The dominance of male workers in the Delhi garment sector is particular to Nor th India, where the percentage of women employed in anysector is low compared to other regions in India.

5 The remaining respondents did not know/specify the case group they belonged to.

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conducting research on a day when only per manentworkers selected by management were available).Never theless, the research team attempted tocounteract the bias in w orker selection by conductingseparate of f-site interviews with contract workerscontacted through a trade union.

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Ready-made garment expor ts from India have grownrapidly over recent decades. Garment exports werevirtually non-existent prior to 1960. Between 1970 and2000, garment expor ts grew from 1.89% to 12.5% asa percentage of total expor ts. India's share in worldgarment exports also rose from 1.8% in 1980 to2.34% in 1990 and stood close to 2.82% in 1999. In2003, India ranked as sixth largest garment expor terto the European Union, with a 5.6% market share,which has been increasing.

It is estimated that in 1999-2000 there wereapproximately 30,472 garment enterprises in Delhi. Ofthese, 675 garment enterprises were registered underthe Factory Act and 29,797 were unregisteredgarment enterprises. Thus nearly 98% of theestimated garment units in Delhi were in theunorganised sector. Delhi accounted f or a little over13% of the all-India registered sector garmententerprises and 3.84% of the unregisteredenterprises. In terms of the value of all-Indiaproduction, Delhi produced roughly 19.20% of thetotal output in the registered sector and 16.54% of theoutput in the unregistered sector.

The setting up of NOIDA (New Okhla IndustrialDevelopment Authority) in 1976 was an experiment indeveloping a modern township under the UttarPradesh Industrial Area Development Act. NOIDA is awell planned township 12 km from the centre of Delhi.Phase 2 of NOIDA included an expor t processingzone and a hosiery complex. Textiles and ready-madegarments were among the areas of special focus.However, while planning the industrial townshiphousing no space was allocated for workers. Thisresulted in the emergence of slums and‘unauthorised’ residential colonies of the poor.

Gurgaon is located in the state of Haryana and is 32kms from Delhi. Udyog Vihar, a par t of Gurgaon, is anarea earmarked for industrial units. Industrial plots areof reasonable size. Here ready-made garments were

also identified as a sector of potential development.Gurgaon again had no pr ovision for workers’ housing.

Delhi employees were estimated to inc lude 1.02 lakh7

workers in the garment industry. Of these, it isestimated that only 21,469 workers were in theregistered garment sector and 80,051 workers were inthe unregistered sector. The total garment sectoremployment in Delhi was roughly 5.82% of the all-India garment sector employment.

The gender distribution of the estimated workforcesuggests that in the unorganised g arment workforce,men formed roughly 96.68% of the total employmentin Delhi while women were barely 3.32 per cent. InDelhi’s registered ASI sector though women’s sharewas much higher - 17.87%, while men’s share wasnearly 82.13%.

In India currently there are nearly 40 labour laws,which are fairly progressive. Labour legislation appliesto all factories and contr ary to commonly held belief,differ very little with factory size and whetherregistered with the Factories Act or not. Registrationwith the Factories Act is formally meant to ensure thatthe following legislation is complied with:

• Payment of Wages Act 1936

• Minimum Wages Act 1948

• Workmen’s Compensation Act 1946

• Employees’ State Insurance Act 1948

• Employees’ Provident Pension Fund and Miscellaneous Provisions 1952

• Employees’ Pension Scheme 1971

• Maternity Benefit Act 1961

• Payment of Gratuity Act 1972

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6 The background information on Dehli garments is drawn from: N. Singh, R. Kaur and M. Kaur Sapra, (2003) Continents Wide and LayersDeep: The Ready-made Garment Industry in the Times of Restructuring, National Council of Applied Research, Delhi.

7 A Lakh is a unit in a traditional number system still used in India equal to 100,000

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• Trade Union Act 1926

• Industrial Employment (Standing Orders) Act 1946

• Employment Exchanges (Compulsory Notification of Vacancies) Act 1959

• Apprentices Act 1961

• Contract Labour (Regulation and Abolition) Act 1970

• Equal Remuneration Act 1976

• Inter State Migrant Workmen (Regulation ofEmployment Conditions of Service) Act 1979.

However, a major issue is lack of registration orenforcement of legislation. Key informants in ourresearch indicated that paying off labour inspectorsto avoid implementation of labour laws is notuncommon. A key factor stopping implementation oflaw is long working hours and over time, without whichsupplier s would lose orders

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Table 3.1 summarises the impacts repor ted bymanagement and workers in each of the nine areas ofthe ETI Base Code. ’Major’ indicates that widespreadand significant change had occurred acr oss severalor all case stud y worksites (e.g. reductions in workinghours at over half the sites). ’Minor’ indica tes thatchanges were only repor ted at a few sites or hadminimal impacts on workers (e.g. introduction of agedocumentation at one or two sites). An asterisk nextto either Major or Minor implies that the change wasviewed as negative for at least some of the peopleinterviewed. Zero means that no change wasrepor ted, but this does not necessarily imply therewere no non-compliances with the Base Code (seesection 3.4 for Key issues remaining).

The main impact of codes of labour practice in Indiahas been on health and safety. There have been someimpacts in relation to the payment of minimum wages,and par ticularly the payment of social and pensionbenefits. There have been minor impacts on workinghours, regular employment and harsh treatment,although these varied by factory. There has been littleor no impact on freedom of association anddiscrimina tion, which remain issues in the Delhigarment sector.

It should be emphasised that impacts were notnecessarily exclusively a result of implementation ofthe ETI Base Code. It was sometimes impossib le toseparate changes brought about by company codesfrom other influences, but all impacts repor ted herewere considered to be at least in par t a result of codeimplementation.

3.2.1 Employment is freely chosen

This did not come up as an issue at any of the sites.

3.2.2 Freedom of association and the right to collective bargaining

The Factories Act 1948 allows the workers of anyenterprise with seven or more workers to form a tradeunion and register it. None of the workers inter viewedwithin the factory premises repor ted being a memberof any trade union, and no unions were found to beformally operating in the f actories. All factories hadworkers’ committees:

Base Code principle

Freedom of employment

Freedom of association

Health and safety

Child labour

Living wage

Working hours

Discrimination

Regular employment

Harsh treatment

0

0

Major

Minor

Minor

Minor

Minor

Minor

Minor

0

0

Major

0

Minor

Minor*

0

Minor

Minor

Mmt Wkrs

Table 3.1 Summary of impacts at thesix supply sites

KEY

MmtWkrsMajorMinor*0

ManagementWorkersMajor and/or multiple impacts across several worksitesMinor impacts and/or impacts at isolated worksites onlyImpact perceived as negative by at least some intervieweesNo impact reported

8 A full explanation of how Table 3.1 was derived is given in Part 1, Key findings, section 2.1.

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• Four suppliers said workers committees were set up because of codes. Suppliers see the workers’committees as bringing a positive change in the relationship between the workers and the management;

• Workers were more ambiguous. On one site workers saw committees as positive. Non-regular workers were not represented on committees .

3.2.3 Health and safety

Health and safety was the area of greatest positiveimpact. The management in all the factories repor tedthat health and safety has undergone a number ofchanges due to the implementation of codes, and thiswas confirmed by workers on all the sites. The humanresource managers usually attended to this aspect ofcode compliance.

• Code compliance was given as the single reason by the management for:

- increase in fire exits

- provision and usage of protective safety equipment, like needle guards, gum boots,etc

- increase in the number of toilets

- improvement in ventilation and lighting facilities

- clear labelling of chemicals

- provision of suggestion boxes.

• In some supplier companies, training for first aid toworkers and regular fire safety drills took place on a regular and frequent basis in accordance with code requirements.

• All six supplier companies visited had separate toilets for men and women.

• Fire safety precautions, including fire exits and extinguishers were visible on each of the floorsvisited in all supplier company units. Workersrepor ted that they undertook regular fire safety trainings and drills. Names of such trained worker

representatives were displayed on notice boards on dif ferent floors.

• On five sites, regular workers repor ted that theynow had access to better medical care within the factory, which they linked to buyers’ codes.

• As a result of codes, first aid boxes were nowprovided on each floor for use in case of minor injuries and ailments, and these were observed bythe research team. However, in off- site interviews contract workers repor ted that first aid boxes got stocked with medicines, etc only during buyers’visits or a few hours prior to the arrival of the buyers and other inspectors. The first aid boxes were emptied as soon as such visits were over.

3.2.4 Child labour shall not be used

Suppliers repor ted that their youngest workers were18 or 19 years old. No child labour was found to beemployed by any of the supplier companies that werevisited. Four sites had introduced procedures forchecking workers’ ages, as a result of codes.However, suppliers suggested that by the time codeswere introduced, the incidence of child labour ingarment expor t factories had already beensubstantially reduced as a result of more effective lawenforcement.

According to one human resources manager, therewas a ‘tremendous improvement’ in workingconditions resulting from health and safetychanges linked to code compliance:

“The workers have become more disciplined. The management has become more liberal andprovides good quality working conditions to theworkers.”

“We have realized that they are human beings andthat they need all these facilities in the factories.”

This was confirmed by worker interviews.

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3.2.5 Living wages to be paid

We found that codes had had some impact inensuring payment of a minimum wage, payment ofbenefits and documentation of wages, for regularworkers in par ticular. However, codes had done littleto ensure payment of a living wage.

• All supplier companies said they now paid minimum wages, and buyer codes had made minimum wage payment mandatory9. Suppliersalso repor ted tha t arrears from revision ofminimum wages as per government norms werenow also given to workers. Regular workersrepor ted receiving minimum wages but not necessarily ‘living’ wages.

• Contract workers were less likely to receive their wage or benefit entitlements, depending on the contractor (see section 3.4.5 below). Two supplier companies rep o rted that , as a result of c o d e s, t h ey n ow ensured that their staff we re present when c o n t ra c t o rs d istributed wages to their wo rke rs. Th eysaid this ensured timely payment of wages as well as the payment of l egal minimum wage s.

• All supplier s repor ted giving workers benefits and other entitlements such as Employees’ State Insurance (ESI) and Provident Fund (PF)10. When workers were interviewed in the factories they saidthey received these benefits and on four sites workers linked this to buyers’ codes. However,some temporary workers said they did not get benefits when laid off, and of fsite interviews with contract workers indicated many did not receivetheir entitlements.

• The implementation of codes had compelled supplier s to maintain personal files on workers.The files include identity pa pers of workers,personal data, age proof documenta tion,photographs, nomination papers for ESI and PF benefits, etc. On four sites management repor ted giving wage slips to their workers as a result of

codes. Regular workers did not repor t having received permanent written contracts, but said they received pay-slips with the company’s name and the description of salary components.

3.2.6 Working hours are not excessive

Two suppliers repor ted increases in overtime hours asa result of falling lead times from buyers. Bothindicated it was difficult to comply with over timerequirements. All suppliers said they introducedpayment premiums for over time, attributed to codes.This was confirmed by workers on two sites.

3.2.7 No discrimination is practised

One HR manager said there had been an unwrittenpolicy of not recruiting women which he had changedwhen he arrived. Another manager said there hadbeen a change in hiring of women and men becauseof code compliance (women were seen as moreproductive within normal working hours and thishelped to reduce overtime). Two sites had an equaloppor tunities policy, but it was not clear that this wasdue to codes.

3.2.8 Regular employment

Lack of regular employment is a significant issue inthe garment industry in Delhi, but we found that codeshave only had a limited impact in addressing this.

9 Minimum wage: approximately R3,500 per month in the Delhi region, but this varies by region, and by skill grade (e.g. tailor, cutter etc).

10 Employees’ State Insurance Act (1948) provides for health care, cash benefits in case of sickness, maternity and employment injury.Eligibility is for employees drawing wages not exceeding Rs 65,000 per month, and all employees are entitled including casual and temporary workers. Employees’ Provident Funds and Miscellaneous Provisions Act (1952) provide old age or survivor’s benefits inc luding compulsory pensions. Eligibility is for employees drawing pay not exceeding Rs 5,000 per month, excluding casual workers and apprenticesbut including contract labour. (Singh, Kaur and Sapra op. cit. 2003, p. 44).

Workers in one focus group discussion recountedthe situation of one female worker who was nowcovered by Employees’ State Insurance (ESI) as aresult of codes. Her husband had come to the unitto distribute sweets because the expenses ofdelivering their baby were covered by ESI and hedidn’t realise that the monthly deductions wouldpay off so well. Other workers reported similarsituations.

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• All but one of the units in our study employed contract labour hired through third par ty contractors. One unit used to operate this system,but ended it because of the dif ficulty of complyingwith codes (a limited but positive impact).

• Company management repor ted that when theyentered into contractual agreements with contractors they included code compliance in the legal contracts. Suppliers repor ted thatcompliance was ensured in cases w here the contractual workers were hired a t the factorypremises. However, they all suggested thatmonitoring of compliance in the case ofcontracted-out workers was very difficult.

• As a result of codes, two supplier s repor ted providing written letters of appointments to their workers, both permanent and fixed-termcontractual workers. Usually after three months,some companies g ave a letter of confirmation thatset out the employment status of the worker.Suppliers did not provide written employment contracts. On one site workers said there werenow more permanent workers as a result of codes

• In one unit wo rke rs said they we re re - e m p l oyed e a ch time they re t u rned from their villages for h o l i d ays (thus avoiding permanent employment s t at u s ) . The reason g iven for this by suppliers was the seasonal nat u re of the ga rment industry in Delhi.

3.2.9 No harsh or inhumane treatment

Some supplier s repor ted that the incidence of abusehad been r educed because of codes. One repor ted achange, with less verbal abuse and sexualharassment of female workers by male employeesand super visors (e.g. loitering around women’s toilets,shouting). This used to be a pr oblem, but workerscould no w repor t issues to auditors and the problemhad stopped. However, workers did not specificallyverify these changes.

The other main impact of codes f ound at worksitelevel was increased awareness of labour legislationand of the need to comply with it:

• Three supplier s said that codes increased their awareness of labour laws, and that contractual agreements with buyers pressurised suppliers to follow law. One HR manager felt that “codes act asa catalyst for law implementation”.

• One HR manager said that his compan y had traditionally paid a ‘nuisance value’ (bribe) to the government labour inspector. However, since his company has now made improvements to their labour practices as a result of codes, they nowonly have to pay half the amount in bribes because the labour inspector cannot find manyviolations.

• However, in the view of one manager, the relationship between the management and workers had deterior ated after code compliance.He saw this as being largely due to workersbecoming more aware of their rights. The workersnow knew that what buyers wanted was not necessarily what the management wanted.

Owner of a 12-year old garment

export unit in Delhi

3.4

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3.4.1 Freedom of association and right to collective bargaining

Freedom of association remains a significant issue.None of the sites in our study were unionised.

Some employers said formally they would acceptfreedom of association, but most managementinterviews implied they did not want unions. On twosites workers had been laid off as a result ofdisputes , one with cutters in a trade union who weresacked and replaced. In another 150 workers hadbeen laid of f because of disputes over payment ofthe minimum wage and ESI. It was difficult f or tradeunions to organise workers given the high turnover ofworkers (up to 80-90% per annum) and theprevalence of contract workers.

When interviewed on-site the management repor tedthat worker solidarity existed in their company andworkers repor ted a family-like atmosphere at theworkplace. However, during the discussions in theworker colonies, many of the workers said that due tohigh tur nover of labour, worker solidarity was absent.They said that in cases where the managementnoticed increasing worker solidarity, they laid offworkers.

3.4.2 Living wage is paid

Off-site inter views with contract workers indicatedthey did not all receive benefits, contractors couldhold bac k pay, and contractors and/or suppliers keptdouble books.

Codes appear to have had an impact on payment ofminimum wages for permanent and regular workers,but there are still serious issues for contract workers.

The Vice President of a prominent trade union thatworks in the garments sector said tha t contractworkers come to them mainly with three problems, i.e.ESI, PF and non-payment of minimum wages. In suchinstances, the union members approach theemployers and discuss the case with them but the

employers try to circumvent dealing with such issuesby blaming the contractors.

3.4.3 Working hours are not excessive

Some workers indicated overtime premiums could becircumvented (e.g. paid one hour premium for twohours over time), and on one site lunch breaks werenot counted in working hours. Contract workers werenot always paid an over time premium. One supplierhad reduced overtime by increasing capacity (numberof machines), but they also had 90% worker turnoverand workers repor ted being unha ppy at the loss ofovertime pay.

3.4.4 No discrimination is practiced

In Delhi there is a long-standing tradition of employingmen rather than women in garment production (seesection 2.2). This was reflected in the gender ratio ofemployment in our case study sites. One HR managerindicated that fewer Muslims were hired because theyneeded to attend prayers during working hours.

3.4.5 Regular employment is provided

The position of contractual workers remains asignificant issue. They are employed through thecontractor which drastically reduces the responsibilityof the unit owners towards them. Pay slips were givento the contractual workers by the contactor, but oftenno proper written records were maintained forcontractual labour. They may work on a separate floorwithin the premises of the same factory, and have aseparate entrance. Off-site responses of contractualworkers revealed that they were often not paidminimum wages, payment was delayed or made ininstalments. In one case, workers repor ted that thecontractor had a bsconded without paying full wages.Some workers repor ted a system of double book-keeping: in reality they did not receive benefits orallowances, but a separate record was kept for buyersand labour inspectors showing that they did.

3.5

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Most of the workers falling in this category were notallowed to work for a continuous period of threemonths and their employment was characterised b ybreaks in service. Some of the workers stated thatwhen they returned to their villages for holidays, onreturn they were made to re-join as fresh employeesso the employer ensured a break in service. Often theemployers made excuses such as low productionorders or delay in the arrival of fabric to ensure abreak in service.

3.4.6 No harsh or inhumane treatment is allowed

On one site, women workers repor ted that two tokenswere gi ven for a row of 50-60 workers which meantthat at any one time only two workers could visit thetoilets: “Sometimes we find it dif ficult to hold on.”

3.5.1 Impacts by employment status

Permanent/regular workers have seen positiveimpacts from buyers’ codes, par ticularly in relation tothe payment of the minimum wage, statutory benefitsand premium for over time hours. Temporary workershave experienced some positive impacts. However,some suppliers rotate temporary workers betweenfactories, ensuring that they do not work more than240 days at each factory. This way, they are notconsidered permanent workers so are not entitled tothe related benefits11.

Contract workers experienced the least impact ofcodes12. As repor ted in the previous section, seriousissues arose in relation to: contracts, wages, accessto benefits, over time, health and safety and freedomof association.

One site did not use contractors any more becausethey were underpaying workers and not depositingESI and PF. Another site moved 2,500 tailor s hiredfrom the gate to the direction of a contractor who hadan agreement on compliance issues. The companypaid the contract workers, not the contractor, thereforeultimate control remained with the company. Beforecodes only per manent workers had appointmentletters, now contract workers also had them. Factoriestaking greater responsibility for contract workers is animportant way of ensuring that legal entitlements areextended to these workers.

“The contractual labour in our company works on aseparate floor and has separate toilets; they aredirtier than the toilets on other f loors.”

“Contractors do not pay workers total wages at theend of the month; only a part of the wages arepaid to workers. The remaining money is paid toworkers in instalments. Workers are not given pay-slips but are made to sign in a register.”

“Overtime hours are normally put in till 9 pm incase a shipment is stuck. Our workday ends at6pm and we usually put in three hours overtime.Overtime is not voluntary; if a worker refuses to doovertime hours the same day, they risk losing theirjob. We are given Rs. 25 as food allowance ondays that we have to work overtime. However, ifovertime extends from 9 pm to 11 pm or 11pm to2am, we are not given any fur ther additional foodallowance. We also have to report for work thefollowing day at 9:30 am.”

“When buyers come for inspections to the unit, weare told to leave the premises for some time andtake a break and have tea or that there is no morework on that day. We are made to exit from theback gate of the unit and not paid on these days.Since we work on a separate floor we usually haveno access to other workers in the factory.”

Voices of contract workers in oneof the sample companies

11 Any worker who has been employed for 240 days is a permanent worker. Such workers are entitled to 20 days of paid leave and 45 days casual leave. They are also entitled to 1.75 % ESI, 12% PF and a gratuity after five years of employment.

12 The contract arrangements vary: (1) recruit workers at the gate, contractor supervises, workers paid by the company; (2) recruit at the gate,contractor supervises, contractor pays the workers; (3) recruited and paid by contractor.

3.7

3.6

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3.5.2 Impacts by gender/ethnicity

No change in discrimination was noted in relation tocastes and religion. Discrimination against employingwomen has a long tradition in the garments sector inDelhi. There appears to be some movement on this inour case study, but it is difficult to attribute this directlyto codes. In one site it was clearly the ef fect of anewly appointed HR manager who corrected anunwritten policy not to employ women. On two sitesthe management felt more women should beemployed, because they did not want to workover time, and were more productive within normalworking hours13.

Salaried permanent male as well as female workerswho were interviewed within the factory premisesrepor ted that there had been a marked improvementin their living conditions. They repor ted that becausethe factory premises were clean they were inspired tokeep their homes clean as well.

Some of the women stated that working in thefactories had led to an increase in their status anddecision making at the household level, for examplethey could now decide on the kind of schools theirchildren attend. They also repor ted that ESI benefit

had led to better health of family members, and someof the women who had used the ESI benefit to pay fordelivery expenses said they were ab le to save asubstantial amount.

3.7.1 Poverty impacts

A visit by members of the research team to two of thecolonies housing a large number of permanentworkers from the units revealed that their livingconditions were definitel y better than those of thecontract workers. They kept their homes clean andowned working household appliances like TV, radio,etc. These workers were well dressed. Some workerslinked improvements in their living conditions toimprovements in conditions in their factories. Receiptof ESI and PF benefits meant they would now alsoreceive suppor t in the case of old age or ill health14.

In contrast, a visit to a colony of contract workers inthe Tehkand area of Delhi revealed the appallingconditions in which they survived. The majority of theworkers were migrant labourers and lived in squalor :piles of rubbish littered the colon y. Some of thepeople residing her e had built a set of 70-75 living

In one focus group the workers said that the healthof the family has become better due to ESIbenefits. If the children fall ill, they are covered bythe ESI. One of the workers said that theexpenses of his wife’s delivery were covered bythe ESI and he saved Rs. 30,000 - 40,000.Another worker said that his daughter wasadmitted to hospital due to illness and theexpenses were covered by ESI. The workers feltthat their standards of living have improved. Thereis change and improvement in daily living andchildren are being sent to school.

Summary from Focus Group Discussion

13 The implication here is that employing more women with higher productivity would help firms comply with over time restrictions in codes and meet production targets.

14 The women were ar ticulate and confident but even after a lot of persistence from the members of the research team refused to sayanything against the management save that they had never been promoted despite putting in five - nine years of work in the same factoryand did not receive any training which could equip them to take up ‘better/ skilled’ work in the same factory.

“In the absence of ESI, PF or leave benefits life inthe city of Delhi is really tough. Daily survival is achallenge with spiralling costs of living. Most of usare issued a three-month temporary ESI card withreduced health benefit coverage in comparison topermanent workers. Contrary to the management’sclaim, no notice is provided when we are laid off. Insome units the management asks the workers tosign on a sheet of paper stating they were giventhree months’ notice. The lack of a s s u re de m p l oyment leads to insecurity and mental tension.Often we are unable to find employment for longs t re t ches especially during the lean season.”

Contract workers focus group discussion held in a colony

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quar ters specifically catering to such a population.The living quar ters were roughly six by seven feet insize with cooking facilities inside the room, where attimes two - four people lived. A worker paid anaverage monthly rent of Rs. 700.

While most of the male workers were tailors, womenwere piece rate or daily wage workers. Some of themwere also involved in doing embroidery on a piecerate basis. Where they did not receive ESI or PF, theseworkers were likely to face extreme pover ty in theevent of old age or ill health.

4.4

4.3

4.2

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On two sites managers said that codes had made thecompany more aware of their management systems,and that this facilita ted communication with buyers.

The majority of workers were not aware of codes, onlypermanent workers and those working a long periodof time. On one site management said the benefitsworkers get from codes were mentioned in their letterof appointment and in the Standing Order displayedon notice boar ds. But workers were not specificallyinformed about codes. On another site workers wereaware of codes and visits by buyers’ representatives,and said codes were explained to new recruits.

Putting copies of codes on notice boards appearedinsuf ficient to inform workers of their rights. In theview of the research team, workers only read boardsfor rules applying to them, and many did not seemaware that codes applied to management.

Supplier companies experienced a range ofmonitoring activities depending on their differentbuyers. Some ETI buyers had Delhi-basedcompliance of ficers, and car ried out auditsthemselves. Some ETI companies were suppliedthrough agents, and the ETI company itself did notaudit the factory (only the agent). Some buyingcompanies used self assessments (which alsorequired photographs as evidence). Others used fullthird party audits carried out by a range ofprofessional auditing companies. Some audits lastedup to three days and inc luded inter views with 25-50workers in focus groups of up to 10 wo rke rs per gro u p.

All ETI companies identified by the par ticipatingsupplier s announced visits to the factory in advance.H oweve r, one large non-ETI retailer used unannouncedvisits wh i ch we re deemed to be ve ry stringe n t .

Two ETI members in the study had local complianceofficers, and provided support to their supplier s in

implementing codes - set-up generally welcomed bysupplier s. One ETI company had held a supplierconference on codes, which was also seen aspositive. Managers also repor ted that some buyershad become less a ggressive over time. One site hadprovided training for all its workers on health andsafety and provided employees with a handbook.

All supplier s expressed a g rowing concern thatbuyers were demanding adherence to standards, butwere unwilling to reflect that in the prices they wereprepared to pay. Suppliers opined tha t motivatingthem to implement b uyer-driven codes ef fectivelywould essentially lie in investment in a long ter m,profitable business relationship with the buyers.

Three supplier s were particular ly vocal on this issue:

• Two talked of the contradiction (one called it hypocrisy) of buyers who introduce codes requiring double wages for overtime, while squeezing them on price and lead time.

• One of them said that buyers wanted a moreregular workforce, but that was not possible given ebbs and flows in orders and hence the need to use casual labour, contract labour and fabricators.Code compliance was seen as a means ofhelping to g et business.

• A third said that price was a critical issue in raising workers’ payments and over time premiums.Falling lead times put pressure on over time. One talked of a US retailer with double standards,placing strict emphasis on code compliance while it operates a system of blind auctions betw een suppliers.

Senior Manager

5.1

5.2

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The following recommendations were made insupplier interviews and during the stak eholderworkshop held in Delhi towards the end of the project.

• Suppliers recommended more standardisation ofcodes and a move towards the formation of and compliance with a sing le code.

• Audits and inspections are very time consuming.One comprehensive audit is preferable to repeated inspections.

• Suppliers prefer red flexibility by buyers in relation to payment for over time hours since over time is closely linked to productivity and orders.

• Suppliers suggested that better incentives from buyers like regular orders and better prices would facilitate implementation of codes.

• Some were critical of the northern-based paradigm around which codes are developed.Many suppliers opined the need for local solutionsand local applicability of codes.

• Codes are seen as the problem of the management and exclude par ticipation ofworkers.

• Auditors should facilitate rather than pressurise thesupplier s to correct situations. Auditors should also help in designing correction programmes.

The field sur vey also brought out manyrecommendations for the suppliers and theirmanagement approach. The following pointersprovide guidelines for supplier s that will facilita tebetter monitoring of code compliance.

• There is a need to expand training for supervisors,especially on how to manage workers. They also need to be made more gender sensitive for better implementation of non-discriminatory practices atthe workplace.

• Companies need to draft policies and establish channels of communication with permanent and casual workers.

• Workers need to be educated about their rights atwork, their responsibilities and the expecta tions ofemployers.

• More needs to done to pr ovide job security to workers. Long-term casual workers should be given permanent contracts, and/or fixed-termcontracts of at least one year. Seasonal contracts should be used to cope merely with fluctuations in production, providing pro-rata benefits and some guarantee of being rehired the following season.

• Special services for women workers should be introduced in factories. This includes child careservices, breastfeeding breaks, advance notice ofwhen they have to work late, light duties and antenatal care for pregnant women, and job security for women on unpaid maternity leave.

• Steps must be taken to ensure that supplierseliminate intimidation of workers and harassment of all sorts, through awareness-raising and proper ly enforced company policies. There is a need for policies a gainst verbal abuse and favouritism within the workplace that counter discriminatory and socially prejudiced practices.

• Suppliers should ensure confidential channels for complaints without any fear for workers. Worker representative systems should be more inclusiveand effective with female as well as male representatives and both seasonal and casual labour. A forum should be created for women workers in which they feel comfortable to voice their problems and overcome socially embedded gender discrimination.

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