Why Brands Should Pay Compensation to Informal Garment Workers in Their Supply Chains

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Much has been written about brands and retailers who have “abandoned” workers in their supply chains, and civil society organizations are negotiating with brands, shaming brands, and tracking how brands are responding to the COVID-19 crisis and their contractual obligations with suppliers. Relatively little attention, however, has been paid to informal garment workers. A significant percentage of this informal workforce is employed through complex contractual arrangements to avoid the costs associated with employment contracts. The Asia Floor Wage Alliance (AFWA) and Women in Informal Employment: Globalizing and Organizing (WIEGO) call on brands and retailers to pay a once-off COVID relief grant to the informal workers in their supply chains.

Radhika, a 28-year-old tailor in a small garment production workshop in Bengaluru, India, was three months pregnant when she lost her job as India went into lockdown in March 2020. Small units, like the one where Radhika worked, depend on subcontracted orders from large export factories which produce for global fashion brands. As brands cancelled or delayed orders, these workshops were unable to resume operations even when the lockdown was phased out. When production resumed in her workshop in July, Radhika was not rehired and, because of her status as an informal worker, she was not entitled to any maternity benefits. Despite years of work in the industry, she has little in the way of personal savings and no access to social protection. 

Supplier firms, under pressure to meet orders at low costs, resort to a variety of practices that informalize the garment workforce. These pressures that brands and retailers exert on their suppliers are called “the triple squeeze”: to make goods for as little as possible, as fast as possible, with short-term contracts. Suppliers pass down both wage and non-wage costs and the risk of fluctuating demand to their workforce. They employ workers on fixed-term contracts (such as for a week, a contract, or a season), as casual workers paid by the piece, or as homeworkers. Short-term contract workers and subcontracted homeworkers are recruited either directly by the supplier factory or through contractors or agencies. 

In India, for example, there are 6.6 million formal workers and 16.3 million informal workers in the garment industry. Informal work is prevalent in factories, in workshops outside of factories, and at home. The pandemic has exacerbated the level of informalization in the garment workforce. Satheesh, who is a former garment worker in Tiruppur, South India, explains that garment factories laid off permanent workers at the beginning of the lockdown and later asked them to rejoin as informal workers without benefits. 

Most informal garment workers belong to socially marginalized communities. Take the case of Pallavi, a homeworker from Tirrupur, Tamil Nadu. Until January 2020, every day she received piles of garments from a factory for embroidering, trimming or attaching drawstrings. All of her neighbours received their daily work in the same way. But things changed quickly as COVID-19 spread. Neither Pallavi nor her neighbours have been paid for the items that they made in January, and they have not had any work since March last year, even after factories resumed work. Since homeworkers are not recognized as employees under Indian labour laws, they did not qualify for employment-based social security. Were it not for the trade union to which they belong, the women and their families would have starved. The union supported its members by providing dal and rice, facilitating registration for ration cards, and advocating for the government to include homeworkers in their relief packages. 

Due to the lack of transparency in global garment supply chains, informal arrangements like those of Pallavi and her neighbours are kept hidden from regulatory purview and brands turn a blind eye. It is therefore crucial that COVID-19 relief packages and campaigns take into account the complexity of labour relations in garment supply chains. The best way to do this is by including all garment workers—both inside and outside factories—their unions, homeworker organizations and allied organizations in the planning and decision-making process. After all, workers have the greatest incentive to bring transparency to their working conditions and employment relations. In July 2020, the Asia Floor Wage Alliance (AFWA), Women in Informal Employment: Globalizing and Organizing (WIEGO), HomeNet South Asia and HomeNet South East Asia demanded that brands pay a one-time Supply-Chain Relief Contribution (SRC) to all the workers in their supply chain, irrespective of their status of employment, during the unprecedented humanitarian crisis posed by COVID-19.

To determine the SRC, brands should calculate the total procurement spend for each supplier in the 12 months preceding January 2020, and pay 2 per cent of that total to each suppliers’ workers. This 2 per cent—a paltry sum for any brand—should cover 60 per cent of the wages lost by workers in factories and informal workers working from workshops and from their homes. 

For workers employed in factories, the SRC can be paid by the brand to the supplier. The supplier should then directly transfer the amount to each worker, which will be monitored by a co-enforcement mechanism developed by AFWA and partner organizations. Since suppliers produce for multiple brands, by paying the SRC to the supplier in terms of a binding agreement, brands would mitigate the impact of the wage loss that garment workers face during the pandemic. The SRC is a relief contribution and in no way substitutes brands’ existing contractual commitments or obligations to pay severance contributions in cases where suppliers downsize, retrench workers, or close factories.

What makes the campaign for the SRC unique is that it is a bottom-up process, shaped and driven by the material needs of workers, unions and allied organisations. The SRC was organically developed and conceptualised by the Asian garment labour movement, which makes the campaign inclusive in its approach, democratic in process, and realistic in its demand. Brands and retailers must pay the SRC to all workers who produce their products as a responsible business practice during the pandemic. Only if there is a concerted intervention to address the needs of the vast majority of garment workers like Radhika and Pallavi, can we ensure an equitable recovery from the pandemic. 

*All names of workers have been changed to protect their identity. 

Nandita Shivakumar is the India Coordinator of Asia Floor Wage Alliance (AFWA). 

Aabid Firdausi is a research student at the Tata Institute of Social Sciences, Mumbai, India.

Photo: Garment worker's tools in India. Credit: WIEGO