Research into some of H&M’s Platinum and Gold Suppliers in Cambodia

Executive Summary
As with many other garment producing countries exporting to the European and American market, Cambodia has been in the spotlight because of its poor working conditions and low wages for apparel workers. The country’s garment sector engages some 750 000 workers in more than 1000 factories. Cambodia exported garment and footwear products in equivalent to 7.1 billion U.S. dollars in 2015.

This report is a joint effort of the Cambodian NGO Center for Alliance of Labor & Human Rights (CENTRAL) and the Norwegian NGO Future In Our Hands (Framtiden i våre hender).

Interviews were conducted during February and March 2016 by CENTRAL. The report was written by CENTRAL and Future In Our Hands and and finalized with the assistance of Clean Clothes Campaign International Office and the Swedish NGO Fair Action.

Several violations were identified in each of the factories. The H&M platinum suppliers, Eastex, Vanco and Seduno, were presumed to perform better than the selected gold supplier, M&V. However, general working conditions at the platinum suppliers were actually worse than the gold rated supplier M&V.

Main findings

Demographics
37 female workers and one male worker were interviewed.
The youngest worker interviewed was 16 years old, the oldest 40 years. Average age was 27 years.
Average education level was 6 grade.
20 out of 38 workers were married with no children. 12 workers had between one and three children.
All workers were residing in the area surrounding the factory.
All workers were rural migrants.
28 workers were engaged in the sewing section, the others in other departments/positions.
Length of employment was between 0,5 years to 18 years, on average 5 years.

Conditions of employment
Wages:
The average total wages per month before overtime at the three platinum suppliers – Eastex, Seduno and Vanco – were US$174.05, US$167.52 and US$175.97 respectively, making an average of US$172.51.

The average total wage was found to be US$235.03 at Eastex, US$216.49 at Seduno and US$202.43 at Vanco. The average total wage per month was close to US$218.

Considering the monthly legal minimum wage for garment workers is only US$140 for a standard working month of 208 hours, the total amounts per month seem very high but it is important to take into account that almost all compensation beyond the minimum wage is paid only when certain conditions are met, e.g. overtime work, long-term engagement and good performance.
In 2015, the DC Institute concluded that the median total wage (excluding overtime) was US$166/month. In 2016, this should be adjusted by $12 to reflect the recent minimum wage increase, i.e. US$178/month. As we can see the wages at the three H&M platinum suppliers are very much standard across the industry.

Despite H&M’s Fair Wage Method project, that was initiated in 2013, and since then has been rolled out to 20 of the brand’s strategic suppliers in Cambodia, the platinum suppliers are below the industry median in terms of wages.

In contrast, initial investigations conducted at M&V, a gold supplier, in mid-2015 found that average wages before overtime there were considerably higher than at other H&M strategic suppliers, i.e. US$181/month at M&V, compared with US$148 – US$158/month.
In November 2015 however only 7% of the total workforce was working standard work weeks due to lack of orders. This decreased the average wage to meager US$143.50/month. Since then work suspension has decreased even further and in the first months of 2016 the wages went down to $136 per month despite the increase to the garment sector minimum wage.
As we can see, since mid-2015 M&V has gone from paying above-average wages to paying wages below the legal minimum.

H&M has committed to support factory owners to develop pay structures that enable a fair living wage. Better planning of orders and more stable purchasing practices are identified as one of four key elements to this. Further, social dialogue is recognized as an integral element in this process.

The current situation at M&V and the platinum suppliers does not reflect these commitments.

JOINT STATEMENT

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Contracts:
Of serious concern is the use of illegal fixed duration contracts. Workers interviewed at both Eastex and Vanco are engaged through fixed duration contracts with durations of two to six months. As workers have the right to sign an unlimited duration contract after two years of work, and the nterviewed workers at Eastex and Vanco were employed longer than that, this is an illegal practice. Workers at the other two suppliers, Seduno and M&V, had legal contracts.

On 18 March 2015, H&M informed CENTRAL staff that the company had adopted a new internal policy for suppliers that all fixed duration contracts for workers with at least two years seniority would be converted to contracts of unlimited duration. Contract conversion was set to commence July 2015, starting with H&M’s strategic suppliers, those being platinum and gold suppliers. More than a year has passed and there has been no movement on the conversion of contracts at Eastex or Vanco.

Production targets:
Productions targets vary between the factories, depending on product and styles. Each worker

belongs to a production line of 30-50 workers and produces only a part of the garment (e.g. stitching a collar or attaching sleeves to a jumper) before handing it over to a collegue for further changes. If workers at Vanco, Eastex and Seduno work hard and reach their production targets

they can receive bonuses of between 12.5 – 50 cents/day.

21 out of the 28 workers at the same factories said overtime was required to meet production targets. At M&V all workers were employed on a piece rate basis – no production targets are set.

Annual leave:
All workers interviewed for this report said that 18 days annual leave is provided, as required by law. If annual leave is not used it is paid out at 200%, i.e. the equivalent of 36 days per year. All workers said they rarely, if ever, use annual leave as they prefer to use payments to supplement low wages.

Maternity leave:
All workers said that 90 days of maternity leave is provided at 50% pay in their factory, as required by law.

Working hours
Overtime:
Workers at Eastex, Seduno and Vanco complete an average of 10 hours of overtime per week, which is within the legal limit. They all told that overtime is voluntary, but that they very rarely refuse overtime as they need the money to increase their low wages.

At M&V, a H&M gold supplier, there is no overtime. The factory has been under partial work suspension since June 2015 due to decreasing orders, and under full suspension from December 2015 to April 2016, leaving many workers only partly engaged or jobless. These workers have suffered economic hardship and serious problems to meet even the most basic expenses.

Arriving late to work:
Workers tell they face wage cuts if they are just a few minutes late to work. Eastex and Vanco workers told that if they are more than five minutes late, their wages are cut by US$2.50.

If Seduno workers arrive 6 to 10 minutes late their wages are reduced by US$1.00. More than 10 minutes of delay means a deduction by US$15.00, equivalent to the total wage of almost two working days. Whilst this practice is not illegal, the deductions further reduce already low salaries and are viewed as excessive in the Cambodian garment sector.

M&V is an example of best practice in the garment industry as workers are said to face no penalties if they arrive late to work.

Freedom of association
Unions, membership and union discrimination:
At Seduno and Vanco, workers could identify only one union at their workplace while in Eastex two unions were mentioned in the interviews. None of these “best-in-class” suppliers have what could be considered an independent union. Eastex and Seduno workers said that if anyone would try to form an independent union they would be discriminated against or forced to resign, and recalled specific examples of this. At Vanco male workers are allegedly recruited through an agency and are not considered permanent employees. They are confined to the ironing department, are strictly monitored and easily terminated, therefore it is especially hard for them to form a new union.

At M&V there are several unions workers can choose between. Two of them are considered independent. The unions engage in collective bargaining.

Since 2014, H&M have been running an Industrial Relations Project, the goal of which is to make it possible for employees and employers to negotiate about rights and obligations collectively and to resolve conflicts peacefully and in good faith through established processes. After more than two years in operation, the three major platinum suppliers are still without independent representation and workers face termination for independent union activity.

At Eastex six out of ten workers are union members and some of them say that they are members because “.. union fees would be deducted from their pay regardless”. All Seduno workers interviewed were union members as membership, according to the workers, is mandatory. It is assigned to them by the factory and deductions are said to be automatic.

In many respects, the general working conditions at gold supplier M&V are better than those in the platinum suppliers. Most likely, this can be attributed to the existence of independent union activity.

Workplace environment
Toilet breaks:
All Eastex and M&V workers, most workers at Seduno, and a few at Vanco said they are free to use the toilet. However, some workers at Vanco said that there are restrictions on toilet breaks and that they need to show toilet cards to gain access. In general, there were also complaints that there are too few toilets.

Light and air:
All Eastex, Seduno and Vanco workers reported excessive heat during the dry season.

Fainting:
All workers at Eastex, Seduno and Vanco reported observing faintings within the last year and estimated that on average, between two and four workers faint every month. Based on these figures there are reasons to believe that some 70 to 140 fainting incidents happen every year in these factories. M&V workers reported observing occasional incidents of fainting within the last year.

The faintings occur in H&Ms platinum and gold suppliers – assumed to be among the “best-in-class” factories. It is justified to ask what conditions leading to faintings one can expect to find in factories not scoring that high in H&Ms supply chain, and elsewhere in the garment sector.

Health
Sick leave:
Eastex workers say that sick leave is not provided in accordance with the law. Vanco workers say that there is paid sick leave – but limited to two days only. In addition, at Eastex the attendance bonus is said to be reduced by US$2.50 and the daily wage is lost if a worker is sick. This is against the law if workers can provide a proper doctor’s certificate.
Seduno and M&V workers claim that sick leave is available with a doctor’s certificate, which is in accordance with the law.

Drinking water:
In Eastex and M&V clean drinking water is provided. Half of the workers at Vanco, and three workers at Seduno complained about the water quality.

Monitoring/responsibility
Audits/instruction/consulting workers:
Workers reported occasional audits of the factories. Some of them were not sure where auditors came from and if buyers were involved, while others (supervisors informed workers) recalled instances that buyers were involved. Some also indicated that the labour department and ILO had been involved in checking working conditions.

Workers from all factories reported receiving instructions from supervisors and management prior to audits. Workers said they are told not to report any grievances.

Workers from all factories reported they had been consulted or knew of other workers being consulted by auditors inside the factory.

Code of Conduct:
At Eastex and Vanco workers said they had no knowledge of any Codes of Conduct posted inside the factory. Five workers at Seduno had no knowledge of any Codes of Conduct posted inside the factory. The other five workers had seen Codes of Conduct posted on the premises. At M&V all workers were aware of Codes of Conduct posted inside the factory.

Expenses
The average monthly expense of all workers interviewed for this research was US$210 per month. The major items of expense were food (US$61, approximately US$2 per day), remittance to family/childcare (US$62 per month) and housing US$20.

On average there were two wage earners in the family, supporting three other dependents.

12 workers experienced difficulties with all expenses, whilst rent (7 workers), remittance (7 workers) and health (5 workers) were identified as particularly difficult to manage.

Debt
Many workers, more precisely 22 out of 38, say there are indebted. The average amount owed was approximately US$250 with an average interest rate of 16% per month. The average monthly loan repayment was US$20. Most of these workers were lending from micro-finance institutions whilst the others borrowed from relatives or friends.

Living Wage
Workers estimated that on average a living wage should be US$321 per month, earned during a standard work month consisting of 8 hours a day, 26 days per month.
This is considerably more than the total wage before overtime workers are earning.

Prospects
Workers were asked “Will your life improve/remain the same/get worse if you continue to depend on the income from your current work?”. Almost all workers (37) responded they think their life will get worse if continuing to depend on the income from their current work.

Workers see little hope in improving their position at the factory: Only one worker said she thought there was any chance for promotion.
One third of workers, 13 persons interviewed, had no idea how many more years they would continue working in the garment industry. The other 25 workers said that they foresee to stay for some years, on average two years or slightly more.
Almost half of the workers could not identify their ideal job, if they were free to choose. The rest said “tailor”, “own a dress shop”, “vendor”, “beauty salon” or “farmer”.