Better working conditions increase profit at garment factories

                                                                        Photo: vneconomy

Better Work report from ILO and IFC reveals the benefits of a good workplace for the garment industry.

Factories with better working conditions for employees are up to 8 per cent more profitable than their counterparts, according to Better Work Vietnam Quick Facts, prepared by Tuft University for Better Work, a partnership between the International Labor Organization (ILO) and the International Finance Corporation, a member of the World Bank Group.

The average firm enrolled in the Better Work Vietnam program, which focuses on preventing the use of insecure or unprotected contracts that leave workers in a precarious employment situation, increases its revenue to cost ratio by 25 per cent after four years of involvement.

Some of the better working conditions in the program include less use of probationary contracts, paying workers as promised in their contracts, and increasing take-home pay in constant terms.

Better Work Vietnam said that the country’s garment factories have already progressed beyond traditional “low base pay” strategies that compel workers to demand ever-increasing overtime. “While it remains a significant problem for the industry, the proportion of Better Work factories operating excessive overtime fell from 90 per cent at the outset to 50 per cent by the fifth year of the study,” according to Better Work Vietnam.

The research showed that employees in Vietnam reported working 55 hours a week by the fifth year of their factory’s participation in Better Work Vietnam, down four hours a week from the baseline. “However, excessive overtime remains a significant compliance problem for many firms,” it pointed out.

It noted that due to pressure from global garment supply chains, factories still tend to push overtime hours on workers. “For example, despite a reduction of 40 percentage points from the baseline, half of all firms in Vietnam persist in their non-compliance with overtime limits through their fifth year of participation in the program,” the report noted.

On the other hand, training line supervisors, particularly women, pays off in better working relationships and higher productivity, the research found. “When trainees believe they can improve their skills and they have the support of their managers, supervisory skills training is demonstrated to lead to more balanced production lines, higher productivity, and better workplace relations,” the report added.

“Training female supervisors in particular was shown to result in a 22 per cent increase in productivity,” the research found.

The Better Work program works to improve working conditions and promote competitiveness in global garment supply chains. As a result of their participation in Better Work, factories have improved compliance with the ILO’s core labor standards and national legislation covering compensation, contracts, occupational safety and health, and working time.

“In Vietnam, workers at Better Work factories have seen rising weekly pay (independent of the minimum wage) and are now less concerned with excessive overtime and poor wages than they were five years ago,” the report revealed. Moreover, some 15 per cent of garment factories covered by Better Work did not comply with minimum wage requirements at the outset of the study but this fell to just 3 per cent by the fifth year in the program.

Better Work Vietnam Quick Facts was conducted on 392 factories with 512,000 workers, which is equal to 21 per cent of the workforce in the garment industry.

by Luong Nhi / vietnameconomictimes