With the majority of workers lacking formal contracts, a new global study reveals the extensive use of informal practices within garment supply chains in Bangladesh, Pakistan and India.
In Bangladesh, as many as 92 per cent of workers were found employed without any written contracts, according to the study conducted by the Asian Floor Wage Alliance (AFWA).
The rate is 90 per cent in Pakistan and 65 per cent in India, according to the report titled 'Threaded Insecurity: The Spectrum of Informality in Garment Supply Chains'.
These informal working arrangements make it cheaper for employers to hire workers, who often receive lower wages and lack essential benefits like health care or paid leave, according to the report published on 7 March 2024.
These workers can be easily fired at the employer's discretion, it also noted.
By focusing on Bangladesh's 92 per cent of workers without contracts, the report particularly sheds light on the vulnerability of women who are often excluded from essential labour protections.
This lack of formal contracts denies them benefits and exposes them to a greater risk of rights violations, gender-based violence and harassment, it added.
The AFWA, founded in 2007, is an Asian-led alliance working across garment-producing countries and consumer regions. Their focus is on addressing poverty wages, gender discrimination and limitations on freedom of association within the garment industry.
The report, based on research conducted between 2020 and 2024, focuses on a critical issue: informal employment within the formal sector.
It introduces a new framework to understand informality as a spectrum of practices within garment supply chains and beyond. This research involved collaboration with 23 trade unions and labour organisations across six countries: Bangladesh, Cambodia, India, Indonesia, Pakistan and Sri Lanka.
The report identified unequal power dynamics within buyer-driven fast fashion supply chains. Lead firms hold more power than supplier factories and the workers who produce their garments.
"Fast fashion lead firms choose to maintain unstable relationships with supplier firms, allowing them to bargain for shorter lead times at ever lower prices," as mentioned in the report.
To meet these demands for speed and lower costs, garment factories increasingly rely on informal employment practices. This involves hiring contract labour and temporary workers, creating a vulnerable workforce susceptible to exploitation, it said.
The report detailed these practices from employing workers without contracts to outsourcing to unregistered production facilities and home workers. These practices perpetuate a cycle of vulnerability and exploitation imposed on a predominantly female workforce.
Furthermore, downgrading workers from regular positions to informal employment creates a flexible pool of labour. This allows factories to meet production demands but comes at the expense of workers' security and well-being.
In Bangladesh, registered garment factories are supplied with subcontracted orders by unregistered production facilities. These facilities operate without formal oversight from the government or brands, said the report, adding, trade union and civil society representatives from Bangladesh reported high production targets, low wages and extreme difficulty forming unions in these unregistered facilities.
Women in informal garment work have little to no job security. Employers can lay them off or terminate their employment at will.
For instance, across Bangladesh, Pakistan, India, Indonesia and Cambodia, only 15 per cent of women interviewed retained their jobs when the Covid pandemic disrupted production networks. Some 43 per cent were laid off and 36 per cent were terminated. An additional 1 per cent resigned.
In comparison, 33 per cent of male workers retained their jobs, with 43 per cent laid off and 24 per cent terminated, according to the study report.
The report also identifies a concerning trend: women workers are often forced out of the industry by the age of 35. Across the factories studied by AFWA, 75 per cent of workers over 55 were male, compared to only 25 per cent female.
AFWA's research found that during the Covid lockdowns, suppliers in Bangladesh, Cambodia, India, Indonesia, Pakistan and Sri Lanka cut costs by selectively laying off higher-paid workers.
To address the rights of garment workers in informal employment, AFWA calls for urgent action from governments in production countries. This includes strengthening legal protections, such as mandating written contracts for all workers and safeguarding the right to join trade unions.
The report also recommends collaboration with unions and industry representatives. This collaboration is crucial for negotiating acceptable ratios of formal to informal workers and defining productivity targets to combat excessive workload intensification.
States, where lead firms (brands) are headquartered, are urged to implement binding human rights due diligence laws. These laws would ensure that workers across supply chains, regardless of their employment status, have written contracts and the right to join trade unions.
Base pricing for lead firms should consider statutory wages, benefits and entitlements. It should also factor in maintaining ethical standards established through negotiations between trade unions, worker organisations, supplier associations, lead firms and representatives from production countries. This collaborative approach would ensure fair compensation and ethical standard practices.
AFWA argues that voluntary brand codes of conduct, implemented through social auditing mechanisms, are "insufficient". They call for mandatory mechanisms to bind brands to implement human rights due diligence, as outlined by the United Nations Guiding Principles on Business and Human Rights (UNGPBHR).
Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), disagreed with the report's findings on the lack of written contracts.
He said informal employment in Bangladesh's RMG sector is "very negligible" and that export-oriented RMG factories operate with proper formalities.
He added that buyers monitor these factories regularly.
However, Mr Hassan admitted that informal employment might exist in subcontracting factories. He also questioned the study's methodology, suggesting the findings do not reflect reality.
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