COVID-19 wage assurance

Brand and retailers around the world responded to the COVID-19 pandemic by cancelling orders, delaying placement of new orders, or forcing discounts on goods already produced. This way they offloaded the main risks and costs of the crisis upon the people who are least able to pay this price, after having been paid poverty wages for years: the workers. That is why labour rights organisations and unions in the Clean Clothes Campaign network are are urging apparel companies to publicly assure that all workers in their supply chain will be paid during this crisis. Brand and retailers can show their commitment to taking their responsibility towards the workers who enabled their past profits by publicly committing to this wage assurance:

The wage assurance

[Company X] hereby publicly assures that all apparel, textile, and footwear workers in our supply chain, who were paid to produce or handle goods at the onset of the COVID-19 crisis, regardless of employment status, will be paid their legally mandated or regular wages and benefits, whichever is higher. This includes wage arrears (back pay) and, where applicable, negotiated severance pay.

We will contribute funds of a sufficient amount to ensure that, when combined with other support provided to workers by employers, local governments, and international institutions, workers have income, equal or greater than, the amount they received prior to the crisis. In doing so, we provide immediate much-needed relief for workers, and we act upon our responsibility to prevent and mitigate adverse human rights impacts in our supply chains, and to provide for or cooperate in the remediation of harm.

Going forward, we will support stronger social protections for workers by committing to paying a price premium on future orders into a guarantee fund reserved for severance and outstanding wages in cases where employers in our supply chain have gone insolvent, or otherwise have terminated workers, through signing an enforceable agreement with garment worker unions, in line with ILO Recommendation 202, Convention 95 and Convention 76.


Frequently Asked Questions

Should employers (factories) not just pay the wages and benefits?

Yes, they should and they are even legally obliged to do so. However, with orders being cancelled and payments delayed, many employers do no have the funds to pay their workers. In the buyers’ market that the global garment industry represents, brands often function as de facto employers, dictating prices and circumstances. Many factories (several very rich factory groups excluded) have operated for years on minimal margins and have not built up buffers to now fall back on, while they have fronted the costs for orders now cancelled.

Brands and retailers have been the primary profit-makers in these supply chains. Many of the well known garment companies in the world have billionaire owners, including Inditex, Bestseller, C&A and Uniqlo. Brands also have a responsibility under the UN Guiding Principles on Business and Human Rights, and the OECD Due Diligence guidelines, to prevent and mitigate adverse human rights impacts in their supply chains, and to provide for or cooperation in the remediation of harm that they have caused or contributed to.

Does the wage assurance cover workers who are in (partial) lockdown as well as those that have continued or returned to work?

Per country a ‘cut-off’ point will need to be established, indicating for what period of the crisis wages need to be ensured by brands and retailers. This will depend on when government-imposed lockdowns have ended entirely. Within that period the wage assurance will cover all workers: those who continued to work and those that were send home because of lockdowns, lack of orders or social distancing measures.

What is the relation with the GUF/IOE programme of action?

The wage assurance complements the ILO programme of action, which aims to secure loans to enable employers to pay wages and/or enable governments to provide facilities will allow workers to receive their income. Most major brands have committed to this programme. The aim of the wage assurance is that brands commit to covering a potential gap between the results of this programme and the payments that workers are actually due to receive. The more successful the ILO programme is, the smaller the gap left outstanding, and the easier it will be for brands and retailers to fulfil the wage assurance. Swift action is needed however as workers continue to remain unpaid for months, usually without ant financial means to fall back on.

Funds for the payment of outstanding wage payment and benefit can come from multiple sources, including international financial institutions and donor governments, direct financial contributions for immediate relief to employers as outlined in the AFWA Supply Chain Relief Contribution (SRC), or brand ‘top-ups’ of the gap between government pay-outs and full wages. The brand wage assurance means that brands shall be ultimately held responsible for securing this funding and supplementing any shortfall.

How should the money be distributed?

Brands are expected to implement the wage assurance for workers in their supply chains via the most efficient mechanisms available in each country, and, wherever possible, by providing direct financial support to factories that enable -- and is conditioned on -- factories both paying workers’ wages and maintaining their employment status (including rehiring workers previously laid off or furloughed due to loss of orders).

Brands should support the formation in each country of national-level tripartite-plus committees including representatives of brands, suppliers, trade unions, workers collectives and, where needed, worker rights organizations in the garment industry. Brands however should not delay providing the public wage assurance until such agreements are negotiated.

Brands should also support a fair, inclusive, objective, and transparent process for verifying eligibility for and disbursement of the funds to be established, to cover all workers whether employed, furloughed, dismissed, or terminated, and enforcing the payment to the workers through wage slips that re-enforce the employment relationships. An independent oversight and accountability mechanism can be evolved with the ILO or other civil society and government institutions.

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What does "wages and benefits” mean?

Wages include legally mandates payments such as holiday bonuses. Benefits include sickness, maternity, severance and unemployment benefits.

Shouldn't brands and retailers rather make sure workers receive a living wage?

Yes, they should. But given the current very desperate circumstances of garment workers who are not even paid the poverty wages they were counting on, the first and foremost priority is to get workers their current regular wages and benefits, even though we know that these cover only about one third of what is needed to meet basic needs of themselves and their families. Currently many workers are getting reduced wages or nothing at all. Providing their legally owed wages and benefits to their workers immediately is a first minimum step brands should take to ensure workers can survive.

What is meant by a “guarantee fund” and how does it relate to Social Protection?

Social protection covers, among others, unemployment benefit. The absence of social protection mechanisms has contributed greatly to the current desperate situation of the workers, and going forward with many suppliers expected to have to lay-off workers or close this will get worse. ILO convention 173 (Protection of Workers’ Claims (Employer Insolvency)) foresees in the establishment of a Guarantee Fund for this purpose. To make this a reality cost-sharing by brands across the supply chain is necessary. The current pricing system in many cases does not enable governments and suppliers to set up these funds.

Such a fund should be used to pay out benefits to workers not covered by national schemes. In cases where employers in brands’ supply chains have become insolvent or otherwise terminate their workforces, and workers have not been paid legally owed wages, benefits, or severance payments (as documented by worker representatives and advocates, other civil society organizations or government agencies), funds will be disbursed by the guarantee fund to provide workers the amounts that are due. The agreement should specify that, in such cases, workers will receive from the fund full payment of severance benefits and any wages or other benefits in arrears in the amounts required under national law or under ILO Conventions 95 (Payment of Wages) and 173 (Protection of Workers’ Claims (Employer Insolvency)), whichever is greater.

The fund should also be used to supplement, strengthen or set up government social security programmes in the countries where brands’ products are manufactured. The amount that a brand will be obligated to contribute to this fund under the agreement may vary based on the degree of protection for workers already provided by social security programmes in those countries.