Pay Your Workers agreement to end wage & severance theft
Brands and (r)etailers can take their responsibility towards the workers who enabled their past profits by signing the Pay Your Workers agreement the Pay Your Workers binding agreement on wages, severance and the right to organise.
By signing the agreement the company ensures that: all apparel, textile, and footwear workers in their 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. They 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, they provide immediate much-needed relief for workers, and we act upon our responsibility to prevent and mitigate adverse human rights impacts in their supply chains, and to provide for or cooperate in the remediation of harm. Going forward, they 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 their supply chain have gone insolvent, or otherwise have terminated workers. The PYW agreement is an enforceable agreement with garment worker unions, in line with ILO Recommendation 202, Convention 95 and Convention 76.
Find out more
The 260+ endorsers of the Pay Your Workers / Respect Labour Rights coalition are urging brands to sign a binding agreement on wages, severance and the right to organise. Find out more about our demands in the frequently asked questions.
Go to payyourworkers.org and adidasSTEALS.com to find out more about the campaign and take action.
Frequently Asked Questions
Should employers (factories) not just pay the wages and benefits, including severance?
Yes, they should. In most garment-producing countries, factory owners are legally obligated to pay severance. In some countries, regulations require employers to maintain a certain level of income for their employees during the COVID-19 pandemic. However, with widespread order cancellations at the outset of the pandemic and payment delays, many employers do not have the funds to pay their workers as a result of brand behaviour. In the buyers’ market that the global garment industry represents, brands often function as de facto employers, dictating prices and production circumstances. Many factories (except for several very rich factory groups) 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 the brands’ orders before they were cancelled.
Brands, (r)etailers have been the primary profit-makers in these supply chains. Many well-known garment companies are owned by billionaires, including Inditex, Bestseller, C&A, and Uniqlo, who could cover their workers’ wages out of pocket. Brands have a responsibility under the UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance to prevent and mitigate adverse human rights impacts in their supply chains, and to remedy harm they have contributed to or caused.
Does the agreement cover workers who are in (partial) lockdown, furloughed, or whose hours have been reduced, as well as those that have continued or returned to work?
A ‘cut-off’ point will need to be established by country, 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 agreement will cover all workers: those who continued to work and those that were sent home either full-time or part-time because of lockdowns, lack of orders, or social distancing measures.
What about workers whose hours have been reduced?
In several countries governments have created special measures allowing employers to reduce hours and pay, as a means of avoiding banktrupcy. Given the lack of social security systems, this means in most cases that workers and their families have to live off less then the legal minimum wage. Brands that sign the agreement will make up the shortfall between what workers have been paid, and the income they received at the onset of the crisis.
How does the PYW agreement relate to the ILO Call to Action?
The PYW agreement was designed to build on the outcomes foreseen in the ILO Call to Action. .Under that program, loans were foreseen to be secured to enable employers to pay wages, and/or to enable governments to provide facilities that will enable employers to pay wages, or to pay income directly to workers. Twenty months after the launch of the ILO Call to Action, just a woefully small amount, estimated at 200 million USD, in income relief has been unlocked. A very small portion of that money has reached garment workers. In comparison, estimates are that garment workers lost at least 3 billion USD in the first three months of the pandemic. The ILO Call to Action only covers eight countries.
How should brands and (r)etailers go about signing the agreement?
Brands and (r)etailers can contact the union committee of the PYW campaign, and confirm they are willing to enter into negotiations with trade unions for a legally binding and enforceable agreement between brands, employers, and unions, regarding the foreseen severance guarantee fund and with a complaint mechanism concerning violations of workers’ rights, and that they are willing to pay a small price premium on FoB.
How does the Severance Guarantee Fund relate to the Global Fund for Social Protection?
The idea of a Global Fund for Social Protection starts from the finding that social protection floors are affordable, provided low-income countries receive international support in order to complement their own efforts to mobilize domestic resources. The establishment of such a Global Fund, financed by governments worldwide, would support and co-finance – on a transitional basis – the creation of a broad, rights-based social protection for all in low and middle income countries where this is not yet sufficiently developed. Based on conditions in the pre-COVID-19 era, some 10 to 15 countries have social protection financing gaps amounting to more than 10 per cent of their GDP, and require temporary international co-financing of minimum social protection floors, while they strengthen domestic resource mobilisation. Other countries require capacity strengthening and technical support to build their systems. More information can be found here.
Achieving social protection floors providing social protection for all will require some time – even with the help of a Global Fund for Social Protection. But incomes of workers in the garment, textile and footwear sector are now under threat, they can’t wait any longer. In order to meet urgent needs, sectoral initiatives like the Severance Guarantee Fund are needed. CCC strongly believes that the Severance Guarantee Fund is complementary to a Global Fund for Social Protection and helps to fill gaps in existing systems of social protection. While the Global Fund aims to mobilise public money, the Severance Guarantee Fund puts the responsibility of global brands and retailers for the social protection of the workers in their supply chain at the centre, in line with UN Guiding Principles on Business and Human Rights. Moreover, even where national social protection systems do exist, guarantees on severance pay and wage arrears are rarely included. A sectoral, complementary approach can help to close this gap in social protection systems. And lastly, the Severance Guarantee Fund can be a catalyst for the broadening of social protection to other sectors and the society as a whole. It will also provide financial support to improve social protection systems at the national level, and set up dedicated accounts for this purpose which can be accessed by national committees including government, employers, unions, and civil society representatives. As social protection systems improve, the brand premiums will be reduced accordingly.
Does CCC support the campaign for the Global Fund for Social Protection?
Yes, CCC supports the campaign for the Global Fund for Social Protection.
How can we be sure the PYW agreement will pay all workers what they are owed?
There need to be fair, inclusive, objective, and transparent processes for verifying eligibility for and disbursement of wage payments, supported by brands. The process should cover all workers whether employed, furloughed, dismissed, or terminated, and workers should be paid through wage slips that reinforce employment relationships.
What does "wages and benefits” mean?
Wages include legally mandated remuneration, including overtime and bonuses. Benefits include sickness, parental leave, severance, and termination benefits.
Shouldn't brands and retailers focus on ensuring workers receive a living wage?
Yes, they should. But given the very desperate circumstances of garment workers who are not even receiving the poverty wages they were promised, the first priority is to get workers their current regular wages and benefits, even though these cover only about one third of what is needed to meet the basic needs of themselves and their families. During the pandemic, many workers were getting reduced wages or nothing at all. Providing the legally owed wages and benefits to workers in their supply chains is the minimum first step brands should take immediately to ensure workers can survive.
What is meant by the “Severance Guarantee Fund” ?
In addition to providing immediate income support for workers, the legally binding and enforceable Pay Your Workers agreement will also support stronger social protections for workers related to unemployment and severance benefits, in line with the relevant ILO conventions, through the establishment of a Severance Guarantee Fund (SGF).
Workers who were employed in the supply chain of a signatory brand or employer will be eligible to file a claim if they are denied severance when their factory closes or they are fired in a mass dismissal. The SGF will take up claims from workers whose employer cannot be compelled to pay and in cases where national legislation falls short of the international standard. It will also provide financial support to improve social protection systems at the national level, and set up dedicated accounts for this purpose which can be accessed by national committees including government, employers, unions, and civil society representatives. As social protection systems improve, the brand premiums will be reduced accordingly.
Brands and retailers will contribute through a fee based on volume sourced from each country, and employer fees will be a percentage of their wage bill in each country. This is part of the larger movement to establish more sustainable and resilient industries in the near future, consisting of supply chains with better planning and pricing models, which includes a costing model that covers fair payment schedules, and financial space for living wages, safe factories, and social benefits.
It will also provide financial support to improve social protection systems at the national level, and set up dedicated accounts for this purpose which can be accessed by national committees including government, employers, unions, and civil society representatives. As social protection systems improve, the brand premiums will be reduced accordingly.
The severance Guarantee Fund therefore will mitigate the devastating consequences of unemployment for workers in the future by financially supplementing or strengthening government social protection programmes for unemployment or severance benefits. Brands and retailers will contribute through a fee based on volume sourced from each country, and employer fees would be a percentage of their wage bill in each country. This should be part of a larger effort to establish more sustainable and resilient industries in the near future, consisting of supply chains with better planning and pricing models, which includes a costing model that covers fair payment schedules, and financial space for living wages, safe factories, and social benefits.
How much will it cost brands to pay for the Severance Guarantee Fund and the shortfall in wages and benefits?
Brands will be asked to pay a premium of 1.5% of annual FOB, with a special additional 1.5% fee assessed in the first year to account to cover the outstanding wages and benefits occurred during the pandemic."The first year" is defined as the first year after the brand signs on to the Fund. Thus, even if a brand signs on after the initial year of the programme, the additional 1.5% fee will still be assessed in the first year of the brand's participation in the Fund.
The 1.5% fee can be reduced if a brand sources from countries that establish credible and effective social protection programs covering unemployment and/or severance benefits, or if its suppliers sign on and contribute to the Fund. If all of a brand's suppliers sign on, or if the brand is exclusively sourcing from countries that have fully functioning social protection programmes, its fee will go to zero.
The agreement will include a trigger mechanism for implementation, which will be defined either by the number of brands that have signed on or by total amount of purchasing volume. Cooperation from the IFC or other international finance institutions can be sought to front-load the brand premium contributions, enabling relief in the short term while also enabling brands to spread the payments out over a dedicated period.
All told, it will cost brands no more than ten cents per t-shirt to meet all the obligations foreseen in the PYW agreement.
How will the legally enforceable agreement support labour rights?
Company signatories must agree to respect workers’ rights, including the right to organize and bargain collectively. The agreement will include the establishment of an independent complaints mechanism, empowered to investigate worker grievances in cases of failure of payment and in cases of anti-union retaliation or harassment, gender-based violence and harassment, and occupational health and safety violations. The agreement will be enforced through a similar mechanism as the Accord on Fire and Building Safety in Bangladesh: a dispute resolution mechanism, where the union signatories can ultimately take the brands to court if they fail to uphold the agreement and an escalation protocol where brands will ultimately have to cease sourcing from employers who fail to uphold the agreement.
Oversight of the agreement will be subject to negotiation; the Bangladesh Accord provides a proven model to draw from. This includes independent oversight, through a combination of full transparency and a Steering Committee made up of the signatories, together with representatives of the national committees referenced above, and global NGO representatives as witness signatories in a non-voting capacity. The ILO can be invited to act as independent chair, and an ILO-empowered expert committee can assess national social protection projects for financing and determine progress.
