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Wages and Benefits:
WORKPLACE CODE PROVISION: "Employers recognize that wages are essential to meeting employees' basic needs. Employers will pay employees, as a base, at least the minimum wage required by local law or the prevailing industry wage, whichever is higher, and will provide legally mandated benefits."
Click here to access FLA Benchmarks for this provision.
FLA Year Two IEM Findings - Wages and Benefits
* Please note that these findings represent the 1,595 incidences of separate noncompliance issues as found in 105 of the 110 factories subjected to IEMs in Year Two.
Click here for more about the way this data was collected.
Graph 2.5 indicates that the Wages and Benefits provision had the highest rate of reported noncompliance after Health and Safety. Click here for a complete breakdown of the 252 incidents of noncompliance with the Wages and Benefits Code provision in Year Two. Among the most commonly reported noncompliance issues were factory failure to pay workers' legal benefits (15 percent of noncompliance with this Code provision), inadequate time recording systems (11 percent of noncompliance with this provision), and a lack of worker awareness of their Wages and Benefits.
Similar to Health and Safety findings, the high rate of noncompliance with this Code provision may in part reflect monitors' relative strength in monitoring for noncompliance in this area. Noncompliance with this provision can often be found through a review of records, since factories are required to document hours of work, pay, and benefits. An insightful monitor can often find evidence of noncompliance through a review of time slips, payroll records, pay slips, overtime records, and other documentation. Worker interviews can also elucidate noncompliance in some circumstances, since a series of questions can highlight whether a worker understands a factories' pay system.
Despite the high rate of noncompliance with Wages and Benefits, however, some observe that it may still be underreported. With periodic monitoring by sourcing companies and other independent groups, factory personnel have become sophisticated in concealing noncompliance related to wages. They often hide original documents and show monitors a doctored copy of their books. So, while it is not backed by verifiable evidence, it is likely that the rate of noncompliance with this and other code provisions relating to hours and wages (i.e., Hours of Work and Overtime Compensation) is higher than actually reported. The FLA aims to address this issue through its new monitoring instrument, and more advanced monitoring methodologies. Through the FLA Hours of Work in China pilot project, the FLA is also experimenting with ways to address the issues that lead management to keep double books.
During Year Two, various FLA companies addressed the more common Wage and Benefit noncompliance findings by encouraging management to improve record-keeping, and to calculate workers' legal wages and benefits correctly. Some companies also developed plans to review factory records periodically in order to verify that workers receive adequate pay. Others introduced electronic swipe card systems and computerized record keeping software in their sourcing factories. And in a more unique case, when factory security guards who were employed by external security agencies did not receive adequate pay or benefits, one company required that the sourcing factory ensure that these employees also received minimum wages and benefits for work conducted on the factory premises.
Please click here to visit the tracking charts to review how various companies have worked to remediate these and other issues.
Link to:
FLA BENCHMARKS: WAGES AND BENEFITS, HOURS OF WORK AND OVERTIME COMPENSATION
A. WORKPLACE CODE PROVISIONS:
WAGES AND BENEFITS: Employers recognize that wages are essential to meeting employees' basic needs. Employers will pay employees, as a base, at least the minimum wage required by local law or the prevailing industry wage, whichever is higher, and will provide legally mandated benefits.
HOURS OF WORK: Except in extraordinary business circumstances, employees will (i) not be required to work more than the lesser of (a) 48 hours per week and 12 hours overtime or (b) the limits on regular and overtime hours allowed by the law of the country of manufacture or, where the laws of such country will not limit the hours of work, the regular work week in such country plus 12 hours overtime; and (ii) be entitled to at least one day off in every seven day period.
OVERTIME COMPENSATION: In addition to their compensation for regular hours of work, employees will be compensated for overtime hours at such premium rate as is legally required in the country of manufacture or, in those countries where such laws will not exist, at a rate at least equal to their regular hourly compensation rate.
B. Benchmarks
Employers will pay workers the legal minimum wage or the prevailing industry wage, whichever is higher.
- Where training wages are legally allowed, no worker will be paid a training wage for more than three months cumulatively.
- Employers will communicate orally and in writing to all employees in the language of the worker the wages, incentive systems, benefits and bonuses to which all workers are entitled in that company and under the applicable law.
- All notices that are legally required to be posted in the factory work areas will be posted. All legally required documents, such as copies of legal Code or law, will be kept at the factory and available for inspection.
- In general, workers will have access to understandable information about their wages and benefits, and will not express dissatisfaction with their ability to get information.
- All workers have a right to use or not to use employer provided services, such as housing or meals.
- Deductions for services to employees will not exceed the cost of the service to the employer. If questioned, employers will demonstrate the reasonableness of these charges.
- Accurate and reliable payroll reporting, including pay stubs will be provided.
- Employers will provide workers a pay statement each pay period, which will show earned wages, regular and overtime pay, bonuses and all deductions.
- Time worked by all employees, regardless of compensation system, will be documented by time cards or other accurate and reliable recording systems such as electronic swipe cards.
- All compensation records will be maintained accurately and should be acknowledged by the employee as accurate.
- Employers will provide all legally mandated benefits to all eligible workers.
- Legally mandated bonuses (e.g. 13th month payments and severance payments will be paid in full and in a timely manner.
- Legally mandated benefits will be provided or paid in full within legally defined time periods.
- All legally mandated deductions for taxes, social insurance, or other purposes will be deposited each pay period in the legally defined account or transmitted to the legally defined agency. This includes any lawful garnishments for back taxes, etc. The employer will not hold any of these funds over from one pay period to the other unless the law specifies that deposits are to be made less frequently than pay periods (e.g., monthly deposits, weekly pay). If the law does not specify, then deposits will be made before the next pay period in all cases.
- All voluntary deductions (savings clubs, loan payments, etc.) will be credited to proper accounts and funds will not be held illegally or inappropriately by employers.
- Workers will be paid for holidays and leave as required by law.
- All hourly wages, piecework, bonuses, and other incentives will be calculated and recorded accurately.
- All compensation shall be paid in a timely manner.
- Workers paid on the basis of incentive quotas will be paid not less than the minimum or prevailing wage, whichever is higher.
- Regardless of any production quotas, incentives will not be reduced or unpaid if the result will be wages below the minimum wage.
- Employers will not use hidden or multiple payroll records in order to hide overtime, to falsely demonstrate hourly wages, or for any other fraudulent reason.
- All legally required payroll documents, journals and reports will be available complete, accurate and up-to date. (In the United States terms this would include W-4s, I-9s, green cards, 941s and supporting material)
- All employees will be credited with all time worked for an employer for purposes of calculating length of service to determine the benefits to which workers are entitled.
- Under extraordinary business circumstances, employers will make extensive efforts to secure voluntary overtime work prior to mandating involuntary overtime.
- Positive incentives will be utilized, and known by the workers.
- Negative incentives or punitive actions will not used to induce overtime in excess of Code standards.
- Employer personnel practices will demonstrate an effort to maintain a level of staffing that is reasonable in view of predictable or continuing fluctuations in business demand.
- Except in extraordinary business circumstances, employees will (i) not be required to work more than the lesser of (a) 48 hours per week and 12 hours overtime or (b) the limits on regular and overtime hours allowed by the law of the country of manufacture or, where the laws of such country will not limit the hours of work, the regular work week in such country plus 12 hours overtime; and (ii) be entitled to at least one day off in every seven day period. An extraordinary business circumstance is a temporary period of extra work that could not have been anticipated or alleviated by other reasonable efforts.
- The employer will demonstrate a commitment to reduce mandated overtime and to enact a voluntary overtime system to meet unforeseen situations.
- If the employer repeatedly requires overtime in order to respond to the same situation, the employer will explain why it will not have sufficient staff on hand to avoid the necessity of overtime.
- Employers shall be able to provide explanation for all periods when the extraordinary business circumstances exception has been used. Employers shall take reasonable steps to inform workers about the nature and expected duration of the circumstances.
- The factory will comply with all applicable laws governing work hours, including those regulating or limiting the nature and volume of work performed by women or workers under the age of 18.
- Employers will maintain necessary records identifying all workers entitled to legal protections for women and workers under 18.
- Employers will ensure reasonable meal and rest breaks, which, at a minimum, must comply with local laws.
- Employees will be paid for all hours worked in a workweek. Calculation of hours worked must include all time that the employer allows or requires the worker to work.
- The factory shall comply with applicable law for premium rates for overtime compensation.
- Workers shall be informed about overtime compensation rates, by oral and printed means
- Where workers are paid on a piece rate, the payment for overtime work performed shall result in no less payment than the premium pay required by law.
- Overtime hours worked in excess of Code standard will be voluntary.
| Wages and Benefits Benchmarks |
Number of Noncompliance Issues |
Percent of Total |
| Minimum Wage |
19 |
8% |
| Training Wage |
2 |
1% |
| Wage Benefits Awareness |
31 |
12% |
| Wage and Benefits Posting |
9 |
4% |
| Wage and Benefits Information Access |
10 |
4% |
| Voluntary Use of Benefits |
1 |
0% |
| Deduction for Services |
2 |
1% |
| Payroll Reporting |
6 |
2% |
| Pay statement |
14 |
6% |
| Time-recording system |
27 |
11% |
| Record Maintenance |
15 |
6% |
| Legal benefits |
37 |
15% |
| Payment of wages |
4 |
2% |
| Payment of Legal Benefits |
7 |
3% |
| Timely Payment of Benefits |
5 |
2% |
| Illegal Holding of Funds |
2 |
1% |
| Legal Compliance for holiday/leave |
9 |
4% |
| Accurate recording of wage compensation |
9 |
4% |
| Timely Payment |
4 |
2% |
| Minimum wage/ Quotas |
2 |
1% |
| Minimum wage/ Incentives |
1 |
0% |
| False Payroll Records |
11 |
4% |
| Record Maintenance |
13 |
5% |
| Accurate benefit compensation |
7 |
3% |
| Wages and Benefits Other |
5 |
2% |
| Total |
252 |
100% |
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