Supply Chain Innovation

Social Benefit Verification at Factories Operated by Pou Chen

Publication date: 
Monday, August 10, 2015

In April of 2014, workers at the Pou Chen Group, a Participating Supplier with the FLA, went on strike in Gaobu, Dongguan, China, protesting that Pou Chen was not making the contributions for social insurance and housing benfits employers are required to pay under Chinese national law.  According to Chinese law, all employers must contribute on behalf of the workers in five categories of social insurance (basic pension, basic medical, unemployment, work-related injury, and maternity), and also make Housing Provident Fund contributions, to help meet their housing needs.  In response to workers' demands, Pou Chen agreed to correct its social insurance and Housing Provident calculations moving forward, and to provide retroactive benefits to all interested workers, along with improved training and communications on the social benefit programs. Pou Chen began its remediation efforts in May of 2014, with the FLA scheduled to conduct an independent verification one year later.

In its verification report, the FLA found that Pou Chen now makes full and complete social benefit payments on behalf of each worker, calculated in compliance with all legal requirements.  In addition, because the corrections to the social benefits procedure require workers to increase their own social insurance contributions, Pou Chen established a "Subsistance Allowance" program that supplements workers' wages to help offset the decrease in workers' accustomed amount of take-home pay.  At the same time, Pou Chen has established a robust system for providing retroactive payments for all workers who want them.  Overall, 30 percent of eligible workers chose to participate in the retroactive social insurance program, with this program nearing completion at the time of the FLA verification.  The retroactive Housing Provident Fund program was just over half complete at the time of the verification, with around 80 percent of workers choosing to participate.  The full verification appears below, including recommendations on ways Pou Chen can enhance its training program, and improve the implementation of the retroactive housing benefits program. 

The FLA expects all affiliates sourcing from China to ensure that workers receive their social benefits in full compliance with national law.

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