Compliance issues
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  • 1. by:-Bhawna Vashisht(MFT)NIFT Bangalore
  • 2. Compliancecompliance means conforming to a rule, such as aspecification, policy, standard or law. Compliance in aregulatory context is a prevalent businessconcern, perhaps because of an ever-increasingnumber of regulations and a fairly widespread lack ofunderstanding about what is required for a company tobe in compliance with new legislation.
  • 3. IntroductionThe lack of actual implementation of the compliancecodes on labour standards and working conditionswithin the apparel industry poses a serious threat tothe image of the country.India is the second largest manufacturer of garmentsafter China being the global leader in garmentproduction due to cheap labour
  • 4. IntroductionChild labour, sweatshops, discrimination and poorworking conditions are just some of the risks that majorUS and European apparel companies face when theysource clothing and footwear from developingcountries. Greater awareness and more independent monitoring ofoverseas factories are slowly reducing those risks and anew report by CSR World, one of Indias leadingcorporate social responsibility companies, now showsjust how much progress has been made by the industryin tackling such issues.
  • 5. Legal Requirements Factory License Contractors’ Registration & License Consent from Pollution Control Board Registration with Employees Provident Fund Registration with Employees State Insurance Corporation Certified Industrial Employment Standing orders Compliance with Factories Act – 1948 Compliance with Payment of Gratuity Act Compliance with Minimum Wages Act Compliance with Payment of wages Act Compliance With State Factories Rules
  • 6. Types of compliance Regulatory complianceIt describes the goal that corporations or public agenciesaspire to in their efforts to ensure that personnel are awareof and take steps to comply withrelevant laws and regulation Statutory compliancestatutory compliance means you are following the laws on agiven issue. The term is most often used withorganizations, who must follow lots of regulations. Whenthey forget or refuse to follow some of thoseregulations, they are out of statutory compliance. Acompany that follows all the rules, is in statutorycompliance.
  • 7. Code of ConductChild labourForced labourHealth and safetyCompensationWorking hoursDiscriminationFree association and collective bargaining
  • 8. Child labour The Child Labour (Prohibition &Regulation ) Act, 1986 / ILOconvention – 182 – Under the Act ,‘child’ means a person who has notcompleted his fourteenth year ofage. Any such person engaged forwages, whether in cash or kind, is achild worker. Child labour ( asdefined herein ) is completelyunacceptable in the garmentindustry supply chain.
  • 9. Child labourChild labour is a universal problem. At present thenumber of working children in the world rangesbetween 100 and 200 million according to theInternational Labour Organization.India is the country with the largest number of workingchildren. There are no up-to-date and generallyaccepted statistics on child labour in India. Officialestimates vary between 17 million and 44 million childlabourers under 14 years of age. Estimates made byrespected NGOs range between 55 million and over100 million.
  • 10. Distinction between child labour‘&child workChild labour- means that the child is being forcedto carry out the full-time work of adults.Child work- means that the child has time for playand education besides work.
  • 11. Child labour
  • 12. Legal Requirements For Child LabourLegal/Code – Compliance on Child LabourStandards Proof of Age Documentation / Other Means of Ageverification Governments Permits and Parental ConsentDocumentation Employment of Young Workers (those between theminimum working age and the age of 18 years) Hazardous work for Young Workers Young WorkerIdentification System
  • 13. CausesChild labour is cheaper than adult labour.Inefficiency existing primary education facilities.Do not demand social security benefits.
  • 14. Case study on Child LabourViolation: Child labour was found at the factory. It was confirmedfrom the verification of personal document and the appearanceof the employee. From the workers interview, it was understoodthat one worker was about 13 years old.Corrective Action: According to The Factory Act of 1968 in theBangladesh Labour Code, any person who has not completedsixteen years of age is defined as a child. Article 66 prohibits theemployment of any children under the age of fourteen. Factorymanagement agreed to take care of this matter.Most child labourers have been cleared out of Bangladesh�sRMG sector under international pressure, but sporadic cases stillexist due to economic reason.
  • 15. Forced labourBonded Labour System ( Abolition ) Act, 1976 / ILOconventions – 29 & 105 - This Act seeks to provide for theabolition of bonded labour system with a view topreventing the economic and physical exploitation of theweaker section of the people Forced labour is any work orservices which people are forced to do against their willunder the threat of some form punishment. Almost allslavery practices, including trafficking in people andbonded labour, contain some element of forced labour.
  • 16. Forced labour The ILO defines forced labour as “all work or service which isexacted from any person under the menace of any penaltyand for which the said person has not offered himselfvoluntarily. The International Labour Organization (ILO) estimates thatthere are at least 12.3 million people in forced labourworldwide. Children are thought to make up between 40 and50 per cent of all forced labourers. Of this total some 2.4million people are in forced labour as a result of humantrafficking. Women and girls account for almost all thosetrafficked into sexual exploitation and the majority of peopletrafficked into labour exploitation. This means that some 80per cent of all people trafficked for both economic and sexualexploitation are women and girls.
  • 17. Legal Requirements For forced labour Legal/Code – Compliance – Forced labour standards Employment is freely chosen Employment Terms – Voluntary Agreements/ Prohibitions Debt/Bonded Labour/ Prison Labour/InvoluntaryLabour wage advances Free disposal of wages/cash and In-Kind compensation Recruitment through referrals Freedom of movement/Employer Controlled Residence
  • 18. Health and safetyFactories Act – 1948 / ILO convention – 187 – Thisconvention refers to a culture in which the right to a safeand healthy working environment is respected at alllevels, where government, employers and workersactively participate in securing a safe and healthy workingenvironment through a system of defined rights..
  • 19. Occupational Health and Safety (OHS)Occupational health and safety (OHS) primarily seeks tomaintain the working ability of the labour force as wellas to identify, assess and prevent hazards within theworking environment. These issues are important for many developingcountries (DCs), because the effects of poor health andlack of safety facilities, and non-ergonomics conditionsexist in various workplaces are a hindrance to thenational economy and social progress.
  • 20. Occupational Health and Safety (OHS)OHS and ergonomics issues have a connection withvarious components in the regional economy since theprovision of health, hygiene and safety in the workplacecontributes to economic growth processes in a number ofways.In many DCs, physical work practiced as manual materialshandling (MMH) and strenuous tasks which usually take atoll as injuries, accidents and production loss, becausenumerous risky and hazardous jobs and strenuous tasksstill have yet to be semi-automated or be transferred toother forms of controlled environment.
  • 21. Issues
  • 22. Solutions
  • 23. IssuesInjuries caused by repetitive motion are commonwithin the textile industry at a global level.Doctors and nurses in the textile sector rarelyimplement preventive programs.Respiratory problems and other common illnesses suchas the flu, colds, and headaches were also cited asimportant issues.
  • 24. Legal Requirements For Health & Safety Legal/Code compliance - Health and Safety standards Document Maintenance/Worker Accessibility and Awareness Written Health and Safety Policy Worker Consultation Health & Safety management systems Communication to Workers Notification and Record Maintenance Permits and Certificates Evacuation Requirements and Procedure Safety Equipment and First Aid Training Personal Protective Equipment and Use Chemical Management and Training
  • 25. Legal Requirements For Health & Safety Material Safety Data Sheets/Worker Access and Awareness Chemical Management for Pregnant Women and Young Workers Protection Reproductive Health Ventilation/Electrical/Facility Installation and Maintenance Lighting, Temperature and Noise Machinery Safety, Maintenance and Worker Training Proper Use of Machinery Worker Refusal to Use Unguarded or Unsafe Machinery Ergonomics Bodily Strain Medical Facilities
  • 26. Legal Requirements For Health & SafetySanitation in Factory Facilities Toilets Toilets/Restrictions Food Preparation Health & Hygiene Drinking Water Drinking Water/Restrictions Sanitation in Dormitories Dormitory Facilities Dormitories Separate From Production Facilities Child Care Facilities/Children on Premises
  • 27. Health and safety
  • 28. Problem and solutionPotential Hazards:Employees use a pinch grip to hold small scissorsbetween the index finger and thumb. Repeated pinch gripmay cause hand or wrist injuries.Holding small scissors between the index finger andthumb also can cause contact stress on the fingers.While holding scissors or manipulating fabric, employeesoften maintain awkward arm, wrist, hand, and fingerposture.Cutting and manipulating fabric requires the employee touse repeated motions.
  • 29. Possible SolutionsInvest in tools designed to promote neutraljoint postures and minimize contactstresses.Use electric, pneumatic, or otherwisepartially automated tools to reduce forceand repetition of pinch grip.Use tools and work practices thatencourage workers to avoid using moreforce and movement than the job requires.Use job rotation through tasks that do notrequire pinch grips.
  • 30. Potential HazardsEmployees hold theirneck, trunk, and arms inan awkward position asthey strain to see detail inan object.Insufficient lighting makesit difficult for employeesto see their work, andmay cause eye fatigue andheadache.Straining to inspect product
  • 31. Possible SolutionsAt theworkstation, adjustable tasklighting must shine on thework area to make it easierfor the worker to see theproduct.Provide adjustable chairsand training on how toproperly use them.Provide magnifying glassesat workstations wherenecessary.
  • 32. Case Study on Health & SafetyViolation: Workers did not use gloves and/or maskswhile handling chemicals and dyes in chemicalstorage area of Dyeing Department.Corrective Action: In order to comply with TheFactories Act, 1965, of Bangladesh, managementshall provide adequate gloves and/or masks to theappropriate workers. They must be motivatedthrough training to use such protective equipmentfor safety.Violation: Number of toilets in the production floorare not sufficient to cover all the employees.Corrective Action: Factory shall construct sufficientnumber of toilets in accordance with The Factories
  • 33. Case Study Violation: No soap and towels were thereinside all the toilets in a factory.Corrective Action: Soaps and towels are to beprovided at all the toilets in the factory.Violation: Fire extinguishers were foundblocked in some areas of the factory and werenot easily accessible.Corrective Action: All fire extinguishers shall becleared from obstruction at all time. Area infront of fire extinguishers shall be marked onthe ground with yellow lines to indicate thatthe area must be kept clear at all times.
  • 34. Case StudyViolation: Aisles were not marked at differentsections of the factory.Corrective Action: Factory shall put marking onthe floor with yellow lines to indicate theevacuation paths.Violation: No evacuation plan was observedthroughout the factory.Corrective Action: Factory shall prepare and postevacuation plan at different areas of the factoryto facilitate smooth evacuation in the case ofemergency.
  • 35. Case Study Violation: Drinking water closets were found very near (2-3 feet) to the toilets.Corrective Action: As per The Factories Act, 1965 of Bangladesh, factory shallplace drinking water closets at a minimum of 20 feet distance from the toilets.Violation: Primary/secondary aisles were found blocked by fabricroll, cartons, garments etc. in different sections of the factory. Electrical controlpanel was also found blocked.Corrective Action: Factory, in accordance with The Factories Act inBangladesh, shall make sure that all the passages and control panels remainunblocked at all times.Violation: No protective hand gloves were in use by the fabric cutting knifeoperators which might cause serious accident at any time.Corrective action: Factory management shall supply metal hand gloves to theoperators and motivate them to use such protective equipments for safety
  • 36. CompensationWage & Benefits - The Employees’ Provident Funds &Miscellaneous Provisions Act, 1952, The Employees’State Insurance Act, 1948, The Minimum Wages Act,1948, The Payment of Bonus, Act, 1965, The Payment ofGratuity Act, 1972 & The Payment of Wages Act, 1936 /ILO Conventions – 130,131 & 132 - Members shall pay atleast the minimum wage required by local law or theprevailing industry wage – when available, whichever ishigher, and who provide all legally mandated benefits. Inaddition to their compensation for regular hours of work,employees shall be compensated for overtime hours atsuch premium rate as is legally required
  • 37. Minimum wage
  • 38. ObjectivesSocial objective: - That is, by providing sufficientpurchasing power to the worker, enable him/her tohave a basic standard of living. In long run such a stepwould help in abolishing labour exploitation andpoverty. Economic objective: - The rate of minimum wageshould be fixed at such a level which would motivateworkers and enable them to enjoy the benefits ofeconomic growth, and thereby contribute to theeconomy.
  • 39. Need for meaningful minimum wage policyVast number of workers in unorganized sector, andtheir substantial contribution to the nationaleconomy, they are amongst the poorest sections ofIndia’s population.Abolishing the povertystrengthening the enforcement machinery
  • 40. Minimum wageThe minimum wage rate may be fixed at Time rate Piece rate Guaranteed time rate Overtime rateDifferent minimum wage rate may be fixed for Different scheduled employments Different works in the same employment Adult, adolescent and children Different locations Male and female.
  • 41. Minimum wageMinimum wage may be fixed by An hour Day Month Any other period as may be prescribed by thenotified authority
  • 42. Legal Requirements For MinimumWages Legal/Code compliance – standards on Wages & Benefits Form of Payment of Wages Minimum Wage Training and Probation Wage Timely Payment of Wages Holidays, Leave, Legal Benefits and Bonuses Production and Incentive Schemes Payment for All Hours Worked Calculation Basis for Overtime Payments Non Payment of Incentives Premium/Overtime Compensation
  • 43. Legal Requirements For Minimum Wages Overtime Compensation Awareness Overtime Compensation for Piece Rates and Other Incentive Schemes Deposit of Legally Mandated Deductions Voluntary Wage Deductions / Loans & advances Voluntary Wage Deduction/Worker Access to Information Employer Provided Services Accurate Calculation and Recording of Wage Compensation Accurate Length of Service Calculation False / Multiple - Payroll Records Record Maintenance Payroll Record Maintenance/Worker Acknowledgement Worker Wage Awareness Contestation of Wage Payments Pay Statement
  • 44. Steps TakenRecent initiatives for providing social security to theworkers in the informal sector have been passed in theparliament The National Rural Employment Guarantee (NREG) Act2005 and, The Social Security for Unorganized (Informal) SectorWorkers.
  • 45. Case StudyViolation: Overtime wages of the workers were deducted as a means ofpunishment if they could not achieve the daily production target.Violation: Employees, if fail to attend weekend work, were deliberatelymade absent for 2 to 3 days from his working period.Violation: In one of the factories in Chittagong, Bangladesh working for areputed brand of USA, physical torture was reported for simple mistakesincluding no payment of wage.Corrective Action: The factories shall not engage in or support the use ofcorporal punishment, mental or physical coercion, and verbal abuse.Wages shall not be deducted as a form of punishment.
  • 46. Working hours Working time is the period of timethat an individual spends at paidoccupational labor. Unpaid laborssuch as personal housework arenot considered part of the workingweek. Many countries regulate thework week by law, such asstipulating minimum daily restperiods, annual holidays anda maximum number of workinghours per week
  • 47. ImportanceSeveral nations have imposed limits on working time inan effort to combat unemployment. The theory is thatless work hours per a worker will create a demand formore workers, and give those that are already hiredmore leisure time. This has been done both on anational level, as in Frances 35-hour workweek, andon the company-union level, for example theagreement between Volkswagen and its union totemporarily reduce the workweek to 29 hours topreserve jobs. This policy is controversial amongeconomists
  • 48. Legal Requirements For Working Hour Legal/Code compliance – standards on hours of work Rest Day & Rest Periods Meal and Rest Breaks Protected Workers (Women and Young Workers)/Regulations on Hours of Work Protected Workers (Women and Young Workers)/Record Keeping Time Recording System Maintenance of Reasonable Levels of Staff Forced Overtime/Extraordinary Business Circumstances. Extraordinary Business Circumstance/Overtime Explanation
  • 49. Legal Requirements For Working Hour Public & National Holidays Annual Leave/Determination Leave/Retaliation Annual Leave/Wage Payments Sick Leave Sick Leave/Restrictions Calculation of Absences Suspension of Work Rotation of workers to prevent leave entitlement Over-booking of production capacities.
  • 50. Case StudyViolation: Weekend and overnight worked hourswere not recorded in the time cards and payrollsheets and also not compensated properly.Corrective Action: Factory shall record all workedhours in payroll sheets and time cards and shallcompensate those correctly. This is to satisfy ThePayment of Wage Rules, 1937 of Bangladesh.Violation: Female workers were working from 8a.m. to 12 a.m. as overtime.Corrective Action: Factory shall allow femaleworkers to work between 7 a.m. to 8 p.m. only witha view to comply with The FactoriesAct, 1965, Bangladesh.
  • 51. Case Study Violation: Overtime worked hours had exceeded the legal limits ofstipulated hours per month with a large margin.Corrective Action: Factory shall not allow anyone to work more than10 hours per day and 60 hours per week. The duration of 60 hours perweek shall be represented as 48 hours general duty plus 12 hoursovertime as per the local law of Bangladesh.Violation: Factory did not comply with the local law of Bangladesh inthe payment of overtime wages for all the workers in the factory.Corrective Action: Factory shall follow legal requirement for overtimecompensation, which is double of the basic pay.
  • 52. DiscriminationThe Equal Remuneration Act, 1976 / ILO convention –111 – As per this convention discrimination means - anydistinction, exclusion or preference made on the basis ofrace, color, sex, religion, political opinion, nationalextraction or social origin, which has the effect ofnullifying or impairing equality of opportunity ortreatment in employment or occupation. Such practicescannot be accepted.
  • 53. Discrimination Discrimination isthe prejudicial treatment of anindividual based on theirmembership in a certain group orcategory. It involves the actualbehaviors towards groups such asexcluding or restricting membersof one group from opportunitiesthat are available to anothergroup. It involves excluding orrestricting members of one groupfrom opportunities that areavailable to other groups.
  • 54. Types of DiscriminationDiscrimination on the basis of nationalityCaste discriminationEmployment discriminationSex, gender and gender identity discrimination
  • 55. Effects of Discrimination On commercial deals: discrimination of favouritism can leadto less better deals based on discriminatory criteria instead ofquality, price and social responsibility. On the work place: discrimination by unequal treatment cancause stress, tension, aggressively and a loss of cohesion inthe factory which may affect productivity and quality. On skills: discrimination can lead to a higher turnover ofemployees contributing to a loss of skills and experience forthe company. On market share: discrimination can deprive the firm of readyto use assets and knowledge of niche markets or specificsuppliers with the appropriate competences.
  • 56. Resolving Disputes Set up and advertise neutral job profiles for the variouspositions to fill Train your managers (human resources, procurement, sales)about the different forms of discrimination to be able todetect them Create a bottom up communication system to ensure acomplaint system for the employees. Set up a series of indicators in order to monitor possiblediscrimination: compensation and benefits, wage rate, genderratio in the team, age, social, racial and religious origin. Keep a list of suppliers to track place of orders and thediversity.
  • 57. Legal Requirements Legal/Code Compliance – Harassment and Abuse standards Progressive disciplinary practices Discipline/Fair and Non-Discriminatory Monetary fines & penalties Gender appropriate and non-intrusive security practices Sexual harassment Psychological harassment Physical/Verbal – Abuse Freedom of movement
  • 58. Legal Requirements For Non-Discrimination Legal / Code compliance - Non-Discrimination standards Employment Decisions Work-force Demographics Recruitment and Employment Practices/Job Advertisements, Job Descriptions and Evaluation Policies Equal Pay for Equal Work Marital Discrimination Pregnancy Testing Possible Marriage or Pregnancy Discrimination Apparel Export Promotion
  • 59. Case Study on Discrimination:Violation: Factory management is reluctant to recruitemployees from the area where the factory is situated.This is not only to avoid local protests against workingcondition, but also due to fear of post scenario of adisciplinary case. Thus, there is discrimination in hiringworkforce.Corrective Action: To comply with social accountabilitystandard, recruitment shall not be biased towardsavoiding local candidate at the time of recruitment.
  • 60. Freedom of Association andCollective Bargaining Freedom of Association – The Trade Unions Act, 1926 / ILOconvention – 87 – As per this convention - Considering that thePreamble to the Constitution of the International LabourOrganization declares "recognition of the principle of freedom ofassociation" to be a means of improving conditions of labour andof establishing peace3 The Right to Collective bargaining - ILO convention – 98 -Workers and employersorganizations shall enjoy adequateprotection against any acts of interference by each other or eachothers agents or members in their establishment, functioning oradministration
  • 61. How to Improve the Freedom Associationand Collective Bargaining Enquire if the workers rights are respected, as set forth in locallaws: to elect workers representatives or to form or join a unionof their choice and to negotiate collectively, and withoutinterference from the employer. In countries where freedom of association is prohibited, decidedby the State or limited (like in free zones), a company shouldfacilitate all parallel means of freely elected representation, i.e.leave the liberty to all its workers to gather, elect representativesand negotiate collectively without reprisal. To have an overviewof these countries, please consult the ILO ratifications table Make sure workers are able to communicate openly withmanagement regarding working conditions without threat ofreprisal, intimidation or harassment, between themselves andwith the management, in the working place.
  • 62. Legal Requirements Legal / Code compliance - Freedom of Association standards Right to Freely Associate Anti-Union Violence/Harassment/Abuse Anti-Union Discrimination/Dismissal, Other Loss of Rights, and Blacklisting Restoration of Worker Rights/Reinstatement Production Shift/Factory Closure to Prevent Exercise of Freedom of Association Severance Pay Employer Interference and Financial Control
  • 63. Legal RequirementsEmployer Interference/Constitution, Elections,Administration, Activities and Programs Employer Interference/Registration Employer Interference/Favoritism Employer Interference/Favoritism Formation ofAlternative Organizations Facilities for Worker Representatives Right to Collective Bargaining Deduction of Union Dues and Other Fees Grievance Procedures / Channels of Communication
  • 64. Case Study Violation: Employees were not permitted to bargaincollectively about their requirements.Corrective Action: All employees shall be permitted tobargain collectively about their rights
  • 65. OrganizationsInternational labour organization (ILO)Fair Labor Association (FLA)Worldwide Responsible Apparel production (WRAP)Council on Economic Priorities Accreditation Agency(CEPAA) The Ethical Trading Initiative (ETI)Business for Social Responsibility (BSR)(DISHA)Self Employed Women Association (SEWA) in AhmadabadOccupational Safety &Health Administration(OSHA)
  • 66. WRAPWorldwide Responsible Accredited Production (WRAP)It is an independent, global non-profit organizationdedicated to the certification of facilities engaged inlawful, humane and ethical production. Headquartered inArlington, Virginia, WRAP has offices in Hong Kong andBangladesh with staff in the UK, Mexico and East Africa.
  • 67. Principle of WRAPCompliance with Laws and Workplace Regulations Facilities will comply withlaws and regulations in all locations where they conduct business.Prohibition of Forced Labor Facilities will not use involuntary, forced ortrafficked labor.Prohibition of Child Labor Facilities will not hire any employee under the ageof 14 or under the minimum age established by law for employment,whichever is greater, or any employee whose employment would interferewith compulsory schooling.Prohibition of Harassment or Abuse Facilities will provide a workenvironment free of supervisory or co-worker harassment or abuse, and freeof corporal punishment in any form.Compensation and Benefits Facilities will pay at least the minimum totalcompensation required by local law, including all mandated wages,allowances & benefits.
  • 68. Principle of WRAPHours of Work Hours worked each day, and days worked each week, shallnot exceed the limitations of the country’s law. Facilities will provide atleast one day off in every seven-day period, except as required to meeturgent business needs.Prohibition of Discrimination Facilities will employ, pay, promote, andterminate workers on the basis of their ability to do the job, rather thanon the basis of personal characteristics or beliefs.Health and Safety Facilities will provide a safe and healthy workenvironment. Where residential housing is provided for workers, facilitieswill provide safe and healthy housing.Freedom of Association and Collective Bargaining Facilities will recognizeand respect the right of employees to exercise their lawful rights of freeassociation and collective bargaining.