'We found that many buyers were not willing to pay more'
The Fair Wear Foundation (FWF) on Thursday said it is the buyers' responsibility to comply with legal wage requirements.
FWF Expert Klaus Hohenegger stated this at a supplier seminar on "Labour Minute Costing and Price Negotiations with Buyers", organized by FWF and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), at the Lakeshore Hotel in Gulshan, Dhaka.
Effective from December 1, 2018, the legal minimum wages in Bangladesh went up by 51%, which brought about a responsibility for brands to revisit their price levels.
In anticipation of this, FWF undertook a research with suppliers in Bangladesh to help develop a labour costing tool that could assist suppliers and buyers in determining a factory’s cost of one minute of labour—and with that identify the actual increase which would need to be applied to the manufacturing price to cover the increase in labour costs, said a press release.
"We found that many buyers were not willing to pay more," said Hohenegger, adding that brands accept to increase prices when fabric costs increase or currency fluctuates, "but start bargaining when the minimum wage goes up, making the argument that factories simply need to increase their efficiency".
"Our view is that it is the buyer’s responsibility to comply with legal wage requirements, but this starts with transparency, with knowing the labour component as part of an FOB [Free on Board] price."
Speakers at the seminar said that unless buyers cover the additional labour costs, the wage increase can work against, rather than in favour of, workers.
Struggling to cover production costs, factories may reduce their workforce, force production staff to work longer hours, or set higher production targets.
"Unfortunately, we see the same thing happening now," Hohenegger claimed.
Participants urged for greater transparency in cost price negotiations between apparel buyers and their suppliers in order for wage compliance to be achieved and for wages to improve.
Speaking at the seminar, FWF Verification Officer Koen Oosterom, said: "The FWF labour minute calculator offers the much needed transparency. It shows how much the price of a garment would need to go up in order to give factories the required financial room to ensure payment of at least the legal minimum wage.
The FWF tool also makes it possible to calculate the labour cost per product based on a higher wage level, such as a living wage benchmark or a wage agreed through collective bargaining agreement (CBA).
Fazlee Shamim Ehsan, second vice-president of the BKMEA, pointed out that in a margin-driven industry, buyers are often unwilling to shoulder the higher costs of compliance with new legal wage requirements.
However, at the same time, suppliers resist open costing, said Ehasan, adding: "Suppliers are at times reluctant to provide a detailed breakdown of costs, concerned that it will be used against them and they will be pressured to lower prices even further."
FWF Expert Klaus Hohenegger concluded that there is common ground for brands, factories and trade unions, hoping that the growing interest in labour cost transparency might lead to an agreed sector-wide approach to due diligence on wage compliance.