Wage digitisation is an idea whose time has yet to come for many sector workers
Wage digitisation is an idea whose time has yet to come for many sector workers
In Cambodia, you can pay for everything from a month’s rent to a tuk-tuk ride with digital bank transfers. Nevertheless, many garment workers still find themselves sending cash back to their hometowns in a taxi.
On 6 December, representatives from NGOs, the government and the private sector gathered to discuss this conundrum at the Responsible Business Hub’s last event of the year.
The COVID-19 pandemic helped to change digitization from a proposition to a reality for a majority of the country’s workers. “Just three years ago, the prospects of wage digitisation in Cambodia’s garment industry were uncertain,” said Sara Park, programme manager at Better Factories Cambodia (BFC). “Only a few factories were making the switch.”
However, there remains a long way to go. Around 35 percent of workers in the 700 garment factories registered with BFC are still paid in cash. Concerns from both corporate management and the workers themselves challenge the status quo at these holdouts.
One of the biggest concerns to managers is the cost. Financial service providers in Cambodia typically charge 15 to 30 cents per digital transaction, said RISE Country Manager Sok Sethypong, though he noted this is subject to negotiation. These direct costs are highly visible to managers, and thus capture their attention at the expense of other factors.
“Employers tend to focus on this aspect rather than considering the hidden costs associated with cash payments, such as the time spent on payroll administration and the productivity lost on payday,” said Sok.
Even when employers are willing to switch to digital wages, management cannot simply impose the change from the top down. A lack of digital and financial literacy pose major challenges to workers, many of whom have no experience with things like bank accounts and mobile payment applications. Without the proper support, workers are unable to access the benefits of wage digitisation.
“It’s vital to provide adequate training. Otherwise, workers will withdraw 100 percent of their wages on payday,” said Sok.
The benefits of wage digitisation, when combined with the proper support and training, are substantial. That’s especially true for the 85 percent of garment workers who are women. In its Transform Financial Health program, RISE found a 24 percent uptick in the number of women actively participating in family spending decisions after wage digitisation.
“These shifts are particularly noteworthy given the traditional norms in Cambodia,” said Sok. “Men are seen as the primary decision-makers in the household, and it is not common for Cambodian husbands to follow a wife’s initiatives or decisions.”
Increasingly, the switch to digital payments is becoming not just a good move for factories and workers, but a necessary one. Fashion brands and buyers are increasingly pushing to ensure social and environmental standards within their supply chains. Digital wages and the benefits they bring play an important part in this. Not only do they aid in empowering women in the sector; they provide accurate, transparent records of payroll information that help companies identify labour abuses and fraud.
“Digital wage payments are important for Cambodian textile factories to continue getting orders from brands that will increasingly ask for this,” said Hazzo Anwer, project manager at GIZ Fabric.
