With the majority of workers lacking formal contracts, a new international study revealed the extensive use of informal practices within readymade garment (RMG) supply chains in Bangladesh, Pakistan and India.
In Bangladesh, as many as 92% workers were found employed without any written contracts, according to the study conducted by the Asian Floor Wage Alliance (AFWA).
The rate is 90% in Pakistan and 65% in India, according to the report titled “Threaded Insecurity: The Spectrum of Informality in Garment Supply Chains.”
These informal working arrangements make it cheaper for employers to hire workers, who often receive lower wages and lack essential benefits like health care or paid leave, according to the report published on March 7.
These workers can be easily fired at the employer’s discretion, it also noted.
By focusing on Bangladesh’s 92% of workers without contracts, the report particularly sheds light on the vulnerability of women who are often excluded from essential labour protections.
This lack of formal contracts denies them benefits and exposes them to a greater risk of rights violations, gender-based violence and harassment, it added.
The AFWA, founded in 2007, is an Asian-led alliance working across garment-producing countries and consumer regions.
The report, based on research conducted between 2020 and 2024, focuses on a critical issue: informal employment within the formal sector.
This research involved collaboration with 23 trade unions and labour organizations across six countries: Bangladesh, Cambodia, India, Indonesia, Pakistan and Sri Lanka.
The report identified that lead firms held more power than supplier factories and the workers who produce their garments.
Fast fashion lead firms choose to maintain unstable relationships with supplier firms, allowing them to bargain for shorter lead times at ever lower prices, the report mentioned.
To meet these demands for speed and lower costs, garment factories increasingly rely on informal employment practices. This involves hiring contract labour and temporary workers, creating a vulnerable workforce susceptible to exploitation, it said.
The report detailed these practices from employing workers without contracts to outsourcing to unregistered production facilities and home workers.
In Bangladesh, registered garment factories are supplied with subcontracted orders by unregistered production facilities.
These facilities operate without formal oversight from the government or brands, said the report, adding, trade union and civil society representatives from Bangladesh reported high production targets, low wages and extreme difficulty forming unions in these unregistered facilities.
Across Bangladesh, Pakistan, India, Indonesia and Cambodia, only 15% of women interviewed retained their jobs when the Covid-19 pandemic disrupted production networks. Some 43% were laid off and 36% were terminated. An additional 1% resigned.
In comparison, 33% of male workers retained their jobs, with 43% laid off and 24% terminated, according to the study report.
The report also recommended collaboration with unions and industry representatives. This collaboration is crucial for negotiating acceptable ratios of formal to informal workers and defining productivity targets to combat excessive workload intensification.
Base pricing for lead firms should consider statutory wages, benefits and entitlements. It should also factor in maintaining ethical standards established through negotiations between trade unions, worker organizations, supplier associations, lead firms and representatives from production countries.
