SOCIAL COMPLIANCE AUDITS AND SUPPLY CHAIN SUSTAINABILITY: STUDY TO TEST THE ASSOCIATION BETWEEN LABOR COMPENSATION AND BUSINESS SUSTAINABILITY IN TEXTILE AND GARMENT INDUSTRY OF PAKISTAN

Abstract

Purpose: Contractual workers hire on Piece rate (PR) basis in textile and garment industry of Pakistan have high probability to receive wages that may fail to meet minimum wage standards and overtime payments. This inquiry depicts overtime payment and minimum wage violations among contractual based piece rate workers observed during social compliance (SC) audits conducted for foreign buyers by social compliance auditors. Such violations have serious consequences for sustained business growth with foreign buyers and often result in termination of purchase orders and prospect trade. The current study intends to investigate the association between hiring contract piece rate workers and minimum wage and overtime payment violations Methodology: A total of 54 social compliance onsite audit reports of export oriented textile and garment factory of Pakistan were analyzed. 180 Contractual PR workers and 20 contractors ofthese factories were also interviewed. The investigator used Z test for proportion and Chi-Square test for association to test the hypothesis. The methods of both primary and secondary test were used through which the research has been completed. Findings: The present report may help to minimize the violations that are reported during the code of conduct audits. This may also facilitate the suppliers and factories to maintain sustained business growth with foreign retailers and to avoid termination of trade, increase trust and revenue. The current research may also help the factory management and government to make such policies that may help to rectify the existing problem that’s not only violates international labor standards but also Pakistan labor laws. Limitations: The limitations of our research are that the data is collected only from 180 PR workers and only 54 social compliance audits were involved while collecting the data. However, there was a pandemic situation that’s why the research was done online and majority of the data that was collected was secondary data. Moreover, as stated earlier that the compliance audits were done by 54 companies which was the sample size in collecting the data. Another limitation was that the thesis was written during the time of Corona Virus pandemic that’s why the data was collected online as the physical interaction have to be kept to a minimum. Recommendations: The recommendations are that the organizations should follow the proper wage rate and give compensation to labor on time. On the other hand, the labor should also do work on time as it is a two way process. Moreover, some textile firms and organizations do not keep supply chain sustainable that’s why the organizations should try hard to keep supply chain and its department in the organization sustainable. For organizations it could be stated that the companies should not violate their labor laws and the labor should also do their work on time as well.