IMPACT OF SUBCONTRACTED WORKERS ON THE APPLICABLE WAGES IN THE TEXTILE SECTOR OF PAKISTAN

Abstract

Purpose The aim of this study is to study the possible outcome of hiring sub contractual employees / labors by the local textile companies which are producing goods for the international buyers over the violations reported in the social compliance audit relating to minimum wage rate not paid and the overtime premium not paid. Methodology/sample This is a quantitative research.A sample of 40 (N=40) Textile and Garment factories is selected. A total of 120 Social Compliance Audit reports based on panel data (Nov., 2011-Jan., 2013) either conducted directly by buyers or by a third party of 40 textile and garment factories in Pakistan is analyzed. Only those audit reports will be picked having the violations of Minimum Wage and Overtime Premium not paid to check and verity its relationship with hired subcontracted piece rate workers. Findings Based on the regression and correlation testing it is concluded that there is a significant relation of hiring of sub contractual employees to the risk of violation of minimum wage rate not paid and the violation of the overtime premium not paid. Thus the more the local textile companies which are engaged in the production of goods for the international buyers hire sub contractual employees which are not on the direct payroll of the textile companies the more is the risk for not meeting the minimum wage rates and also for not giving them the overtime payment. Practical Implication The findings and results will assist to identify the severity of relationship between the impact of hiring subcontracted piece rate workers and failing to receive minimum wages and overtime payment violations in the SC audit report conducted by the foreign buyers. The findings can also be generalized in other industry. Government will also be able to take step and develop policy to discourage subcontracting piece rate workers and make proper legislation to address the existing issues in Social Compliance.