Employers argue the new wage is too high to be financially viable

Employers argue the new wage is too high to be financially viable

Trade unions and employers in Cambodia's garment sector are denouncing the government's new US$128 minimum monthly wage for the clothing textile and footwear industry.

Union leaders say the amount, which represents a 28% rise from the current US$100 and comes into effect on 1 January 2015, is far below their expectations - while employers argued the figure is too high to be financially viable.

Ken Loo, secretary general of the Garment Manufacturers Association in Cambodia, told just-style that "some factories will have to be closed down" as they cannot afford this increase. However, Loo said he was "not in a position to say" how many factories were at the risk of closure.

But Sokny Say, general secretary of the Free Trade Union of Workers of the Kingdom of Cambodia (FTUWKC), countered GMAC's claims.

"Unions are not bothered about GMAC's warning because they have been saying this for over a decade," Say told just-style. She added the increase to US$128 is far lower than what workers had expected, pointing out that a survey from a tripartite committee of the ministry of labour, union and industry representatives last year concluded that any rise should be between US$157 and US$177.

Garment manufacturers had backed a wage rise to US$110, as opposed to the union's demand of US$140, at a sub-committee appointed by the government to negotiate a new minimum wage.

The government-appointed Labour Advisory Committee on Wednesday (12 November) agreed a compromise level of US$123 but Cambodian Prime Minister Hun Sen later decided to add another US$5, bringing it up to US$128, according to a labour ministry statement. However, the minimum monthly wage for probationary employees will remain at US$123 per month.

The statement noted that all other benefits and allowances paid to workers will be maintained, which includes transport and accommodation allowances of US$7 a month; attendance bonuses of US$10 and additional minimum monthly pay between US$2 and US$11 for senior employees who have been working for two to 11 years. "In total, an employee will receive US$147 - 156," it added.

Exclusing bonuses and allowances, the move means Cambodia's minimum wage is now higher than Myanmar ($50.6-60.6) Bangladesh ($68), Pakistan ($101), and even some zones in India ($65-142.6) and Vietnam ($88.7-126) according to figures included in a World Trade Organization (WTO) report last month.

But Say said she was disappointed that the amounts are below her union's initial demand of US$177.

Likewise, Ath Thorn, the president of the Coalition of Cambodian Apparel Workers' Democratic Union (CCAWDU) said the extra US$5 was added by Hun Sen after the workers insisted US$123 was not sufficient. "US$128 is still way below our demand and we are going to have a meeting of the union and decide on our next course of action," Thorn said.

Both unions have yet to decide whether any trade union action is appropriate over the issue.

Meanwhile, the International Labour Organization (ILO) called on international brands to remain committed to Cambodia as a sourcing destination to reflect the wage increase in their free on board (FOB) prices for 2015.

"This will pave the way for a smooth implementation of the new minimum wage and relieve the cost pressure on garment factories, who have faced stagnating or falling prices in some of their major export markets," the ILO added.

Eight major fashion brands, including one of Cambodia's biggest customers, H&M, have indicated their support for talks to raise wages for the country's garment workers - in line with efforts to improve supplier productivity.

“We intend to hold the brands to their word and will continue working with them on a mechanism that will extend higher wages to workers in their supplier factories,” added Jyrki Raina, general secretary of IndustriAll.