Harnessing Compliance to Improve Well-being and Productivity: The Impact of Better Factories Cambodia

15 Oct 2020

An independent impact assessment of Better Factories Cambodia (BFC) conducted from 2015-2018 provides evidence that engagement with the programme and improved compliance can drive positive change. Key findings include:

Better Factories Cambodia leads to reduced working hours, in line with legal compliance, without negatively affecting take-home pay. Using workers’ own reports on their average working time, researchers show that participating in BFC leads to an average reduction in overtime of 5.8 hours per week (or 8.8 per cent) as factories achieve compliance with working time regulation. At the same time, increased compliance with wage regulation in a time period of rising minimum wages shows this reduction in working time does not ultimately reduce workers’ reported take-home pay. As a consequence, the effective pay per hour for workers in the study rises 41 per cent, all else being equal. By encouraging adherence to compliance with legal wage regulations, the effect of BFC is consistent with the steady increases in the minimum wage that have been implemented throughout Cambodia’s garment sector in recent years.

Factory productivity increases. Efficiency rates, as measured by workers’ reported time to achieve their daily and hourly production target, increase by approximately 20 per cent compared to firms which had not yet fully participated in the BFC programme. Factories simultaneously increase their production targets and planned production. Taking the two trends together, researchers estimate an average cumulative productivity improvement between 26 – 31 per cent.

However, costs associated with the increase in hourly pay outpace increases in productivity. As compliance with pay and hours increases, costs to the firm increase. Rising costs of compliance could be off-set by rising productivity, yet the current analysis suggests that workers are capturing a greater benefit of higher social compliance, relative to firm management. Researchers suggest this is evidence of the need for supply chain adjustments, including better pricing terms from buyers, which are likely needed to ensure a return to the firm from higher compliance.

Workplaces become more respectful. Workers’ reported exposure to behaviours constituting sexual harassment falls over time. Researchers identify BFC’s work to ensure wage compliance, resulting in better aligned pay structures between workers and managers, as the driving factor in this reduction. Training and grievance systems, taking into account the diversity of workers’ circumstances, are a key priority for future actions.

Human resource management skills improve. Better Factories Cambodia not only drives improvement in compliance, but it also influences managers’ mindsets and human resource management skills. For example, through engagement with BFC, managers are more likely to view timely and accurate payment to workers as an
important priority. Efforts to address workers’ concerns about low wages, as well as concerns about excessive overtime for workers at end-of-production processes are areas for further attention.

Workers experience greater well-being and potential for social development. As factories participate in BFC, workers become less likely to believe that they must regularly work overtime to earn sufficient income, report less need for overtime to meet basic necessities, as well as less concern with work hours and their pay rate. When asked to rate their overall life satisfaction, workers report higher satisfaction, as measured after their factory participated in BFC for three years. Yet, differences by gender persist for overall satisfaction in life and work.


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