Effective monitoring of domestic supply chains key to ending forced labour

Posted by on Jun 3, 2012 in Business, Labor Rights | No Comments

By Mumtaz Lalani
Institute for Human Rights and Business
Published June, 1, 2012

Most debates on business involvement in human rights abuses focus on the role of global multinationals operating overseas. But new research supported by the Joseph Rowntree Foundation finds problems much closer to home, in particular among agency and sub-contracted staff working for companies withinthe UK.

Under the UN Guiding Principles, businesses have a responsibility to protect the human rights of agency workers within their supply chains. Photo: IHRB.

The National Institute of Economic and Social Research (NIESR), Britain’s longest established independent economic and social research institution, set out to explore the business and employment structures that facilitate forced labour in low-wage, low-skill industries in the UK such as construction, food and agriculture and hospitality. In doing so, we identified a link between industry characteristics, the use of agency and sub-contracted labour, labour regulation and exploitative employment practices.

Industry characteristics

Forced labour is more likely to occur in industries in which labour makes up a significant proportion of total operating costs such as care work. High labour costs alone do not increase workers’ vulnerability to forced labour. Rather, it is the nature and pattern of labour use which can do so. High variability in labour demand in industries such as construction and agriculture has led to an increased use of agency and sub-contracted, which in turn, increases the risk of worker exploitation.

The use of agency and subcontracted labour

Sub-contracting work reduces labour costs and is a core part of the way many businesses work today. However, long complex supply chains can allow poor and often illegal labour practice to exist in legitimate industries. Rogue employment agencies or informal labour providers acting outside the law are often involved in extreme exploitation of migrant workers (who make up an estimated 25% of agency workers) including:

  • non-payment of wages;
  • excessive and unfair deductions e.g. for protective clothing;
  • poor quality accommodation provided with the job.

The development of a dual labour market

Businesses’ need to cut labour costs and the resultant increase in the use of agency and sub contracted labour has led, in some cases, to the development of a dual labour market where a core of permanent staff works alongside a variable (mostly migrant) workforce. It is here that the least desirable and most insecure forms of employment, including forced labour, are found. Effectively this means that workers doing the same job may receive different pay and conditions or, as has been found in the food industry, that agency workers encounter discriminatory treatment in the workplace.

The UK Agency Workers Directive, which came into force in October 2011 was intended to eliminate differential treatment between agency and permanent staff after a 12-week period. However, it remains unclear whether businesses have attempted to circumvent the legislation, for example through the use of 11-week contracts.

Labour Regulation

Poor regulation of temporary employment agencies means that rogue agencies operate freely in sectors which are beyond the remit of the Gangmasters Licensing Authority. There is an urgent need for the UK government to increase the current scope of its regulatory and enforcement action across all industries employing temporary labour.

What does all this mean for businesses?

Under the UN Guiding Principles, businesses have a responsibility to protect the human rights of agency workers within their supply chains.

To flush out forced labour practices, governments must do more but businesses need to monitor their supply chains in the UK more closely as well. Such a mentality goes straight to the heart of the UN Guiding Principles on Business and Human Rights for implementing the ‘protect, respect and remedy’ framework on business and human rights.

While governments must ‘protect’ human rights, the UN Guiding Principles make clear that businesses should focus on ‘respect’ and undertake ongoing human rights due diligence including on how agency workers are being treated within their supply chain.

In doing so businesses need to ask themselves the following questions: What are the terms and conditions under which agency workers are employed within our supply chain? Are there formal and detailed service level agreements in place to reduce the risk of agency worker exploitation? Is there sufficient oversight of the agencies we work with?

The use of agency and sub-contracted labour can admittedly result in massive savings for businesses and, as a result, is likely to remain common practice. Indeed, a large London hotel interviewed for our research indicated that the use of agency workers equates to savings of around £2-3 million per year. Interestingly, this employer went on to add that they would prefer not to use agency workers because they are aware that such workers are not always treated fairly.

Under the UN Guiding Principles, businesses have a responsibility to protect the human rights of agency workers within their supply chains. Clearly, this may require a shift in mentality for some businesses who currently see this as beyond their domain. The food and agriculture industry is currently leading the way with ethical audit systems and workforce engagement strategies in place to uncover cases of exploitation and provide workers with access to effective remedies as called for in the UN framework. However, the recent outcry over working conditions within Apple’s supply chain indicates that public opinion is playing an increasingly vociferous role in advancing the human rights agenda and may provide the necessary push for others to follow.

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