Ensuring a responsible transition towards digital wages in Cambodia – Event

The ILO’s Global Centre on Digital Wages for Decent Work, Better Factories Cambodia (BFC) and the Garment Manufacturers Association in Cambodia organized an online launch event on ensuring a responsible transition towards digital wages in Cambodia on 16 February 2022.

The event featured contributions from the organizers and representatives of Business for Social Responsibility (BSR), Cambodian Women for Peace and Development (CWPD) and Women’s World Banking. The 115 participants included representatives from government institutions, workers’ and employers’ organizations, factories, brands and retailers, financial service providers and development partners.

Objectives of the event

1. Present findings on the progress of wage digitization in garment factories
2. Identify and discuss priorities for action to accelerate the responsible transition to digital wage payments
3. Build partnership for responsible digital wage transition

Speakers during the event

• Sara Park, Programme Manager, Better Factories Cambodia
• Ken Loo, General Secretary, Garment Manufacturers Association of Cambodia
• Valerie Breda, Technical Expert, ILO Global Centre on Digital Wages for Decent Work
• Sethypong Sok, Country Representative, Business for Social Responsibility
• Sophavy Seng, Project Manager Cambodian Women for Peace and Development
• Agnes Salyanty, Research Lead, SEA Region, Women’s World Banking
• Arron Goldman, Deputy Programme Manager Better Factories Cambodia

Key insights and learnings

The adoption of digital wage payments has grown with the recognition of its benefits
The transition to digital wage payments in the Cambodia garment sector has accelerated in recent years. In January 2022, a rapid survey of 210 factories that Better Factories Cambodia covers revealed that about half paid wages in cash. The Garment Manufacturers Association of Cambodia has encouraged its members to offer workers the option of receiving digital wage payments. To that effect, it has signed memoranda of understanding with financial service providers since 2016. Factories paying cash wages and their workers are more vulnerable to robbery around payday and spend more time paying and receiving wages. The COVID-19 pandemic has increased the need for digital wage payments, especially during the lockdown.

Factories engaging in the transition have been reaping the benefits. A 2021 study by BFC, BSR HERproject, the International Finance Corporation and Microfinance Opportunities revealed that nine in ten factory managers reported satisfaction with the cost of digital wages. For a factory with 2,000 workers, the financial benefits of wage digitization exceeded the cost of transition within four months.

Digital wage payments need to be responsible to benefit women and men workers

Participants recognized the importance of promoting responsible digital wage payments to ensure that the transition benefits and does not harm workers, particularly the most vulnerable, including women, migrant and informal workers. Responsible digital wage payments enable workers to receive fair and timely wages, make the most of their wages, have better economic opportunities and be more resilient. As the experience of other countries suggests, enterprises and workers may revert to cash wages when digital wage payments and related financial services do not respond to their needs. For example, the fees may be too high or the conditions to use a digital account may be too restrictive. In some cases, digital wages may negatively impact household gender dynamics, which is a particular challenge for women workers.

In Cambodia’s garment sector, limited financial and digital literacy is a major challenge, with four in ten workers expressing the need for training before engaging in the transition. Workers often lack awareness of privacy and security risks, as those paid digitally may share account details with family and friends. Insufficient competition among financial service providers has curtailed the development of services that adequately respond to the needs of women and men workers. The network of ATMs and mobile money agents is insufficiently developed, particularly in rural areas. This is important since most workers who receive digital wage payments cash out the full amount on payday. Identified reasons include low wages, high fees in case of multiple cash withdrawals and limited opportunities to make payments digitally, as less than one in ten workers make payments digitally. Another important factor is limited savings and over-indebtedness among workers, with multiple borrowing a concern. Insights from CWPD showed that workers not yet receiving digital wages are relatively reluctant to move away from cash wages; however, those who did so showed signs of satisfaction shortly after receiving wages digitally.

Stakeholders have recognized the opportunities for collective action in support of the transition

Participants discussed opportunities for employers, workers and their organizations, along with government institutions, financial service providers and other stakeholders, to collectively push towards responsible digital wage payments. A responsible transition to digital wage payments holds benefits for workers, enterprises, government, supply chain actors and financial service providers in the Cambodia ecosystem. GMAC’s support for a just, safe and responsible transition suggests opportunities for scaling up wage digitization. Existing initiatives, although fragmented and in small scale, offer tested, effective approaches for inclusive wage digitization in factories. Good practices and lessons learned can be shared more widely among factories, employers’ associations and workers’ organizations and those that support the transition.

Participants expressed a high level of interest in supporting the transition to responsible digital wage payments, including the possibility of contributing to a joint action plan. Some expressed interest to know more about how government institutions will be engaged and how relevant ministries can support such transition efforts. Participants also acknowledged the need for more/close consultation and engagement with workers’ organizations and government institutions. Government institutions, including the Ministry of Labour and Vocational Training, the National Bank of Cambodia and the Ministry of Economy and Finance, have shown interest in supporting the transition. However, further engagement is necessary to translate such interest into specific commitments or interventions for responsible digital wage payments.

Opportunities for action and next steps

• Building inclusive digital payment ecosystems to design digital solutions that respond to the needs of employers and workers.
• Building trust in digital financial services to boost the acceptance and the use of those services.
• Articulating policies that encourage the transition and that protect the wages of women and men workers.
• Strengthening women and men workers’ digital and financial literacy.
• Sharing good practices and tools to facilitate the transition.
• Improving coordination and guidance among stakeholders, to promote coherence in the approaches, strategies and leadership in driving the transition.

Next steps will include further consultations with government institutions, workers’ and employers’ organizations, financial service providers and other stakeholders, responding to capacity development needs and enabling inclusive social dialogue on the promotion of responsible digital wage payments.