Bangladesh launches pioneering employment injury scheme for the garment sector

Bangladesh launches pioneering employment injury scheme for the garment sector

The launch of the employment injury scheme (EIS) in Dhaka on 21 June 2022 – Photo: GIZ

On 21 June 2022, Bangladesh launched a ground-breaking employment injury scheme – the first of its kind – providing income protection for workers in the country’s ready-made garment sector.

‘This is a historic day for Bangladesh’, declared Mohammed Eshan Elahi, Secretary of the Ministry of Labour and Employment, as he launched the country’s first employment injury insurance (EIS) scheme in Dhaka on 21st June 2022. This pioneering scheme, named EIS Pilot, will ensure that, for a trial period of three years, all workers in the export-oriented ready-made garment sector are for the first time ever eligible for work-place injury and disability compensation payments in accordance with international standards adopted by the ILO Employment Injury Benefits Convention, 1964 (No. 121). The ready-made garment sector is Bangladesh’s largest manufacturing industry and provides jobs to around four million people. 

The aim of the three-year trial is to provide the proof of concept needed for such a scheme to become permanent and statutory, showing that it can improve manufacturers’ productivity and international competitiveness, provide financial security to workers and their families in the event of a workplace death or injury and help international buyers show that their products were produced under ethically sound conditions. Before the launch, families of workers who died or were injured were legally entitled to a one-off compensation payment of 200,000 Takas (just over 2,000 Euro). Under the EIS Pilot, they will on top of the lump sum now receive a monthly payment of up to 60% of their wage for life, which will protect their families from financial hardship or poverty. 

A collaboration between public and private partners

As usual in work-related social protection schemes, the EIS Pilot is a carefully crafted collaboration between public and private partners: The Ministry of Labour and Employment will administer it through its existing Central Fund and head a tripartite public-private oversight committee composed of its own representatives as well as employers’ associations (the Bangladesh Employers’ Federation, Bangladesh Garment Manufacturers and Exporters Organisation and Bangladesh Knitwear Manufacturers and Exporters) and workers’ representation (IndustriALL Bangladesh Council, the National Coordination Committee for Workers’ Education and the Jatiya Sramik League). 

Seven international brands, including the H&M Group, Primark, KIK, Fast Retailing, Bestseller and Tchibo, have so far committed to financing the scheme for the trial period, and it is expected other brands will soon follow suit. 

Millions of workers in Bangladesh depend on the ready-made garment industry for their livelihoods

Photo: GIZ

ILO and German technical cooperation jointly support the prototype

This pioneering public-private collaboration is jointly supported by the International Labour Organization (ILO), funded by the Netherlands Ministry of Foreign Trade and Development Cooperation, and the project Social Protection for Workers in the Textile and Leather Sector‘, implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) and henceforth in this article called ‘Bangladeshi-German project’. 

The ILO and the Bangladeshi-German project have worked closely with the government, employers’ and workers’ associations to support the design of the EIS Pilot and to persuade international clothing brands to fund it. They will continue to collaborate throughout the pilot’s duration, with the ILO advising on international standards and policy and the project delivering capacity development, training manufacturers to monitor and improve health and safety in factories and also providing technical support to the Central Fund to ensure that the organisation can cope with the extra demands of administering the scheme in a transparent and efficient way.  

The ILO and the Bangladeshi-German project have common objectives to promote the employment injury scheme in Bangladesh, says Saad Gilani, ILO’s chief technical advisor for the employment injury scheme. The ILO has very strong relationships with the government, employers and workers, the three main partners in any social security scheme, and can help them understand their roles and responsibilities. The organisation also has strong connections with international buyers and retailers in the ready-made garment sector. 

This came in very useful in ‘selling’ the scheme to buyers, says GIZ’s Moazzem Hussain: ‘The ILO and our project jointly used their respective networks and connections to reach out to brands and persuade them to finance the trial of this scheme.’   

The EIS builds on previous German-supported interventions

Generally, there are three major elements in any employment injury insurance scheme – income protection, rehabilitation and prevention. The Bangladeshi-German project’s current involvement with the EIS Pilot grew out of two previous German-supported projects to strengthen health and safely in the ship building industry (documented in this GHPC report) and a project working on the prerequisites of employment injury protection with a strong focus on prevention, rehabilitation and return to work in the export-orientated garment manufacturing industry (see this Healthy DEvelopments article). Both these projects worked with Bangladeshi manufacturers to demonstrate that adopting pragmatic prevention, rehabilitation and return to work policies could not only reduce the time lost to accidents and disability but also makes economic sense in that it saves them money and makes them more attractive to overseas buyers. In the case of the second project, for example, participating factories in the ready-made garment industry have been supported voluntarily to establish a Disability Management Committee, set up a proper referral procedure and network for rehabilitative services and ensure that return to work clauses are fully embedded in existing human resources policies. 

‘Previously, we were only looking at the rehabilitation and return to work side of things,’ says GIZ’s Moazzem Hussain. ‘Now, with the launch of the EIS Pilot, this has become part of a grander scheme.’ It is also, he says, a foray into an exciting new sphere of work for German Development Cooperation, looking beyond health insurance to much broader social security schemes. 

Gathering the evidence needed for the proof of concept

Although the accident rate in the export-oriented ready-made garment sector has improved since the terrible disasters of 2012 and 2013, Bangladesh still has little accurate data on workplace accidents or long-term disabilities. It has therefore been difficult to calculate the exact impact and costs, in terms of lost productivity for manufacturers or the impact on workers and their families. It also means it has been impossible to demonstrate the desirability or viability of implementing a comprehensive EIS.  

Consequently, a vitally important initial stage of the trial period will be to gather accurate data on death and accident rates, as well as average medical and compensation costs for injured workers under the new scheme. A sample of around 150,000 workers from 150 representative factories will be monitored. The database generated will help to demonstrate the viability, feasibility and cost efficiency of adopting a comprehensive and permanent EIS in Bangladesh and ensure that sufficient resources are allocated to meeting the scheme’s future needs.  

Although the EIS Pilot will initially focus primarily on providing employment injury benefits to all workers in the ready-made garment industry, support for prevention, return to work and rehabilitation interventions will also be offered as an incentive to the factories taking part in the pilot’s data collection phase. 

Investing in a safe and healthy workforce helps manufacturers retain skilled workers and compete on the international market.

Photo: GIZ/Noor Alam

Risk-sharing for long-term benefits

The employment injury fund will in the first instance be financed by voluntary contributions from the seven international brands and retailers that have signed up to the scheme so far. It is hoped that more will soon be persuaded to participate. Initially, some brands were apprehensive that the costs of a scheme covering some four million workers would be too high, but calculations conducted by the ILO showed that they would amount to a mere 0.019% of their purchases in Bangladesh. ‘0.019% is very little for them – it makes the scheme very affordable. So, when we explained it to them, they were all for it,’says Saad Gilani.  

The next vital step will be to convince Bangladeshi manufacturing companies to contribute to the scheme as well, thus spreading the costs and sharing the risks between international and local enterprises. Although agreed in principle, looking ahead, the ILO’s Saad Gilani thinks this will prove to be a major challenge, but ‘the test of the pudding will be in the eating.’  He believes data collected during the trial phase will help manufacturers to understand that investment in a safe and healthy workforce will help them retain skilled workers and improve access to international markets, by demonstrating to buyers that they are complying with international codes of conduct. 

Transparency and accountability crucial for success

Given the amount of money involved in any insurance fund, another challenge for the future success of the EIS Pilot will be establishing its credibility and transparency, cautions Saad Gilani.  He says the ILO and the Bangladeshi-German project have worked closely with the Government of Bangladesh to put financial safeguards in place and obtain iron-clad guarantees that the money will only be used for the welfare of workers and nothing else.  In this respect, he says, ensuring that the claims process is totally transparent and reducing the possibility of miscalculations or personal discretion in awarding compensation will be crucial for building future social security systems in Bangladesh: ‘It will all depend on the performance of this pilot.’ 

With this in mind, in addition to the capacity development support and training that will be given to the Central Fund to administer the scheme, the EIS Pilot will be managed using a customised version of the open-source and free-to-use management information system openIMIS (for more information listen to the HealthyDEvelopments podcast here). Supported by the BMZ and already in use for social security schemes in several other countries, including Nepal, the openIMIS team is now adapting the programme for use in Bangladesh and, as this article demonstrates, the two countries are working closely together to share information and experiences. Whilst there are many similarities between them, some customisation will be necessary in Bangladesh, for example, in determining who should be eligible beneficiaries in accordance with different inheritance laws and customs. 

In the initial phase of the EIS Pilot, openIMIS will be run by a local software company, but, once established, it will be hosted by the Ministry of Labour and Employment and based on the existing identity card scheme, in line with the government’s national digital architecture plans. 

A ‘very important first step’ for Bangladesh

If the EIS Pilot proves successful in the export-oriented garment industry over the next three years, the following two years will be spent building on this prototype to develop an employment injury scheme covering all manufacturing industries in Bangladesh, both export-oriented and domestic. 

It is also hoped the EIS Pilot will be a catalyst for other types of work-related social security schemes in a country where hitherto there have been none. ‘Once this monthly income protection scheme has started, we can gradually introduce other types of social security schemes – such as unemployment and sickness insurance’, says the ILO’s Saad Gilani:‘This work on employment injury is just a start, but it is a very important first step for the textile workers and the people of Bangladesh.’    

Ruth Evans, August 2022 

© GIZ

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