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Focus: Manufacturing

Feature Article from Our Supply Chain Trends and Issues Subject Area - See All

From SCDigest's On-Target E-Magazine

April 4, 2012

 
Supply Chain News: Headlines Said Fair Labor Association Found Numerous Violations at Apple/Foxconn Facilities, but Issues were Actually Quite Modest

 

Firm Cited for Too Much Overtime - but More Workers Want More Hours than Think They Log too Much Time on the Job

 

SCDigest Editorial Staff

As the anxiously awaited report relative to an audit of several Foxconn factories making Apple products from the Fair Labor Association, a non-profit group formed to protect worker rights, was released late last week , most media outlets focused on the negative.

"Foxconn Labor Violations '"Serious and Pressing,'"  a Washington Post headline blared. "Foxconn Apple Factories Violated Chinese Labor Laws, According To Fair Labor Association" said The Huffington Post.

SCDigest Says:

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However, these violations were mostly tame, and certainly did not contain any bombshell type findings.

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So, when we dug into the full report, that's what we were expecting too. The truth: issues related to working conditions and pay were very modest indeed.

Concerns about labor conditions at Apple suppliers and contract manufacturers became a growing issue over the past couple of years, triggered at first by reports that nearly 20 workers had committed suicide at Foxconn's massive complex called Foxconn City, where iPads are assembled. A number of workers had jumped to their deaths inside the factory walls themselves, causing Foxconn to install nets underneath some of the most common jump points.

That news in turn led to other investigations, such as several reports from the New York Times that painted s largely dark picture of working conditions at Apple's suppliers generally and Foxconn specifically. (See Apple's Groundbreaking Moves to Audit its Extended Supply Chain for Compliance to its Supplier Code of Conduct)

Apple for its part has been growingly transparent, releasing early in this year its own report on what its nearly 200 audits of supplier facilities had found. The audits were based on Apple's Supplier Code of Conduct, which contains more than 100 practices across working conditions and pay, environmental issues, and more.

Apple's own report found a large number of violations, and among the actions it vowed to take was to contract with the FLA for the first time to perform some percentage of the audits in 2012.

 

Massive Audit Effort

The FLA process involved nearly a month-long effort during February and March across three separate Foxconn facilities that assemble Apple products, with 5-7 assessors at each location, in total logging about 3000 hours of work inside the factories alone, meaning Apple spent quite a bit of money to get these FLA audits performed.

The number of workers at each site ranged from 73,000 at Guanlan to 38,000 at Chendu. The scope of the investigation included anonymous surveys completed by some 35,000 workers across the three facilities, hundreds of one on one interviews with workers and management, review of a year's worth of payroll records, and more.


(Manufacturing article continued below)

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The reviews were conducted not in the context of Apple’s own Supplier Code of Conduct, but the FLA’s Workplace Code, and applicable Chinese law.

 

“This multi-pronged approach produced a range of both quantitative and qualitative data, allowing FLA to develop an in-depth understanding of working conditions, particularly during peak production periods,” the report says.

 

The results: the report says the FLA observed more than 50 violations of its code or Chinese law across areas such as safety, pay, working hours, and more. However, these violations were mostly tame, and certainly did not contain any bombshell type findings. The most serious of the issues were as follows, according to the FLA:

 

  • Number of working hours per week exceeding Chinese law in all three factories during peak periods, and some employees worked seven days or more straight without the required one day off period. It found workers averaged about 56 hours per week, which is above the Chinese legal limit of 40 regular hours per week and 36 overtime hours per month, but many workers like the extra hours and overtime pay, it turns out.

 

In fact, the worker survey at the Foxconn plant found that almost half of the 35,000 workers surveyed by the FLA said they thought their working hours were reasonable and 34% would like to work more hours to make more money. Only 18% thought hours were too long.

 

  • Probably to no one’s surprise, it found Foxconn workers felt largely “alienated” in their jobs, especially with regard to issues like health and safety, where they felt they were not being listened to. (SCDigest wonders how many workers in Western factories also feel a bit “alienated.”)

 

  • There are cases of unpaid overtime in some situations, often as a result of the time system, which is based on 30-minute increments. So, if a worker logs 25 minutes of overtime, they are not compensated, or if they work 58 minutes they are only paid for 30 minutes. However, the FLA report says Foxconn workers are paid better than average Chinese workers, that the overtime issues only impacted 14% of employees, and that in general the time keeping system and pay are correct.

 

Foxconn Workers Largely Happy with Hours Worked

 

 

Source: FLA Audit of Foxconn Facilities

 

In fact, the report says it found that "wages are paid on time and are above the applicable legal rates. The legal minimum wage in Shenzhen is RMB1500, while the starting wage at Foxconn is RMB1800. After the probation period, wages go up to about RMB2200. Sick leave payments are higher than the local law requirement, with workers compensated 70% as opposed to the minimum law requirement of 60%. Overtime hours were also paid at the appropriate premiums."

 

It is probably true that some of these policies have happened in the past couple of years, as the scrutiny of the Foxconn operations has increased dramatically, and the company has in fact raised worker pay three times even as legal minimum wages have also increased in China.

 

Foxconn has promised to make a number of changes in response to the audit results, such as limiting the amount of hours to the Chinese legal threshold, which it says will happen by July of 2013.

 

It also said it will continue on in its previously announced efforts to install thousands of robots to reduce its labor costs and headaches - which of course will cause thousands of workers to lose their own jobs.

 

Foxconn also is said to have agreed to allow unions to be formed that are not run by management, but in China generally the only unions allowed are those that operate under the wing of the Communist Party, so how that will play out is unclear.

 

The full FLA Report can be found here: FLA Audit of Foxconn/Apple Factories

 

What is your reaction to this Foxconn/Apple audit report? Do you agree the headlines seem away overblown based on the actual findings? Let us know your thoughts at the Feedback section below.


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