Digital wage payments in the Cambodian garment sector could promote efficiency in the supply chain, while including large numbers of women workers who do not have access to bank accounts in the formal financial system. Digital wage payments are an effective and sustainable payroll solution for enterprises and workers, especially in the context of the COVID-19 crisis.

Ms. Bun Channy is a 27 year-old Administrative Manager at Horseware Products (Cambodia) Co., Ltd , a horse ware production factory employing 215 workers in Sihanoukville, on the Cambodian coast. Channy started working in the factory as a quality control worker, where she worked during the four years of her Bachelor’s degree in human resource management.  Upon graduating, she was promoted to her current position.

On top of Channy’s daily administrative work, she helps resolve workplace conflict through mediation between workers and management, and manages the distribution of salaries. In the past, Channy and her assistants would spend almost a full day every two weeks picking up workers’ wages from the bank in front of the entrance of the Special Economic Zone (SEZ) where the factory is located, and dividing cash into envelopes for the employees. Once the COVID-19 pandemic started, her factory started to test digital wage payments, and Channy has been leading the way.

What made Channy’s factory decide to shift to digital wage payments?

The factory resides in an SEZ, where only one bank and three ATMs are available. Despite this limited access, the factory decided to go ahead with a shift to pilot digital wage payments to its management staff for the first four months of 2021, and eventually roll it out to the entire factory six months later.

Efficiency gains, transparency as well as the need to reduce direct contact during the pandemic were the major motivators for the factory to adopt a safer way to transfer salaries to their employees.

Since the pilot began, more Financial Service Providers have been established in the SEZ, and additional ATMs have been installed in the zone, removing some of the challenges faced by Channy’s factory. The transition to digital wage payments has made life easier for administrative workers like Channy as factories can now choose financial services which suited them, and workers can make financial transactions at ATMs without there being huge queues.

What were the changes?

“The main advantage of this transition is the reduced time it takes to pay workers, increased transparency, and most importantly, it is much safer transferring the funds digitally to the workers” – Channy

Workers go to the bank to create their accounts and receive in-person training about digital wages and how to use the bank application. Channy further noted that workers were quite concerned and hesitant at first, but today they have come to appreciate how transparent and safe it is to receive their wages digitally.

Of her personal experience with the process, Channy noted “I am happy that I can transfer remittances to support my father back in Svay Reing digitally and that I am able to work more efficiently in doing payrolls”

Making digital wages possible for the wider industry

Figure 3&4: Digital Wage Training: a one-day responsible digital wage training in Sihanoukville to 26 garment and travelling goods factories

Given their considerable advantages, digital payments are becoming a prominent method of distributing wages to employees in Cambodia. Currently only half of the 557 factories registered with Better Factories Cambodia have transitioned to digital wage payments, meaning there is still a long way to go before all factories have made this transition.

The ILO’s Global Centre on Digital Wages for Decent Work in partnership with Better Factories Cambodia, engages the Garment Manufacturers Association in Cambodia (GMAC), BSR HERproject and local partners to raise the profile of responsible digital wages in the garment industry and to enable necessary support to factories, brands and financial service providers in making sure that the transition takes place responsibly. Among other interventions, the ILO’s Global Centre in partnership with Better Factories Cambodia and GMAC, recently conducted responsible digital wage training in Sihanoukville, reaching 26 garment and traveling goods factories, out of which three factories are currently working on digitizing their workers’ wage payments.