Late or non-payment of wages is one of the major risks facing migrant construction workers in many parts of the world and is particularly prominent in the Gulf Cooperation Council (GCC) where all countries face issues in prompt payment in the construction sector. It is an issue in need of addressing as migrants often experience high debt due to recruitment or other migration-associated fees. And when they are not paid on time, both migrants and their families suffer as they are unable to send remittances home. To make matters worse, in the GCC specifically, there are few possibilities of redress for migrants which leaves them destitute and vulnerable to exploitation.
For International Migrants Day, Engineers Against Poverty (EAP) proposes innovative policies and actions which could offer a preventative solution to the issue affecting countless migrants in the region. These are outlined in Part Two of our paper published today, ‘Protecting the wages of migrant construction workers: Addressing the problem in Gulf Cooperation Council countries’.
Calling for measures to address the root cause
Our paper emphasises addressing the root cause of late payment in the construction supply chain – that of more flexible forms of employment and extensive sub-contracting and outsourcing. Consequently, migrant workers are now far removed from clients and principal contractors at the top of the chain and the responsibility for direct payment of workers has been passed onto those in the lower tiers who are in a weaker position to ensure it.
We demonstrate that several measures adopted in the region, whilst with their merits, are a reaction to the issue rather than a preventative measure. For example, the Wage Protection System, adopted by five GCC countries has brought payment to the forefront of the political agenda but does not adequately ensure prompt cash flow. For example, in the United Arab Emirates its Wage Protection System issued sanctions if companies at the bottom of the chain did not pay workers on time, neglecting that these companies could simply not pay the workers if they themselves had not received payment from tiers above. The need to address cash flow is also extremely important to avert other major problems such as increased indebtedness and company collapse.
What lessons could be learnt from approaches elsewhere?
To offer pragmatic solutions to the issue, we look at innovative policies tried and tested around the world, making assessments on their potential uptake in the region and on how successful their implementation could be. Of particular note is the role of statutory (rapid) adjudication in improving cash flow and which has benefits to all industry participants. As late payment is often due to disputes resulting in lengthy payment applications, statutory adjudication resolves this by dealing with disputes in real time.
We also highlight the need to ban the practice of only “pay when paid” – doing so would provide much fairer terms to small and medium enterprises and subcontractors at the bottom of the chain as it ensures that they, who often do not have surplus funds to fall back on when payments to them are defaulted, will still be paid and can then pay their workers. Banning “pay when paid” may be resisted by principal contractors as it restricts their control over project funds and requires them to finance the project even in instances when the client does not pay. However, if it were implemented alongside statutory adjudication, faster payment from clients would be ensured.
Other important measures are considered, looking at their current limitations and potential for success in the region, such as Project Bank Accounts which ringfence payment to subcontractors (and the workers they employ) and joint liability where responsibility is shared to ensure subcontractor and workers’ payment. This has been successfully adopted by the EU and could be implemented effectively in the region.
How can sector ‘Agents of Change’ help?
In addition to the measures outlined, there is also a role for ‘Agents of Change’ in the construction industry who can influence prompt payment and the uptake and effectiveness of the innovations proposed. There is a clear role for industry stakeholders to apply pressure, including for clients who could protect workers’ wages through the choice of companies with whom they engage, the terms and conditions specified in the tender process and by approving the subcontractors appointed by principal contractors. Consultants who provide advice to clients can also help, advising on tender conditions and subcontractor approval as well as delivering important messages including that the lowest price for a bid is not necessarily the best choice.
Taking action on prompt payment will not only protect the lives of migrant workers, but it is in the best interest of the client, contractor and consultant and will ensure a more profitable and robust sector. Prompt payment reduces the risk of the industry self-financing, it can mean that clients are not sub-charged when there are defaults in payment, better quality of work is delivered (and delivered on time) and that clients can make savings in the form of lower prices on subsequent tenders.
The next steps
The EAP approach with this, and other work, is to consult with government, industry and civil society about the challenges to identify practical measures to address them. With our latest research we will continue to engage relevant stakeholders in the GCC, to stimulate discussion on the paper and the measures proposed.
If you would like to be involved in this engagement process please contact us. We welcome your feedback which can be incorporated into our work, to strengthen the sector and protect the lives of many migrant workers.