Two months after a directive came into effect stipulating that salaries be given fortnightly, garment workers say they are enjoying greater cash flows and borrowing less.
In October last year, the government issued a directive requesting that all state institutions, private companies, and organisations disburse employees’ salaries in two installments.
The directive, which came into effect in January, aimed to improve workers’ livelihoods by increasing access to cash throughout the month, thus discouraging the use of informal lenders that charge high interest rates.
Sitting inside a room in Takhmao’s Prek Ho village that she rents for $40 a month, garment worker Srey Maryden says she now enjoys a more consistent flow of income throughout the month.
“Having my salary paid fortnightly allows me to have more money to spend on what I want. Before, I had to wait for payday to buy anything.
“I think it was a great move to have salaries disbursed twice a month,” Ms Maryden said.
According to a ministry report issued in January, 81 percent of factories in the country comply with the directive.
Before the directive came into effect, factories generally paid employees during the first week of the following month (between the first and the seventh), which allowed them to include overtime pay and bonuses in the wage, according to the ministry.
As per the directive, garment and footwear factories should disburse the first installment from the 19th to the 25th of the month, while the second should be given from the first to the seventh of the following month.
Ouk Samchandara, administration staff at Makalot Garment of Cambodia, a factory located in Phnom Penh, said the scheme is proving very helpful for workers.
“I’ve learned that the new payment arrangement really helps workers have more cash to spend on food and other important expenses,” Ms Samchandara said.
“Thanks to the new scheme, some workers no longer resort to borrowing money from fellow workers at the end of the month, so I find this new arrangement very helpful,” she said.
Informal lenders, derogatorily known as ‘loan sharks’, generally offer loans with a one-month maturity and high-interest rates, around 20 percent per month.
According to Ms Maryden, borrowing from fellow workers is the easiest thing to do when running short on cash to pay for food, rent or when one needs money for special occasions like weddings or funerals.
Speaking on condition of anonymity, a garment worker that also acts as moneylender for fellow workers said business has declined since the directive came into force.
“Under the new directive, I have fewer clients, but that’s all right because I still have enough customers,” the lender, who started providing loans to fellow workers two years ago, said
Loans normally range from $50-$100 with an average interest rate of 20 percent per month, the lender said.
Mey Kalyan, senior advisor to the Supreme National Economic Council, said bi-monthly salary payments improves living conditions for garment workers.
“Their wage is not much to begin with so disbursing it in two installments makes things easier for workers. It helps to stop people from borrowing when they run out of money at the end of the month,” he said.
Mr Kalyan said the new arrangement works great for workers but pointed out that it may put a burden on employers, whose concerns should also be taking into consideration.
Last year, Cambodia’s economy grew at a rate of 7.5 percent, with income per capita increasing from $1,434 to $1,563, according to government figures.