flextronics-response-cividep-nov-2010 by yaoyufang


									Flextronics response regarding Cividep report “Changing Industrial Relations in India’s Mobile
Phone Manufacturing Industry”

Business & Human Rights Resource Centre invited Flextronics to respond to the following items

Summary: “Changing Industrial Relations in India’s Mobile Phone Manufacturing Industry”, Cividep,
Sep 2010

full report: “Changing Industrial Relations in India’s Mobile Phone Manufacturing Industry”, Cividep,
Sep 2010

Flextronics sent this response:

              CIVIDEP Report Statements                                 Flextronics’ Response
    Companies’ CSR Policies
    Flextronics1                                           Flextronics has established an Industrial Park in
    Flextronics has had one facility in Sriperumbudur      Chennai in the year 2006. Besides this Plant,
    since 2007. According to a senior manager, given       Flextronics operates a Service Centre in
    the current economic environment, the chances of       Bangalore and a Global Shared Services Centre at
    another plant in India are slim.                       Chennai City.
    The company has been producing mobile                  The Chennai Industrial Park, located in
    chargers since Sony Ericsson pulled out                Sunguvarchatram,        manufactures      Mobile
    worldwide of mobile phone manufacturing and            Chargers, Mechanical Enclosures and PCB
    does it in-house now. The mobile chargers may          Assemblies for both domestic and overseas
    be exported or sold in the domestic market,            customers.
    depending upon the customer‟s plan.
    Since the plant is based in a SEZ, the company         Flextronics Chennai Industrial Park is a notified
    receives tax immunity for a specified period, pays     SEZ Developer and the company is entitled to
    no customs and excise duty since the product is        benefits as provided under SEZ Act.
    sold to another SEZ customer and the finished
    product is not subject to custom duty or sales tax.
    The company would be liable to customs duty
    and sales tax if it imported materials and sold the
    product to a local customer.
    Flextronics buys its components locally and from       The decision of sub-contracting is purely based
    overseas vendors approved by its customer.             on business considerations and value creation. It
    Further subcontracting any work is not viable          is not linked only to margins.
    from the customer‟s and from a business
    perspective because it would further erode the
    profit margin.

    Interview with company managers, 7 July, 2009
        CIVIDEP Report Statements                                 Flextronics’ Response
In the past, the company has worked with Sony          Flextronics Chennai Industrial Park is engaged in
Ericsson and Nortel and is currently working with      business transactions with many OEMs.
Xerox and Dell worldwide. Due to the non-
disclosure agreements that the company has with        However, due to the non-disclosure agreements
its clients, it cannot reveal any details. However,    we have with our customers we are unable to
currently it is supplying only one OEM.                provide more details about our Customers.
Flextronics employs over 1,300 workers in three        Currently we employ approximately 1600
categories: unskilled, skilled and multi-skilled.      employees and the gender ratio is 60-40 men to
The majority of the workforce falls into the           women.
skilled category because they have completed a
minimum of 6 months to one year of work, and
the line leaders are multi or highly skilled
workers. The gender ratio is 60-40 women to
men, with the men doing technical work such as
fitters, mechanics, electronic welders, due to their
technical qualifications from the Industrial
Training Institute (ITI). Women are trained in
electrical engineering and computer operation.
The company has 3 divisions: FlexPower where           The PCBA unit is operational and caters to a few
mobile phone chargers are produced and women           OEM customers.
are in the majority; PCBA where mobile phones
were assembled, but this division has been
closed; and the mechanical division.
The company‟s workforce consists of 40%                The employees engaged through the Contractors
permanent employees and 60% contract                   are provided with robust instructor-led as well as
employees. The average age of the workers is 20        on-the-job training. The curriculum includes
years. Workers are engaged through contractors         aspects like Code of Conduct, Safety and basics
who recruit them young when they have finished         of Electronic manufacturing etc.
their schooling or ITI training. Workers on the        The employees engaged through contractors are
contractor pay rolls receive no training or            entitled to wage increases in accordance with the
promotion.                                             terms of labour contact.
Those who are directly engaged by the company          Currently, employees join the company directly
start as trainees for a year and then move up the      on the rolls and there is no specific training
career ladder.                                         period, since we recruit skilled employees.
The workforce turnover is high with only 1-2 day
notices given by the contract workforce before         Many reasons contribute to attrition among
they resign. The regular workforce has a 1-2           contract workers, including vibrant employment
month notice period by mutual agreement. Due to        market and abundance of unskilled jobs near their
the high turnover of the contract staff, they are      preferred locations.
placed primarily in the unskilled category.
The company workers with five labour                   Currently we work with 4 labour contractors
contractors for production work and three more
for security, cafeteria and other services such as
cleaning, making a total of 8 to 10 contractors.
The regular work shift is 8 hours a day and 48         Flextronics employees are paid as per Company
hours a week. Due to the current economic              compensation practices.
climate, there is no overtime. Workers‟ wages          Current contract employee‟s wages stand higher
levels meet the Minimum Wages Act, and                 than MW Act stipulations.
contract workers are paid slightly higher than
        CIVIDEP Report Statements                              Flextronics’ Response
that. The minimum wage in Tamil Nadu is Rs.          Present minimum wages for our employees are
3,345 per month in the unskilled category. The       much higher than indicated.
company pays Rs. 3,485. The skilled category
receives Rs. 3,965 per month or about 15%            Flextronics complies with overtime regulations
higher than unskilled workers. Wage revisions are    specifed under Factories Act, 1948
automatic dependent upon the consumer price
index or inflation, not on the performance of
workers. Overtime compensation is paid as per
the law with leave. Workers have 24 days of
annual leave, 8 days sick leave and 8 days of
casual leave, which is above the legal
requirement of one day for every 30 working
days, or 15-16 days to a maximum of 18 days in a
year according to the Factories Act 1948.
Maternity leave is also as per the law of pre- and
post-natal for a total of 12 weeks.
The company has a full-fledged medical centre
with trained nurses round the clock and a doctor
on call at the nearby hospital. The doctor comes
twice a week for consultation. The nurses‟ team is
equipped to handle any medical emergency and
there is a fully equipped ambulance 24/7stationed
at the facility.
The medical centre is 100% free for the workers.
Since the area is not been covered under ESI,
Flextronics has ensured all employees via the
company and provides free medical facilities
against injuries. The medical centre is not for
occupational injuries alone but for common
illness. The health and safety team investigates
each and every incident in the company.
The other facilities that Flextronics offers its
workers is a crèche, which is not heavily availed
of because the workforce is young and not yet
parents; transportation facilities which are 98%
subsidized by the company; and subsidized
        CIVIDEP Report Statements                      Flextronics’ Response
Flextronics‟ CSR programme is called the
FlexPledge Plan which is deployed in all the
company sites and has four quadrants, namely
people, environment, society and legal
compliances. The company has a code of
conduct. The company does a self assessment and
is also assessed by its corporate global team or its
customers from time to time. Reports of
compliance vary according to the customer‟s
needs. Certain customers insist on a report, some
audit the company themselves, some only ask for
a self assessment questionnaire. Internal audit
reports are done on a quarterly basis and these are
made available to customers. Since Flextronics is
a part of the EICC, the audit management system
has been developed according to EICC
guidelines, along with the value systems and
ethical management practices.
The same code of conduct is extended to
suppliers, which are trained on the code of
conduct and required by contract to comply with
all the laws, specifically, labour laws. Suppliers
are not required to be part of the EICC since the
supplier base in India for the electronic industry
is developing, but Flextronics insists that they
follow the company‟s code of conduct.
An audit of the finalized suppliers is conducted
after the company‟s sourcing team finalizes the
list. If there are any gaps, a gap closure plan is
given to them. If required also trainings are given
by our FQA team. The gaps are audited based on
the action plan the suppliers come up with.
It depends on the intensity of the issue/problem.
For instance, if they do not pay even minimum
wages we do not work with them. If certain
things are right but they do not document things
properly, we suggest they should come up with
some documentation plan that is auditable. The
suppliers are assessed the same way as
Flextronics‟ customers assess the company. Flex
Pledge includes a supplier compliance
management programme for all direct suppliers,
which also includes a supplier quality assurance
team. “We have put in place effective
mechanisms to ensure that our vendors and
suppliers strictly adhere to eco-friendly standards.
And since our inception we have supported all
policies, standards and directives, such as EHS,
RoHS and WEEE.”
         CIVIDEP Report Statements                                 Flextronics’ Response
Flextronics is one of the founding members of           In addition to the site‟s ISO14001 management
EICC and subscribes to the GESI Global                  system certification, Flextronics has 13 global
Environmental Sustainability Initiative. It is          EHS standards that are mandatory for all sites to
certified by ISO 14001 (covering EHS and                implement.     These standards are to further
RoHS) and ISO 9000 with external and internal           strengthen the site‟s existing ISO14001
audits. Each certificate is valid for 2 years. Audits   management system and to drive for continuous
and corporate reporting for the re-certification of     improvement and to protect the health and safety
ISO standards are done on a regular basis with          of all our employees.
fixed schedules.
The company is involved in a number of                  On 1 Feb 2010, Flextronics launched a Women
philanthropic initiatives through the Flex              Empowerment project in Santhavellur village,
Foundation.                                             near the factory. The project, which is managed
                                                        by an NGO called “Hand-in-Hand”, aims to
                                                        create alternative livelihood for women at home,
                                                        construction of day care centre for children, and
                                                        health camps for women.

On the demand from industries that some of the          We have suggested to the government that the
labour-related regulation be relaxed, the manager       laws be amended to accommodate the current
replied in the following words:                         economic situation. We‟re committed to
     “Indian labour laws are framed with the            compliance with all legal requirements at all
     intention of supporting the Indian                 times.
     population. I would agree broadly with the
     status quo. Improvement is required, some
     old obsolete returns and permissions, those
     things can be removed. But in broad, the
     legal provisions are relevant. I am not
     going to blindly say change the law! The
     contract labour [system] gives us the
     flexibility to increase and decrease the
     workforce when the business demands.
     Abolishing it is probably a radical change.
     They can obviously consider exempting or
     offering concessions to certain industries
     based on the business model. But for
     contract manufacturers as we are, the
     business is a contract manufacture; the
     customer can engage and disengage with
     us. In this kind of industry, there must be
     some flexibility. So those things the
     government can consider. There are some
     certain exemption clauses they can
     consider, allowing us to engage more than
     the x% of contract workforce. But doing
     away with the Act – not a great idea.”
On workers‟ committees, Flextronics has a safety
committee and another one called Team
Sunshine, which is an employees‟ forum (for blue
        CIVIDEP Report Statements                                 Flextronics’ Response
and white collar employees) which gets
employees together and organises recreational
activities, entertainment and celebrations. While
there is no special committee on sexual
harassment yet, there is an informal group called
the Eve‟s Council which meets and deliberates in
case of a complaint. They interact with
employees without identifying themselves as
being part of Eve‟s Council. They inform HR and
the concerned people so that corrective actions
can be taken.
There are three types of communication systems        Flextronics also employs an anonymous reporting
to handle workers‟ grievances. One is an              program called Ethics Point for employees to
employee conclave on the shop floor, wherein          anonymously provide feedback, concerns, and
employees directly interact with the management       grievances either online or via a toll free number.
and air their grievances. The managers also go to     The Ethics Point program is also made available
the shop-floor at least once in a month in order to   to external parties like suppliers, customer and
meet with employees face to face and exchange         other stakeholders to report any ethical issues.
ideas and grievances in a dialogue, not a
monologue. Second is a formal forum like coffee
talk or town hall anchored by the site leadership
and the general manager. The coffee talk is for
white collar employees and town hall is for all
employees in which they interact and
communication takes place. Third is both internal
and corporate, the internal one is a suggestion
scheme/drop box and the corporate one is an
ethics hotline in line with the compliance
management system. This toll-free hotline is
totally anonymous; the calls end up in the US,
where the company has a dedicated person who
handles complaints of breaches of ethic.
Since the Flextronics plant is a very young unit,     The company is committed to EICC principles
there is no union. The concept of collective          and constructively engage with employees
bargaining is also absent because pay increments      through various employee engagement initiatives.
are automatic. “The company is committed to           Besides the communication channels mentioned
EICC principles. However, our business, the           earlier, the site follows transparent systems and
EMS business worldwide does not operate with          employee feedback processes. Please see below
the union-management mechanism. That is why           for more details on our Flextronics Flex Pledge
we have forums like Eves‟ Councils and created        program.
opportunities for employees such as Team
Sunshine. We have also a safety committee and         Apart from the initiatives mentioned in the report,
interact extensively with employees in different      the site has also established regular skip level and
ways, so that the employees can reach out to the      focus group meetings with site GM. Besides we
management and whatever issue they have can be        hold regular GM open hour discussions wherein
resolved. I do not think unions are the only way      all employees are provided an opportunity to
to get your concerns and grievances addressed,        personally interact with GM at his office.
there are so many other ways.”
        CIVIDEP Report Statements                                Flextronics’ Response
Labour Standards from Workers’ Perspective
This section covers the survey of workers about
their working conditions and the extent to which
these correspond to the International Labour
Organisation‟s (ILO) core labour standards. Out
of the 115 workers in mobile phone factories
interviewed, 38 (or 33%) were from various
departments of Nokia. The rest were from Nokia
suppliers in the Sriperumbudur SEZ near
Chennai, where this study was predominately
Flextronics                                          The Chennai Industrial Park, located in
Flextronics located in Sriperumbudur, but outside    Sunguvarchatram,       manufactures   Mobile
the Nokia SEZ, supplies to Sony Ericsson.            Chargers, Mechanical Enclosures and PCBA for
Flextronics manufactures chargers, set-top boxes     both domestic and overseas customers.
and portable music players. There are in total
about 2000 workers among whom about 1300 are       Currently we employ approximately 1600
permanent workers and 700 are on a temporary       employees and the gender ratio is 60-40 men to
basis. There are both male and female workers.     women. The regular employees account for
                                                   ~40% of the site headcount.
Workers say that they are shifted from their Operators are deployed in job positions after
positions on the shop floor very frequently and proper training. Job rotation is effected based on
this leads to pressure on them to learn new skills skill and customer requirements.
rapidly. These changes affect productivity and
leads to conflict with supervisors and managers. Flextronics employees are paid as per company
Monthly wages are pegged at the level of compensation practices and are consistently
statutory minimum wages, but taken with the higher than statutory guidelines
overtime payments the take-home pay is about
Rs. 4500 per month.
Flextronics has a curiously named „Eve‟s
Council‟ working under the human resources
department. This is supposedly for receiving
complaints from and to redress grievances of
women workers.
Workers reported layoffs at least twice in the past Workers have never been laid-off in Flextronics
two years.                                          Industrial Park. A few indirect labour employees
                                                    have either been redeployed or released on
                                                    voluntary separation plan with due compensation
It is reported that Flextronics is planning to shift There is no move to shift the factory
the factory to a new location. Workers have not
been formally informed of this move.
The company provides bus facilities for the
transport of workers. There is also a subsidized
Except for the weekly off day it is hard for Employees are entitled to their earned leave as
workers to claim their earned leave.             per company policy and employees are never
                                                 denied of this privilege. We also encourage
             CIVIDEP Report Statements                              Flextronics’ Response
                                                        employees to plan their vacation and spend time
                                                        with their family.
 Production targets are said to be inordinately         Production targets are set in accordance with
 high.                                                  principles of industrial engineering and as per
                                                        plant capacity. The targets are aligned with the
                                                        statutory working hours followed in the factory.
 Most workers use the services of Jaya Clinic           We have a fully equipped medical centre,
 notified by the company for health facilities.         managed by trained personnel round the clock, to
 Some workers are also accessing the ESI                cater to employee health requirements. The
 dispensary.                                            medical centre is capable of handling all medical
                                                        emergencies and provides first aid services. For
                                                        secondary treatment of injuries, we have entered
                                                        into an arrangement with Jaya Hospitals,
                                                        We also provide gynaec support to all women
                                                        employees. More recently, all our women
                                                        employees including contract workers have been
                                                        provided with a nutritional health kit following a
                                                        health examination.
                                                        Besides, the company has also rolled out a home
                                                        medical scheme to facilitate health care needs of
                                                        employee‟s family members.
                                                        Apart from the above, the company provides
                                                        medical insurance to cover hospitalisation
                                                        expenses for employees and their families.

Flex Pledge
At Flextronics, we not only uphold our mission of being a global (tier-1) Electronics Manufacturing Services
(EMS) provider that delivers quality products and services to our global customers, we also recognize the
importance of Corporate Social & Environmental Responsibilities (CSER) that accompanies our business

Our CSER strategy called Flex Pledge consists of the following cornerstones: (1) People – treating all
employees with respect and dignity and enable them to pursue their career aspirations; (2) Environment -
protecting the environment; (3) Ethics & Governance - upholding the highest standards of integrity; and (4)
Community Partnership – participating in & contributing to communities where we operate in. We deploy and
manage “Flex Pledge” through vigorous training programs, assessment and audit processes, and ensure full
gap remediation through an effective management system designed to identify potential gaps and implement
corrective and/or preventive actions.

Flextronics is not only committed to internal CSER conformance, but is also committed to ensuring that its
supply chain is in full conformance to the EICC. We have very effective supplier development, selection, and
measurement systems in place. Suppliers that do not meet Flextronics’ criteria are assigned developmental
actions and are expected to demonstrate the same full commitment to EICC conformance.

Flextronics FlexPldge

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