The widespread use of short-term contracts in Cambodia’s garment industry has come under fire in a new report, which looks at ongoing issues with the practice at H&M supplier factories amid pledges of reform.

A Short-Term Solution, which was released yesterday by Swedish NGO Fair Action, uses interviews with workers producing garments for the mega-brand to illustrate how fixed duration contracts (FDCs) can be used to exploit and intimidate.

Despite apparent efforts from H&M to address the issue, workers from three of its supplier factories in Cambodia said FDCs had led them not to exercise rights such as taking sick leave or refusing overtime because of a “widespread and continuous fear of not having their contract renewed”.

At one factory, the workforce was allegedly employed entirely on FDCs, while at another, moves to put workers onto unlimited duration contracts amid union pressure were short-lived, with many workers now kept on FDCs beyond the two-year legal limit.

“Through the trade with factories using FDC workers to illegally make up a permanent workforce, H&M breaches not only the company’s own code of conduct, but also Cambodian labour legislation as well as international norms,” the report notes.

Ken Loo, secretary general of the Garment Manufacturers Association of Cambodia (GMAC), argued yesterday that a number of workers prefer to be on FDCs. “The trade off for the job security is they get the 5 per cent” severance payment at the end of each contract, he explained.

But the report says that interviews with workers suggest otherwise.

“We all want long-term contracts, but we do not protest. We are afraid that we will be sacked,” said one woman employed at a H&M supplier factory where all workers are on two-month FDCs.

“As workers, we were not given the option to choose the type of contract when we started the job,” another worker is quoted as saying.

Fair Action says efforts made by H&M to address the issue have so far fallen short.

A project was launched by the label in February to reduce the use of FDCs in its supplier factories, mapping where the contracts were being used illegally.

But, the report says, H&M has shown a “low level of transparency” by refusing to disclose results of the mapping, and has failed to include a prohibition of FDCs in its code of conduct.

H&M yesterday acknowledged that the “illegal use of short-term employment is an industry-wide problem”, which it said it was attempting to address by working closely with trade unions, civil society and other stakeholders.

“We always require that the suppliers we work with follow national legislation and implement awards from the Arbitration Council Foundation. Since 2015 . . . we require that workers that have been employed for more than two years should have a contract valid for an unlimited time,” it said.

Joel Preston, a consultant with the Community Legal Education Centre, which conducted interviews for the report, said H&M had taken “positive steps” towards addressing the issue, but “the question is the implementation”.