Workers’ Compensation and the Case Study of Rana Plaza pp. 309-313

© Taslima Akhter

By M.M. Akash

May 01, 2014

Translation Samina Lutfa

I have had the opportunity to serve as the chair of a committee which, on the directive of the High Court, has worked on determining the ‘rate of compensation and nature of victims’ resulting from the Rana Plaza collapse. During my tenure I received advice and suggestions from many different areas, on the basis of which certain decisions have been finalized. Bangladesh is witnessing an increase in the number of workers, with an estimated 40 lakh (4 million) working in the ready-made garment industry alone. Their pre-existing demands for higher wages are now all the more noticeable after the Rana Plaza disaster. The issue of how to compensate workers who fall victim to such disasters, or suffer for some other reason, is also crucial. We can expect this issue in particular to be subject to much attention and scrutiny this International Workers’ Day (“May Day”), and that is why I am writing this piece.

The following is the compensation scheme proposed in the first meeting of the committee (all sums are one time, lump-sum payments unless otherwise specified):

Deceased: BDT 2,000,000 Missing (confirmed): BDT 2,000,000 Disabled: One hand or leg: BDT 1,000,000 Two hands or legs: BDT 1,500,000 Grievous injuries beyond the above: BDT 2,000,000 (maximum) Under long-term medical care: BDT 600,000 Psychologically traumatized: BDT 200,000 Unemployed: Employment secured by BGMEA (Bangladesh Garment Manufacturers and Exporters Association) All living victims, including those who do not fall into any of the above categories, will be guaranteed free and comprehensive medical treatment until full recovery; the children of all deceased or disabled workers will be guaranteed free schooling up to the HSC (Higher Secondary Certificate) examinations or equivalent.

Benchmarks for the primary proposal: In our first meeting we used as guidelines the existing compensation scheme for government and non-government administrative officers for the ‘one-time compensation rate determination’. The categories for the degree of compensation were as follows: Funeral of the deceased: BDT 25,000 One-time grant (12 months’ basic salary): BDT 60,000 (assuming a monthly basic salary of BDT 5,000) Welfare allowance (monthly): BDT 180,000 (BDT 1,000 until 67 years of age or 15 years of service, whichever is lower) Collective insurance fund: BDT 500,000 Pensions: BDT 600,000 (50% of a basic salary of BDT 5,000) Total: BDT 1,365,000

This sum seemed to us to be too low, leading the central committee to increase it by 46% during the first meeting, thus deciding on a one-time compensation sum of BDT 2,000,000 (in addition to free schooling for the victims’ children until the HSC examinations, as well as suitable employment for one active member of the family).

The following was proposed as compensation for those who lost one or more limbs: Loss of one limb: BDT 1,000,000 Loss of two limbs: BDT 1,500,000 Loss of more than two limbs: BDT 500,000 for each additional limb lost In addition to free schooling for the victims’ children until the HSC examinations, as well as suitable employment for one active member of the family).

For those are under long-term medical treatment (189 persons): One-time grant: BDT 600,000 (30% of the proposed compensation for the deceased) Free medical treatment until recovery In addition to free schooling for the victims’ children until the HSC examinations, as well as suitable employment for one active member of the family).

And for all others who have lost their jobs: Psychological trauma: BDT 200,000 Rehabilitation Suitable employment for those who have recovered

Comments and alternative benchmarks:
Our proposed amount is 29% lower than IndustriALL’s assessment of BDT 2,800,000 (accounting for inflation; BDT 2,200,000 otherwise) as appropriate compensation for the deceased, following Section 121 of the ILO (International Labour Organization) Convention. The latter sum is close to our proposed amount. Our proposed compensation for the injured is also in certain cases less than their sum of BDT 1,200,000. These calculations, they claim, were based on a consensus among international retailers, major Bangladeshi workers' rights organizations and international trade unions, and is aligned with the ILO’s guidelines. This scheme was organized by the Clean Clothes Campaign. Their calculations were based on the following:
According to their estimate, the average wage of garment workers in Bangladesh is BDT 5,833. Assuming that the deceased worker would have been able to work for the same wage for 25 more years if alive, her lost income is (5,833*12*25 =) BDT 1,749,900.

And to compensate for the suffering and pain of living family members, an additional one-time grant of BDT 500,000 [this, according to the ILO representative team visiting Bangladesh, is not included in the ILO-121 compensation scheme].

The total amount comes up to BDT 2,248,900. If, however, we account for wage increments and inflation over the 25 years, the total increases to BDT 2,800,000. For the injured and disabled, the calculation is as follows: Lost income: BDT 699,960 (5,833*12*10) Compensation for living family members: BDT 500,000 Total: BDT 1,200,000 (approx.)
Estimates from labour organizations:
Local labour rights organizations have an estimate close to that of the ‘international measurement method’. According to a BILS (Bangladesh Institute of Labour Studies) estimate, the calculations are as follows: Compensation for living family members: BDT 500,000 Lost income per year: BDT 70,000 [(5,000*12) + 10,000 (two bonuses a year)] Assuming that every deceased worker lost, on average, approximately 30 working years (with retirement at 60 and an average age of 30 at the time of death) Thus the total owed amounts to (2,110,652 + 500,000 =) BDT 2,620,652. In addition, an additional 10% (BDT 260,000) was proposed as the cost of their children's schooling, bringing the amount to BDT 2,880,000, close to the IndustryAll inflation-adjusted estimate. Besides BILS, there is also an estimate by the Somajtantrik Sramik Front, which amounts to (4,200,000 + 525,000 =) BDT 4,725,000 for the deceased.

Professor Anu Muhammad suggested an average compensation of around BDT 2,600,000 for the deceased. He has also demanded a sum of BDT 4,800,000 based on an alternative measure. According to the ‘Fatal Accidents Act’ of 1855, compensation for the deceased should be calculated by doubling the probable lost income, based on the average longevity of workers. Since most of the deceased in the Rana Plaza collapse were between 20 to 30 years old, their average age was 25. Assuming an average longevity of 65 years, the deceased workers lost 40 years of income. With a monthly income (not including inflation) of BDT 5,000, the total lost income amounts to about BDT 2,400,000, which when doubled gives us a sum of BDT 4,800,000 per deceased worker.

However, we did deliberate on what the appropriate average longevity should be - i.e. whether to take 65, 60 or 50 years. Since the retirement age is set at 60 in Industrial Law, that would probably be the most appropriate number. Nevertheless, since our sub-committee decided to use an average longevity of 50 years, and with a mean age of the deceased at 25 years, we estimated that the deceased workers have lost 25 years’ worth of income.

A visiting ILO delegation informed us that there was no provision for a ‘one-time grant as compensation for the suffering and pain of living family members’ in Section 121 of the ILO convention, although IndustryAll and other workers' rights organizations have claimed that the one-time grant was included in their proposals based on the ILO’s suggestion. This specific allocation therefore might not eventually be included, depending on the central committee’s decision.

Thus, given the diversity of possible benchmarks discussed above, it is possible to determine different degrees of compensation, or alternatively a single average figure for the lost income of the deceased workers. In addition, the cost of schooling, or guaranteed free schooling for the workers’ children, treatment or funeral costs, and welfare allowances must be included. In that case, the education allowance should be around 10% of the total lost income, or alternatively a guarantee of free education upto the undergraduate level. Medical treatment or funeral expenses should remain as proposed in the first estimation, and the welfare allowance should be as much as is legally permissible.

Based on the above discussion, we can now propose a revised standard compensation scheme:
For deceased or missing (verified) workers, total compensation should include: Compensation for lost income (based on a basic income of BDT 5,000, an average annual inflation rate of 6.72%, an average deposit rate of 9.22%, an average real discount rate of 2.50%, and at least 25 lost working years) Funeral cost (as per the primary proposal)

Welfare allowance (as per the primary proposal)
Cost of education upto the undergraduate level (10% of lost income or direct provision, but the victim can decide not to take the cash amount)
Employment for the spouse or any other family member.
Accordingly, total compensation will amount to BDT 1,451,300, or BDT 1,500,000 approximately.
The corresponding sum for the disabled, those under long-term treatment and others should be recalculated in proportion to the compensation for the deceased. The revised sum for the deceased is 25% less than the amount proposed in the central committee meeting. Accordingly, the amounts calculated for all other victims may be decreased by 25% relative to the primary proposal.

This amount is 25% less than the preliminary proposal, because we have eliminated the proposed one-time grant as compensation for the suffering and pain of living family members (BDT 500,000 or 25%), based on our discussions with the ILO delegation, and in the context of a new proposal from BGMEA representatives. On that note, the BDT 700,000 proposed by the BGMEA was rejected right away as far too low a sum relative to social standards and expectations. Similarly, the BDT 2,800,000 to 4,800,000 proposed by the workers' rights organizations was also rejected as too high, given social expectations and ILO standards. We believe that the final, revised scheme will be deemed reasonable and widely acceptable in the eyes of society.

This proposal is currently under review in the High Court. Given the urgency of securing compensation for the victims and their families, as well as the need to restore the image of our ready-made garment industry, we urge the Court to come to a decision regarding this without delay.
Writer: Dr M. M. Akash
Professor, Department of Economics, University of Dhaka
May 01, 2014 The Daily Samakal