Formal Employment in Coffee: Going Against the Grain

A coffee worker is picking cherries during the harvest period on a steep mountainside. It has been raining all day, and after hours of picking, laden with cherries, the worker takes a bad step, falls, and breaks his leg. The farm owner, in difficult financial circumstances themselves, cannot afford or is unwilling to help the worker he pays daily for picking cherries. The owner drives him into town and drops him off near a clinic. If anyone asks, they claim they found him on the side of the road and was just giving him a lift. The worker does not argue, and given that he is uninsured, pays his own medical bills out of pocket if he is able, even though the farm owner is technically responsible. His chance at earning a living is destroyed in a moment, with no means of recovery.

This story is unfortunately common in the world of Colombian coffee production.

At the GCC, we are doing things differently. As part of the comprehensive corporate responsibility strategy of the company, we are dedicated to bringing a formal employment structure to avoid the scenario above. From our perspective, providing formal employment for all of our workers is one of the crucial areas where we can create an enormous impact in our local community and begin improving Colombia’s coffee culture by providing a secure work environment for our team.  This is a key focus for the GCC going forward. With over 2,300 acres of farmland and over two million trees, the size of our Colombian coffee operation demands from us a greater responsibility to care for our workers and set a good example for the industry. 

 

What does formal employment mean in Colombia?

 

What do workers in the formal economy here in Colombia have? They have legal contracts establishing their wages and work hours, and their employers are obligated to contribute to health care, insurance, and pension plans on their behalf. This means that businesses in Colombia will often pay 1.5 times the actual salary for the employee to cover these costs. Formal workers also have protections if they are wrongfully fired, receive vacation days and parental paid leave, and they have legal recourse if the employer violates their contract. These stipulations provide a crucial level of stability to low-salary workers and a formal economy can often provide a path out of poverty. 

Workers in the informal economy common to coffee operations here in Colombia have none of these benefits. While they are earning an income, they have no built-in means to accumulate wealth through pension plans, and they take on enormous health risks without insurance. On top of this, informal employment means an employer has no real obligation to that employee, and they are not incentivized to treat them well. From an employer’s perspective, employing workers informally is a risk as well. It is not only illegal in many cases, but by broadcasting a clear sense of indifference toward worker well-being, an employer will not benefit from workers inherently caring about doing a good job.

Colombia has long faced persistent and complex challenges with reducing informal employment throughout its economy. Colombia’s National Administrative Statistical Department (DANE) reports that a majority (60%) of working individuals make up the informal economy nationally. It is worse when looking specifically at rural communities (where most coffee operations are located), where the rate is about 85%. While there is progress, change has been painfully slow, and the lack of formal employment continues to put immense strain on Colombia’s economy and global reputation.

The nature of picking coffee only highlights this phenomenon. In Colombia, coffee picking is variable and a majority of a farm’s harvesting will occur within a few weeks throughout the year. During these periods, farms of all sizes need to hire additional workers to come to the property and harvest the cherries at precise times in order to maximize their coffee quality. These workers often sit at the bottom of the social ladder, and receive little to no support or attention in the coffee world. Farm owners may provide housing and food options for purchase, and may truly care about their workers. However, when it comes to compensation, the fact of the matter is that there is little to no expectation that farm owners will offer anything to their employees other than their salary paid in cash every week.

Part of the issue with formal employment also stems from a lack of understanding of how the law works, which means neither party will even try to break the status quo. As a 2016 SCA Coffee Workers Report notes, “the limited knowledge of [Colombian] labour law amongst workers, farmers and managers of corporate farms exacerbates this reality.” Coffee laborers are also more accustomed to informal or verbal agreements, and they do not want their cash salaries to be reduced. Many harbor a deep distrust of the government and banking systems for honoring any commitments.

 

GCC Workers on the farm in Salgar

 

GCC’s Plan for Formal Employment

 

Over the past year, GCC has experienced tremendous growth as a company. We decided to take this exciting moment in our history as a fantastic opportunity to increase our efforts in fully protecting and supporting every worker on our farms. Of all the areas of focus in our business, we believe formal employment is a top priority.

In order to better understand how the company has prioritized this issue and will continue to do so in the future, it is important to have a clear understanding of the different types of employment that currently exist among our team members. Our workforce is currently split between the three different groups:

1. Full-time workers: Those who have standardized, full-time contracts with the company. They receive all of the benefits of full-time employment. 

2. Part-time workers (year-round): Individuals who will work for the company on a daily basis. They must be registered with the company to ensure legal work status, but their contracts do not include most benefits that full-time workers receive. They are paid at the end of the week based on the tasks they completed and the days they have worked. 

3. Part-time workers (seasonal): People who come to work for us during the coffee harvest period. They are often a mixture of locals who live in nearby villages and migrant laborers who follow the cycle of Colombia’s coffee harvest. During peak periods, the part-time workers from Group 2 will be taken off normal daily tasks to assist with the harvest. These workers are paid at the end of the week, based on the number of kilograms of coffee cherries they have picked. In peak harvest periods, we will need about 300 workers across all of the farms for part-time work. These 300 can be a mixture of part-time workers, as well as the full-time people who will be taken off from other tasks to help with the harvest.

Step 1: Move people from Group 2 to Group 1:

When our Human Resources team began this endeavor of a move to formal employment, they first initiated a full review of all of the people who have worked with us over the past year. In total, we had over 250 individuals who worked with the company at least once in 2019. Of those individuals, 150 workers consistently showed up for periods of 6 to 8 weeks. Instead of continuing with the less efficient system of daily work for a constantly changing group of people, we have contacted the most productive members of this group to offer them full-time positions, with detailed contracts and the subsequent benefits of stable employment. This transition process began in August 2020, and we are expecting to welcome 50-70 more people to the company as full-time employees in 2021. 

Step 2: Employment Strategies Groups 2 and 3:

A portion of our operations, given the seasonal nature of the industry, will always consist of part-time workers. Additionally, we have also found that there are many people who do not want to or are unable to work full-time, but who still contribute greatly to our company on a part-time basis. We believe that these part-time workers should still receive benefits similar to those of our full-time staff.  Because of that, we have implemented the following: 

1. Pensions through Planilla 51: Formal Employment Status (read here) The government recently enacted a new type of program where employers can register part-time workers through an employment status called Planilla 51, which above all else provides pension to workers. Employers contribute an 8% salary bonus into a pension plan, with an additional 4% contribution from the workers. We are one of the first coffee producers to use Planilla 51 as a means to bring coffee pickers into the formal economy, and we are proudly the first to do so in Salgar.

2. Accident Insurance through SUMA: We talked with every insurance provider we could to try to find the most comprehensive coverage. Most companies had never worked with a coffee operation before, but we finally found a partnership with SUMA. They will cover nearly every type of accident that could occur within our operations, and our registered employees (full-time and part-time) will never have to worry if they are injured on the job. 

3. Financial Inclusion: Payment Methods Making entirely cash payments is inherently risky, and with the COVID crisis, requiring all of our workers to gather together at our office in Salgar every weekend to receive their compensation became an additional risk. When possible, we have helped our workers get bank accounts, many for the first time. For those who don’t want accounts, we are working to register as many of our workers with banks in Salgar as possible, where they can simply enter a code at an ATM to withdraw their weekly salary.

 

Where We Are Compared to our Peers:

 Pension Plans, Accident Insurance, and Financial Inclusion

We are happy with the work we have done so far, but there is still room for improvement.

 

Shared Value: The Benefits of Formal Employment Go Both Ways

 

Striving for 100% formal employment at the GCC is not only good for workers, but it also makes good business sense. To put it simply, formal employment makes a coffee operation safer. We are phasing out paying people in cash from our office in Salgar, which eliminates the risk of human error, theft, and unnecessary crowding. Fully-insured workers are more likely to seek treatment to deal with health problems proactively, as opposed to retroactively. As Colombia continues to grapple with the pandemic, this becomes critical to safe and secure operations.

In the longer term, we expect to see additional benefits from our actions. Stability in employment means our workers can focus more intently on the work they do each day, allowing them to learn and thrive in their positions. Instead of having to train new people every week on how our operations work, our farm managers can instead focus on working with their existing team to make our farms more productive. The benefits of our actions have also begun to spread outside of the company, as we have been recognized as a leader in the region on a number of occasions. This positive impact on our  reputation has led to higher-talented individuals coming to us for job opportunities, and more people in Salgar are inquiring about working with us than ever before. 

 

Conclusion:

 

This process has not been easy, and it will not get any easier. Getting buy-in from the workers is tough, especially when battling cultural and industry norms. Our workers need to be made aware of the fact that a small part of their paycheck will be contributed to meaningful programs, which is often a tough pill to swallow for people who are unaccustomed to working in the formal economy. In order to explain these changes to the hundreds of workers, members of our HR team are putting together a series of videos to provide a detailed explanation of how these programs work and how it will benefit each individual.

As coffee producers, we deeply understand and empathize with the thousands of Colombian farmers who struggle every day to keep their businesses alive. Preparing contracts for everyone is time-consuming, and paying into these programs can be expensive. The process of formalizing all of our employment is not going to be a straightforward path, and we know that we will run into difficulties along the way, seen and unforeseen. However, as one of Colombia’s largest coffee producers, we feel it is our responsibility to lead by example, and to show everyone that there truly is a path to treat workers properly while being profitable. We look forward to pioneering improved workers´ rights in a historically challenging sector, and to continue to make our community proud.

 

About the author: Robby Kuster is a junior member of GCC’s management team who has been with the business since its inception in 2018. From farm operations to the sales team, he works across the company’s different operating branches in order to develop a cohesive impact strategy. Robby has a background in sustainable economics, agriculture, and corporate finance, and is based in Medellin, Colombia.

 

Sources:

2019 Formal Employment in Colombia Article:

https://www.portafolio.co/economia/empleo/los-cambios-que-se-vendrian-con-la-reforma-laboral-534312 

2016 SCA Coffee Workers Report:

https://www.scanews.coffee/wp-content/uploads/2016/07/Coffee-Workers-report-ING-V81.pdf

2017 FNC Coffee Collection Report:

https://federaciondecafeteros.org/static/files/La_recolecci%C3%B3n_de_cafe_en_Colombia_mercado_laboral.pdf

2017 Global Findex Report:

https://globalfindex.worldbank.org/sites/globalfindex/files/chapters/2017%20Findex%20full%20report_chapter2.pdf