A Value Chain tool for sub-contract homeworker chains
Homeworkers tend to be paid a piece rate. Tracking the value received by homeworkers and other
value chain actors for a single product is fairly straightforward. However comparison of prices and
wages across supply chains for different products is difficult. A convenient methodology to enable
such comparisons is described below.
Homeworkers in crafts production (if not organised into a self-help group) are typically engaged
through informal sub-contract chains like the one below.
Figure 1 A typical sub-contract homeworker chain
Factory
Rate offered by factory
to contractor (1st tier)
(Rupees per piece)
Contractor
Rate passed on to level
below *
Services provided by
contractor
(Rs per piece)
Sub-contractor
Services provided by
sub-contractor *
Rate received by
homeworkers
(Rs per piece)
Homeworkers
* A 3-tier chain is shown, but chains may be shorter, or longer to spread the work to a wider number of homeworkers
Homeworkers tend to be paid a piece rate. Tracking the value received by homeworkers and other
actors in the value chain for a single product is usually straightforward. However it is difficult to
compare prices and wages across supply chains for different products. A simple methodology,
developed by Home-Workers Worldwide, is to convert payments for a standard unit of production –
usually what a homeworker can produce in one day – as shown in the example below.
A homeworker earns 60 Rupees (Rs 60) for embroidering a bag. The factory or exporter at the top of
the chain pays Rs 100 per bag to one or more contractors, who in turn distribute the order to a number
of sub-contractors who receive Rs 80 per bag, and distribute them to homeworkers. Each level of the
chain (contractors/sub-contractors) may be providing services, such as transport of materials, quality
control, training etc, and takes a margin which tends to reflect their bargaining power within the chain.
Table 1 Sub-contract value chain data
Price per bag
Paid to contractor
Rs 100
Paid to subcontractor Rs 80
Paid to homeworker
Rs 60
file: 533582252
Each bag takes a homeworker 2.5 hours to complete. Over an 8-hour day a homeworker can therefore
produce 3.2 bags per day (8 hours/2.5 hours per bag), and earn Rs 192 per day (3.2 bags x Rs 60 per
bag). The prices paid at each level of the chain are standardised for a unit of production (one
homeworker’s daily production) by multiplying by 3.2
Table 2 Standardised sub-contract value chain data
Price per bag
times 3.2
(bags per day)
Paid to contractor
Rs 100
x 3.2 =
Paid to subcontractor Rs 80
x 3.2 =
Paid to homeworker
Rs 60
x 3.2 =
Standardised price
(one day’s production)
Rs 320
Rs 256
Rs 192
How does this compare with a homeworker earning Rs 90 for a piece of embroidery which takes her 6
hours to complete (for which contractor and sub-contractor receive Rs 110 and Rs 190 respectively)?
Standardisation of rates paid for one day’s production (multiplying by a factor of 8/6 = 1.33 i.e. the
number of pieces she can make in a day) enables comparisons between the two product chains.
Table 3 Standardised value chain data for several products
Raw data
Paid to 1st
Contractor
(per piece)
Paid to
Subcontractor
(per
piece)
Piece rate
paid to
Homeworker
Number of
pieces
homeworker
can make
per 8-hour
day
bag
INR 100
INR 80
INR 60
3.20
embroidery
beadwork
INR 190
INR 110
INR 90
1.33
Product
Standardised data
Contractor
price per
day's
work Rs
Subcontractor
price per
day's
work Rs
Homeworker
earns per 8hour day's
work Rs
100 x 3.20=
80 x 3.20=
60 x 3.20=
INR 320
INR 256
INR 192
190x 1.33 =
110x 1.33 =
90x 1.33 =
INR 253
INR 147
INR 120
These can be plotted as a value chain in a simple spreadsheet (below), which shows graphically how
much of the value is taken by each of the actors in different product chains, and how much (or how
little) reaches the homeworker. A model spreadsheet, which makes these calculations and can be
adapted, is appended.
Homeworker value chain
INR 350
bag
Standardised price (1 day homework equivalent)
INR 300
daily minimum wage
INR 250
embroidery beadwork
INR 200
INR 150
INR 100
INR 50
INR 0
Contractor price per day's work Rs
sub-contractor price per day's work Rs
Homeworker earns per 8-hour day's work Rs
If you have questions, or for further advice, please contact info@homeworkersww.org.uk.
For information on homeworking please see www.homeworkersww.org.uk
Spreadsheet for standardising value chain data
file: 533582252
Raw data
Product
bag
embroidery
beadwork
Paid to 1st
Paid to SubContractor (per contractor (per
piece)
piece)
Standardised data
Number of
pieces
homeworker
Contractor price sub-contractor
Piece rate paid can make per 8- per day's work price per day's
to Homeworker hour day
Rs
work Rs
Minimum wage INR 248
Homeworker
earns per 8% of minimum
hour day's work wage earned by
Rs
Homeworker
INR 100
INR 80
INR 60
3.20
INR 320
INR 256
INR 192
77%
INR 190
INR 110
INR 90
1.33
INR 253
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
INR 147
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
INR 120
0
0
0
0
0
0
0
0
48%
0%
0%
0%
0%
0%
0%
0%
0%