Performance Standard 2 -
Labor and Working Conditions
Stakeholder Feedback
Frequently Asked Questions
How does the IFC ensure that workers engaged
through third parties have access to adequate
terms of employment and working conditions?
Does the policy make a distinction between
workers hired directly by the company or
workers hired through third parties?
One of the main objectives of PS 2 is the non-
discrimination and equal opportunity right for all
workers. Which are the provisions under PS 2
that ensure this objective is applied?
Subcontracting labor through third parties is a
common practice in a number of developing
countries. This practice allows abuses related to
discrimination, fair treatment of workers and
basic worker’s rights. How has IFC addressed
the issue in the new version of PS 2?
Occupational health and safety (OHS) represents
different risks to men and women. How will IFC
ensure that these risks are identified and
mitigation measures implemented adequately to
protect both men and women?
Are impacts to home-based workers addressed
under PS 2?
What are the implications of expanding the
scope of the supply chain risk assessment to
include significant safety aspects (paragraphs
25 and 26)?
Will the IFC include information on sector-
specific averages of working hours or any
general recommendations on hours of work?
IFC Response
PS 2 requires all contracted labor to have terms of employment
and working conditions that are in line with PS 2 standards.
Furthermore, the client is required to develop and implement a
management and monitoring procedure to ensure that contractors
apply the applicable PS 2 requirements.
The draft Version 2 of PS2 broadens the scope of coverage to
include contracted workers working on the project activities. Only
retrenchment and supply chain requirements will not apply for third
party employers. In addition, specific requirements for migrant
workers, including their payment and work conditions at
substantially equivalent terms for similar work, have been
included.
The draft Version 2 of PS2 addresses potential risks related to
subcontracted labor. Except for the retrenchment requirements, all
PS 2 requirements apply to all workers performing a job at the
company’s business activity, regardless of their contracting
relationship. Companies will need to include these requirements in
contractual agreements with contractors and monitor performance
to ensure compliance of terms of employment and working
conditions.
The basic principle of IFC’s requirements under PS 2 is that
companies are obliged to implement all reasonable precautions to
protect the health and safety of all workers. Specific OHS hazards
related to gender are part of the assessment all companies need
to perform. Hazards to women are now specifically included as
part of the OHS section. If specific gender-related risks and
impacts are identified, companies will need to implement
mitigation measures as part of their management systems.
Home-based workers are generally present in the supply chain of
specific industry sectors. IFC’s supply chain requirement focuses
on preventing child labor, forced labor and safety events. In the
event home based workers are subject to forced labor, significant
safety aspects or child labor, this will be addressed through the
supply chain requirements.
The inclusion of examining significant safety aspects in the supply
chain is new. This is aimed at moving clients away from
contracting suppliers that have a high rate of fatalities. The
expanded scope will require companies to have a good
understanding of their supply chain.
IFC will not specify average working hours in PS 2 but expect
companies to comply with national legislation and be guided by
the International Labor Organization (ILO) Conventions. Most of
the countries IFC invests in follow ILO Conventions and have
embedded working hour requirements into national legislation.
To what extent are clients responsible for the
"inherent risk of a sector" to workers as
specified in OHS paragraph of PS 2?
How will IFC adequately monitor the aspect of
undocumented migrant workers across
countries and sectors of economic activity?
Comments
The guidance document on OHS does not
explicitly refer to gender issues or issues
specific to women, such as pregnancy tests,
exposures during maternity. The
recommendation is that the language be added
substantively in PS 2 itself or the guidance
document be revised to include explicit gender
references where there are OHS potential
hazards for women.
PS 2 lacks guidance on procedures related to
child workers and home-based workers. It
should include a procedure to identify, map, and
ensure equal treatment of these groups of
workers.
There needs to be more explicit language in PS 2
around prohibiting discrimination, e.g. on the
basis of race, sex, national origin, caste.
There is no statement prohibiting disciplinary
practices that are threatening, coercive, sexually
abusive, and no requirement prohibiting
companies from withholding worker
identification documents, benefits, or property.
Language prohibiting both trafficking and
supplying of labor to companies from using
trafficked persons should be strengthened.
PS 2 should specify that where the workers are
procured by third parties, those third parties
should be reputable and legitimate.
An issue in many countries is unregistered
producers. If the entity is unregistered, there is a
dual effect: workers do not have legal
protections or social security benefits, and tax
revenues are lost.
Recommend that IFC require clients to
demonstrate that job positions filled by workers
not considered being direct employees, were not
created with the intent to avoid obligations to
The client has to use good international industry practices to
mitigate all potential adverse impacts and is obliged to implement
all reasonable precautions to protect the health and safety of
workers. Inherent sector risks have to be taken into consideration
when designing and implementing the OHS management system,
including all preventive and control measures.
IFC monitors clients on a yearly basis and visits business activities
at a minimum once every two years. Clients will implement policies
and procedures to ensure compliance with PS 2. Contracts with all
workers are a requirement, as well as payment of salaries and
benefits. Access to pension and health care are also a
requirement and it is reviewed during due diligence.
IFC will provide specific guidance on gender issues and OHS in
the guidance notes.
All workers engaged in the business activity of an IFC client have
the same rights as reflected in PS 2 (except for the retrenchment
requirements). If workers are part of the supply chain, provisions
regarding child labor, forced labor and safety apply.
IFC has added specific characteristics, as per ILO Convention, in
PS 2.
IFC has guidance on disciplinary practices in the Labor Toolkit and
in the Labor Handbook for clients: “Measure & Improve Your Labor
Standards Performance”. IFC will include some of these
references in Guidance Note 2.
IFC has included a specific requirement in paragraph 22, that
clients will not employ or benefit from labor from trafficked
persons.
Paragraphs 23 and 24 reinforce workers’ rights performing a job
for the company’s business activities regardless of the working
relationship. Workers engaged by third party have the same rights
under PS 2 as direct workers.
This a supply chain issue, as such, only provisions regarding child
labor, forced labor and significant safety aspects will apply. In
addition, under PS 1, we ask clients to identify risks and impacts of
their supply chain. If risks are identified, the client needs to map
their supply chain and ensure provisions under PS 2 and PS 6
related to supply chains are applied.
Except for the retrenchment requirements, all workers performing
a job for the company have equal rights. Access to pension and
freedom of association are two of the risks that are assessed by
IFC during due diligence and are discussed with the company to
direct employees. ensure that workers’ rights are protected.

Note: IFC’s responses to questions and comments are based on the current draft (Version 2) of IFC’s Sustainability
Framework. They are subject to change as the Framework is further revised. No text in the Framework or in these
interim comments and responses is final until approved by IFC’s Management and Board.