Living Wage

Business Case

Brand reputation

Proactive wage practices protect reputation and avoid the costs of crisis management, including more frequent audits and supplier monitoring, media scrutiny, stakeholder pressure and lasting brand damage.

Financial resilience

Fair wage practices reduce compliance costs, legal liabilities and management costs associated with dealing with issues that arise from poor working conditions, such as third-party reports, injuries to workers or consumer complaints.

Investor confidence

Companies with strong wage practices across their supply chains reduce project risk, attract financing and avoid withdrawal of project financing by lenders when social requirements associated with a loan are not met.

Market access

Companies known for responsible wage practices become preferred buyers, attracting better suppliers, accessing new markets and increasing business opportunities as a result of responsible practices.

Operational continuity

Suppliers that pay fair wages maintain more stable operations and more predictable output. as poor wage practices increase the risk of production stoppages from worker unrest, strikes or disputes.

Productivity and quality

Fair wages attract and retain skilled workers, leading to more consistent product quality, fewer production errors or failures and more reliable supply. Underpaid workers are more likely to leave, resulting in high turnover costs for suppliers that ultimately affect delivery and quality. Suppliers that pay fair wages attract and retain better workers, strengthening the quality and reliability of the workforce producing your goods and services.

Resilient supplier relationships

Building longer-lasting and more productive supplier relationships through fair wage practices strengthens supply chain resilience and reduces the cost and disruption of supplier turnover.

Stable sourcing communities and sustainable livelihoods

Fair wages contribute to economic stability in sourcing regions, creating more predictable operating environments and reducing the social and political risks that can disrupt supply chains.

Strategy & Planning

Assessment

Initial Action

Identify procurement categories and sourcing regions with elevated risk of wage violations (low-wage sectors, regions with weak enforcement, high use of migrant or informal labour), such as:

  • paying below minimum wage
  • failing to pay overtime
  • requiring off-the-clock work
  • making illegal deductions (for uniforms, walkouts, etc.)
  • misclassifying employees as independent contractors
  • misclassifying employees as overtime-exempt
  • stealing or misappropriating tips
  • not paying for all hours worked (including preparation/cleanup)
  • delaying final paychecks
  • not paying for required travel time or training
  • wage gaps for work of equal value
Intermediate Progress

Conduct an annual living wage risk review, using recognised living wage benchmark for each sourcing region (Anker Methodology - Global Living Wage Coalition, Wage Indicator Foundation data or Fair Wage Network benchmarks), documenting the methodology used to ensure comparability across sourcing regions over time and complete risk segmentation based on the following:

  • wage‑gap severity
  • overtime dependency
  • emerging trends
Advanced Practice

Identify living wage gaps across high-risk supplier portfolio by comparing current supplier worker remuneration (including base pay, bonuses and in-kind benefits) against living wage benchmarks across high-risk supplier portfolio and develop action plans to address unmonitored categories, regions or supplier groups.

Policy

Initial Action

Establish commitment to fair wages and incomes in supply chains, requiring suppliers to comply with applicable wage and hour laws.

Intermediate Progress

Integrate living wage risk criteria into sourcing decisions for high-risk categories, requiring suppliers to work toward paying living wage and enhanced due diligence on living wage as a condition of supplier approval or contract renewal.

For existing suppliers, while focusing on remediation before termination decisions are made, establish a living wage escalation protocol with:

  • trigger criteria (serious incidents, repeated findings, falsified records)
  • mandatory intensified monitoring
  • defined consequences
Advanced Practice

Integrate living wage considerations and wage forecasting into procurement decisions and total cost of ownership calculation and require strategic suppliers to conduct their own living wage due diligence and share results.

Targets

Initial Action

Set targets for percentage of suppliers assessed on living wage practices.

Intermediate Progress

Set targets for percentage of high-risk suppliers with verified wage compliance.

Advanced Practice

Set targets for percentage of supply chain workers earning a living wage.

Supplier Selection

Screening

Initial Action

Add wage-related questions to supplier pre-qualification and RFPs:

  • confirmation of compliance with legal minimum wage requirements
  • payment frequency and method
  • provision of pay documentation to workers
  • policy on wage deductions
  • policy on equal pay for work of equal value
Intermediate Progress

Request evidence of wage practices from suppliers:

  • wage levels, sample pay records or payroll summaries (anonymized)
  • overtime payment policies and records
  • benefits documentation
  • grievance records related to wage issues
Advanced Practice

To respond to RFPs, request documentation on:

  • commitments to living wage progress
  • multi‑year wage trends, including wage‑gap analyses vs. living‑wage benchmarks
  • independent wage‑audit reports

Selection

Initial Action

Prioritize suppliers with living wage policies.

Intermediate Progress

Allocate points in selection criteria for suppliers demonstrating:

  • fair wage practices beyond legal minimums
  • awareness of and progress toward living wage benchmarks
Advanced Practice

Prioritize suppliers with verified living wage certification or demonstrated progress toward closing living wage gaps, including:

  • evidence of worker‑voice validation (surveys, interviews, grievance trends confirming timely and complete payments)
  • sustainable wage‑improvement mechanisms (reducing overtime dependency, improving wage structures)

Contracts

Initial Action

Include contractual clauses requiring:

  • compliance with applicable wage and hour laws
  • prohibition of illegal deductions
  • right to audit and review wage records.
Intermediate Progress

Include contractual clauses requiring:

  • accurate record‑keeping (time, pay, benefits)
  • requirement to notify buyer of any wage-related violations or legal actions with an established red‑flag escalation protocol in case of wage theft, illegal deductions, falsification of wage records and retaliation against workers raising wage concerns
Advanced Practice

Include contractual commitments for suppliers to close living wage gaps within specified timeframes.

Supplier Engagement

Goal Setting

Initial Action

Work with suppliers to determine appropriate goals to close gap between living wage and wage currently paid, such as eliminating illegal deductions, ensuring correct overtime premiums and providing transparent pay documentation.

Intermediate Progress

Set goals with suppliers on specific strategies and improvements to close living wage gaps, such as reducing overtime dependency, increasing base pay, formalizing benefits, etc.

Advanced Practice

Set multi-year goals with Tier 1 suppliers on working with their suppliers (Tier 2 and 3) to ensure living wage is paid.

Capacity Building

Initial Action

Provide guidance and basic training to suppliers on wage and hour compliance requirements and share resources on living wage benchmarks and methodologies, explaining the difference between legal wage and living wage.

Intermediate Progress

Provide training to suppliers on:

  • conducting wage gap analyses
  • understanding wage components (base pay, benefits, in‑kind, allowances)
  • reducing overtime dependency
  • improving payroll accuracy and documentation quality
  • establishing transparent wage policies and grievance procedures
  • developing wage improvement roadmaps
Advanced Practice

Provide detailed training on strategies to most effectively close the living wage gap.

Data

Initial Action

Request baseline wage data from suppliers in priority categories:

  • wage levels by worker type
  • overtime payments
  • deductions and allowances
  • payment method and frequency
Intermediate Progress

Support suppliers in developing structured wage management systems to enable systematic tracking and sustainable wage improvements.

Advanced Practice

Require verified wage distribution data across the pay structure, including evidence of living wage gap trends over time.

Certifications

Initial Action

Provide guidance on existing fair labour certification programs.

Intermediate Progress

Financially sponsor suppliers to participate in recognized wage benchmarking or fair labour certification programs.

Advanced Practice

Require certification for strategic suppliers in high-risk categories and support Tier 2 suppliers in achieving certification.

Advisory

Initial Action

Provide guidance to suppliers on how to identify living wage gaps.

Intermediate Progress

Provide guidance to suppliers on establishing a fair compensation program, including key components (wage policy, pay documentation, grievance mechanisms, violations).

Advanced Practice

Support suppliers in embedding living wage into their own procurement practices and subcontractor management processes.

Financial Support

Initial Action

Identify funds to support supplier access to living wage benchmark data, wage analysis tools and wage gap assessment resources.

Intermediate Progress

Offer preferential payment terms, early payment options or purchase-order financing for suppliers demonstrating progress on wage and income commitments or offer volume commitments and/or longer contract terms to suppliers that demonstrate wage improvements, giving them the revenue stability to sustain higher wages.

Advanced Practice

Link commercial incentives (contract extensions, volume increases, pricing adjustments) to verified progress on closing living wage gaps.

Audits

Initial Action

Include wage compliance checks as part of supplier audit programs and human rights due diligence, including verification that workers have access to grievance mechanisms to report wage violations without retaliation and verification of worker voice mechanisms such as wage surveys to confirm that recorded wages reflect wages were actually received by workers and that deductions and in-kind benefit valuations are understood and accepted by workers.

Intermediate Progress

Commission independent wage audits in high-risk categories as part of human rights due diligence, including verification of payroll records, overtime payments and in-kind benefit valuations and assess whether grievance mechanisms are functioning and accessible to all workers.

Advanced Practice

Require strategic suppliers to conduct their own due diligence on wages and share findings.

Project Partnerships & Innovation

Initial Action

Join industry groups or topic-specific coalitions to share best practices and learn from successful implementation strategies.

Intermediate Progress

Work with suppliers, partners, sector peers or international organizations to develop solutions for improving living wage across shared supply chains, such as open access to global benchmarking data.

Advanced Practice

Lead industry collaborations with suppliers, partners and sector peers to scale solutions for improving living wage across shared supply chains.

Continuous Improvement

Metrics

Initial Action

Track:

  • percent of suppliers with sites in high risk regions / number of priority supplier sites in high risk regions
  • percentage of suppliers assessed on wage practices
  • percentage of suppliers that implemented required corrective actions
Intermediate Progress

Track percentage of suppliers engaged in buyer living wage programs.

Advanced Practice

Track percentage of suppliers cascading living wage policies and due diligence to their own supply chains.

Scorecards

Initial Action

Introduce basic wage criteria into yearly supplier evaluation forms, starting from onboarding:

  • self-assessment on living wage
  • checklist for existence of basic policies (wage payment, documentation, deductions)
Intermediate Progress

Include wage and income metrics in category business reviews and track progress on wage improvement plans, using results to influence sourcing decisions and renewal discussions.

Advanced Practice

Weigh living wage performance in supplier scorecards, with top performers receiving preferential weighting in tenders with commercial incentives and bottom performers required to submit improvement plans.

Impact Verification

Initial Action

Gather feedback from suppliers on effectiveness of engagement programs.

Intermediate Progress

Assess whether supplier engagement initiatives are improving wage and income outcomes, cross-checking supplier-reported outcomes with additional independent data source such as worker surveys, grievance channel data or third-party assessment.

Advanced Practice

Measure improvement in supplier living wage outcomes attributable to engagement programs. For example, consider:

  • percentage of supplier workers at or above living wage benchmark by sourcing region
  • supplier worker-reported financial security and wage satisfaction (from surveys)
  • reduction in supplier wage-related grievances over time
  • comparing supplier audit findings before and after interventions
  • tracking remediation outcomes and recurrence rates over time
  • average living wage gap (in local currency) before vs. after program implementation
  • commissioning independent evaluations of program effectiveness

Sources consulted

Occupational Health and Safety, Physical Working Conditions & Protection against Hazardous Materials Non-Discrimination