Being paid enough money to support a family and cover basic living costs – a fair living wage – is a fundamental human right. It is integral to improving the quality of life of garment workers and their families. For factory owners, it is an important step towards attracting and retaining high quality employees, boosting productivity, demonstrating their ethical credentials to customers, and ultimately, growing their business.
Apparel companies and their suppliers are under increasing pressure to catalyse real and lasting progress on fair living wages for garment workers, as stakeholder interest in who makes their clothes intensifies. However, achieving this goal means players across the supply chain must take definitive, complementary action. Crucially, it also requires a complete mind shift at factory level in the way that workers and wages are valued.
The 12 Fair Wage Dimensions were developed in 2010 by Daniel Vaughan-Whitehead, founder of the Fair Wage Network, to shine a light on each of the core aspects that create and uphold a fair living wage. By breaking down what should be done and by whom, Vaughan-Whitehead sought to bring clarity to this complex issue and help fashion businesses to make fair living wages a reality.
Here, he explains how each aspect can be put into practice:
- Payment of wages
“Workers should be paid regularly, on time and in full by their employers,” says Vaughan-Whitehead. “All too often, there are delays, sometimes of several months, putting workers at risk of not being able to pay their bills. Brands should check with factories how and when they pay workers. It’s important to establish the root causes of delays and distinguish between infrequent technical issues and systematic late payments.”
- Living wage
“Paying wages that sustain minimum acceptable living standards is a key dimension,” says Vaughan-Whitehead. “Adopting a pragmatic approach is central to understanding workers’ needs, which can vary according to level of expenditure and number of dependents. Importantly, brands should compare actual wages at factory level with living wage thresholds.”
Brands are starting to tackle this, Vaughan-Whitehead confirms, but there is still some way to go. H&M, for example, has introduced a ‘Roadmap to a fair living wage’. The Indonesian government has made some progress on raising living wage thresholds, and the Asia Floor Wage is also helping to improve wages across Asia, including in China.
- Minimum wage
One of the most basic requirements for factories is that they should pay wages that respect legal minimums.
“In order for factories to make progress on respecting minimum wage levels, they first need to change their mentality to value workers and view paying wages in the same light as paying energy bills and other key overheads,” says Vaughan-Whitehead. “By giving priority to wages, factories are more likely to pay workers on time and in line with legal minimums.”
- Prevailing wage
The prevailing wage is the going market rate, which factories should be able to afford if they are supplying international export markets, Vaughan-Whitehead confirms.
“Building an accurate picture of going market rates is both important for brands and can help inform workers’ job moves,” he says. “As supplier mentalities evolve, monitoring this information will also be useful for factory managers in attracting skilled workers and remaining competitive, as they will be able to offer slightly above the market rate.”
- Payment of working hours
“Wages should reward both basic and overtime hours, without exceeding legal overtime limits,” says Vaughan-Whitehead. “Currently, workers often want to work overtime in order to supplement their income. Brands should check suppliers’ policies and determine whether overtime pay respects legal rates.
“It’s in the factory’s interest to cut overtime but this shouldn’t be to the detriment of workers,” he continues. “Suppliers need to improve their production planning, but there is also a role for brands to play in achieving a better balance – by providing accurate forecasts and reducing last minute orders.”
- Pay systems
“Fairer, more efficient pay systems should be leveraged to improve wages,” says Vaughan-Whitehead. “Above all, pay and benefits should be used to reward workers for their skills, education and performance.”
Many factories operate pay systems based on discipline, giving bonuses for attendance. Even with a medical certificate, workers might lose this bonus for a whole month. Similarly, where workers work to a piece rate, as is typically the case in China, they often neglect to take breaks or holiday days.
“There is growing recognition, particularly in China, that a basic wage linked to skills with a bonus for performance is the way forward,” says Vaughan-Whitehead.
- Communication and social dialogue
“It’s important that factories communicate regularly and clearly with workers on pay issues through contracts, pay slips and frank discussions,” says Vaughan-Whitehead. “Developing ongoing social dialogues paves the way for individual and collective wage negotiations, and opens the door to progress in other areas, such as cutting overtime hours, introducing bonuses and increasing efficiency.”
In H&M’s role model factory in Cambodia, for example, wages increased through talks and meetings between representatives for workers and factory managers.
- Wage discrimination and wage disparity
“Ensuring equality within a pay system is vital to retaining workers’ motivation and preventing concerns over discrimination, and should be continuously monitored,” says Vaughan-Whitehead. “This means developing a system whereby workers at all levels receive proportionate wage increases based on consistent performance criteria, and paying all workers in the same way, regardless of their gender, age or nationality.”
- Real wages
A wage that progresses at least in line with price increases adds weight to workers’ wage negotiations.
“Overall, those factories where wages are not well adjusted to price increases lose ground and may fall behind on progress on living wages,” says Vaughan-Whitehead. “This is where ongoing social dialogue is crucial – structured, regular wage discussions lead to systematically fairer outcomes for workers on multiple aspects, including wage increases in line with inflation.”
10. Wage share
“Workers’ wages should grow to reflect their employers’ commercial success,” explains Vaughan-Whitehead. “Where workers contribute towards significant profit growth, factory owners should share at least some of the fruits with their employees, through bonuses linked to factory or team performance, or both.
“Performance-related bonuses provide strong incentives to workers,” he continues. “They also boost productivity and generate an enhanced sense of fairness among workers.”
11. Wage costs
“It’s essential to keep a firm eye on the relationship between a factory’s wage progression and labour costs,” says Vaughan-Whitehead. “Factory owners should keep wage costs steady in relation to other production costs, and avoid any dramatic reductions, as this would spell a lower investment in labour compared to other key overheads such as machines, raw materials and energy. It could simply lead to a negative redistribution of internal growth.
12. Work intensity, technology and up-skilling
Finally, it’s important to adjust wages in relation to work intensity. This would apply in the case of workers suddenly taking on a greater workload due to colleagues leaving. Similarly, if a worker develops new skills, the resulting productivity gain should translate into higher wages, helping to retain the worker.
“If workers are not compensated for becoming multi-skilled, there’s a risk that they’ll look for higher wages elsewhere, which leads to high turnover rates,” concludes Vaughan-Whitehead. “It’s smarter to encourage them to stay and harness their skills to help improve the factory’s performance.”
This article was originally posted on the Guardian Sustainable Business site.