In our last post, we reviewed the necessity of equality of treatment, corresponding to section H of the report. In today’s post, we cover section I of The John Lewis Partnership‘s “Responsible Sourcing Supplier Workbook”, which covers wages.

Although governments set a minimum wage in most countries, which vary according to region, industry, and type of job, it is also the case that minimum wages are often not adequately enforced in many countries, especially developing ones. The most notable offenders often include:

• informal sectors
• suppliers who use subcontractors, homeworkers, and casual workers
• repeated short-term or probationary contract workers
• jobs that pay on a piece-rate basis
• countries that dictate a minimum wage that falls (well) below the cost of living

The last two offenders are often all too common. In most countries, legislation attempts to set the piece-rate at a level that is estimated to be sufficient to ensure the worker earns the equivalent of a minimum wage in a set number of hours, however, this is hard to calculate and notoriously hard to enforce and many workers in the plants of the worst offending suppliers and countries will have to work arduously long hours to reach a wage sufficient to meet their basic cost of living. Furthermore, in the worst of the worst, some employers will not be transparent about piece rates and wage requirements and the workers will have no understanding of how their wages are calculated relative to how they should be calculated.

Furthermore, in some countries where minimum wages fall below the cost of living, their wages will be further eroded through a system of, usually illegal, fines and deductions for “misbehavior, lateness, production errors, uniforms, supplies, and accommodation”, among others.

As with the other subjects tackled by the workbook, JLP points out some startling facts:

• Almost 10% of countries do not have a minimum wage legislation of any form
• A recent survey in China found that 32% of workers were being paid below the legal minimum wage
• An estimated 1.4 Billion Workers (half of the world’s working population and almost one quarter of the population) live on less than $2 / day
• An estimated 550 million people, or 20% of total world employment, live on less than $1 / day
• Even in the EU, minimum wage rates vary by a factor of more than 10: from 115 euros/month in Latvia to 1,500 euros/month in Luxembourg

And if this isn’t enough to force you to ensure you, your partners, and suppliers are paying fair wages, consider the following:

• workers who cannot make a living working regular hours in one job are forced into a cycle of poverty where they have to take other jobs during evenings and weekends – this makes them tired and worried, and we already know that tired, worried, and stressed workers are less productive, more error-prone, and take significantly more time off than those who are rested and content with their jobs
• compensation is the basis of worker loyalty; as numerous responsible sourcing studies and human resource retention studies have found
• as Corporate Social Responsibility becomes more common and countries take action, your risk of serious fines, levies, and workforce departure will dramatically increase if you don’t take action now to ensure you are in compliance and paying, and treating, your workers fairly and equitably

Specifically, make sure that:

• Wages meet national legal requirements and industry standards
• Wages meet basic needs plus some discretionary income;
  the Living Wage Summit proposes the following formula to calculate your minimum wage, and you should pay this if it exceeds the legal minimum wage:
  (avg household size * avg cost basic needs per person /
  avg number adult earners per household) * 1.1
• Wage information, clearly written and inclusive of the payment process and job requirements (hours, pieces, etc.) must be provided to workers before they agree to employment
• Wages shall be paid directly to the worker in cash, cheque, or transfer at the agreed times and in full
• Pay slips shall be made available
• Deductions are not utilized as a disciplinary measure – only deductions required by law are permissible (unless they are allowed, such as 401K withholdings, and agreed to by the worker)
• Wage records are kept for sufficient periods
• Overtime is paid at least at the legally required premium
• Wages are not held from workers as a deposit

In our next post, we’ll tackle the ninth major issue addressed by the workbook, regular employment. (You can access all of the posts in the series (to-date) by selecting the JLP category at any time.)