The question of calculating and paying fair wages is complex but one that the apparel industry needs to tackle. The adidas Group has been looking at the issue since 2002 and we continue to explore possible solutions that the whole industry might adopt.
During 2011 and 2012, 25 adidas Group suppliers in eight countries completed Fair Wage self-assessment questionnaires and four factories received full Fair Wage assessments, where workers are surveyed in addition to the management self-assessments. The countries were Philippines, Indonesia, Mexico, Brazil, Vietnam, China, El Salvador and Thailand. The assessments aim to identify what management practices are required for a Fair Wage.
The Fair Wage model proposes a more holistic consideration of the wage issue than simply paying the minimum wage or a living wage. The assessments do evaluate compliance with legal wage provisions, wage levels and adjustments, but they also look at wider wage issues. These include the quality of pay systems, their fairness and efficiency, as well as the strength of communication and dialogue.
The findings from these first pilot assessments are mixed. The suppliers were found to be strongest in practices related to making regular payments, paying the prevailing wage, and communication and dialogue. There is rather low wage disparity and discrimination, and no dramatic reduction of wage costs in total production costs was reported.
Issues where the suppliers were less fair were the underpayment of working hours, wage systems not being linked to skill sets or to the economic performance of the company, a high frequency of 'piece rate' pay, and rather weak pay systems performance.
… the Fair Wage methodology focuses on processes along a series of benchmarks rather than on absolute numbers; it also tries to incorporate both the social (workers) and economic (employers) aspects. Daniel Vaughan-Whitehead, specialist for wage policies at the International Labour Organization and co-chair of the Fair Wage Network
Source: University of Washington Fair Wages Workshop PDF, p.4.
Once the Fair Wage assessment reports are finalised, the suppliers will engage with representatives of the Fair Labor Association (FLA) and the Fair Wage organisation on recommended actions and remedial processes.
The Fair Wage assessments have helped us improve the way we monitor compensation and pay issues. We have integrated the Fair Wage idea into our supplier training on Human Resources Management Systems (HRMS). This has helped to clarify where gaps existed in monitoring and measuring wage performance and what sustainable remediation practices might look like. The Fair Wage model complements our initiatives promoting manufacturing excellence and responsible buying practices.
In 2013, we will commission three qualitative case studies, more worker surveys in the factories where management has already completed self-assessments, and a new set of management self-assessments and full assessments. The research will also examine the 2012 findings in more detail for best practice in the areas of minimum wage and overtime payment, living wage and pay systems. The work will remain within the eight original target countries.
Read more about the topic of Fair Wages on the Fair Wages Network website at fair-wage.com.
The adidas Group influenced FFC membership and membership consideration by several brands and multi-stakeholder initiatives.
Together with two other brands, the adidas Group completed the development of the SCI core question set. Other companies are being recruited to adopt this audit tool, significantly improving industry-wide collaboration.
25 factories in eight countries completed the assessment.
The registration and application for self-assessment were completed for all five reference and benchmarking tools.