FAIR WAGE PILOT
In order for workers to meet their basic needs, such as access to nutritious food, schooling for theirchildren and health care, sufficient wages are crucial. Wages in many developing countries often do notallow for workers to meet these needs because they do not earn a living wage.
The Universal Declaration of Human Rights (1948) recognises the worker’s right to “a just and favourable
remuneration ensuring for him/her and his/her family an existence worthy of human dignity”. The ILO
highlights three key conventions that are related to ensuring proper wages:● Protection of Wages Convention, 1949 (No. 95);
● Minimum Wage Fixing Convention, 1970 (No. 131);● Equal Remuneration Convention, 1951 (No. 100).
These ILO conventions and declarations have been ratified by most governments, though some major
textile producing countries have not included them in national legislation. Where they have been included,government enforcement is weak. Of the three conventions mentioned above, the main textile producing
countries China, Bangladesh and India have only ratified the Equal Remuneration Convention. In reality
we see that in those countries where minimum wage levels are set, these are often insufficient to live adignified life. At the same time, the Ruggie framework clearly states that governments’ failure to protect
human rights does not relieve businesses of their responsibility to respect these rights.
In this light, more and more fashion brands committed to sustainability are looking for practical, effectivemeans of improving wages in their supply chains. Social audits have been shown to have serious
limitations when it comes to uncovering issues around wages and overtime, thus leaving brands
vulnerable. An approach that is too compliance-driven cannot solve a complex issues such as livingwage.

Need for a new approach
To date, a lot of attention has been given to the level of the living wage, or the actual salary paid. In orderto bridge the gap between current wage levels and a fair or living wage, a focus on implementation andstep-by-step improvements was needed, according to all participants of this project. A fair wage is morethan just a number. It’s about various interlinked dimensions, for example, regular and formal payment,
periodic review of the wage against costs of living, and wage levels that do not generate excessive
working hours.
A Solidaridad study (year 2015/2016) among workers in five sourcing regions in China showed that agood wage goes beyond the salary alone. Workers indicate the salary is an important factor, but broader
employment conditions and opportunities for skills development also rank very highly. Workers’ own
concerns and priorities need to be the central starting point of any proposed solution.
The Fair Wage Methodology, as developed by Daniel Vaughan-Whitehead and as implemented by theFair Wage Network, sets a comprehensive framework of 12 wage dimensions to be integrated into HR
management processes. It attaches great importance to dialogue between management and workers toestablish solid wage policies and practices.
The 12 dimensions are:
1) Payment of wages
2) Living wage3) Minimum wage4) Prevailing wage5) Payment of working time6) Pay systems7) Communication and social dialogue8) Wage discrimination/ disparity

9) Real wages10) Wage share11) Wage costs12) Wages along work intensity, upskilling, technology

ObjectiveSolidaridad and the Fair Wage Network collaborated with G-Star and Lindex in a pilot project toimplement Fair Wage Methodology as a tool to improve wages in Chinese textile factories, while
simultaneously improving the brand’s impact of purchasing practices on factory wage issues.

Approach
In this pilot project, Solidaridad and the Fair Wage Network joined forces with G-Star and Lindex and twoof their RMG factories in China. In these factories, the Fair Wage Methodology was implemented andtested. The factories were provided with guidance and training on how to integrate key dimensions intotheir HR systems by the Fair Wage Network. At the buyers’ end, Solidaridad analysed the purchasing
practices and their link to wages in the supply chain, and provided guidance on how to improve them.

Project activities
A) Analysis of the purchasing practices at brands levelB) Implementation of the Fair Wage Methodology at factory levelC) Analysis of changes at factory levelD) Next steps
A) Analysis of the purchasing practices at G-Star and Lindex
Solidaridad executed a thorough analysis of the purchasing practices of both G-Star and Lindex. The1
Ethical Trading Initiative Norway (2014) developed an approach that enables an analysis of direct andindirect links between purchasing practices and working conditions in global supply chains. The critical
path that is part of this approach was used to look into the purchasing practices of the brands.
Interviews were conducted with the key staff (COO, Production Manager, Senior Product Developer, Manager
Product Development China, CR director, Sustainable Supply Chain Manager, CR Supply Chain Manager China,
Sourcing Director, Sourcing and costing manager, Data & pricing & purchasing manager and Quality AssuranceManager) in both Europe and China. Internal documents were also reviewed (codes of conduct, generalagreements etc.) After the analysis, a workshop was organized at the brand office to discuss the results
and to make an action plan to improve the purchasing practices.
The analysis showed that brands can take several actions that have positive effects on wages on working
conditions in factories:● Creation of a vendor capacity planning;● A production planning that takes into account the actual working days and indicating which styles
have priority;● Booking yearly capacity at a factory;● Open cost calculation to check that supplier’s price quotation covers decent working conditions;● Sharing forecasts to allow the supplier to plan for production;● Good supplier relationships (open and transparent, true partnership);● Delivery of products in multiple drops;● No order placement or changes after the final order date.
These are clearly important aspects that can help improving wages, working hours and other working
conditions at supplier level.
B) Implementation of the Fair Wage methodology at factory level
In the factories, we implemented and tested the Fair Wage Methodology and provided factories withguidance and training on how to integrate these key dimensions into their HR systems. Aim of this
1IEH (2014) Supplies Speak up: a practical guide. Accessed on 10-08-2015.

approach is to professionalize HR and pay systems in the factory, improve dialogue and increase worker
satisfaction.
The Fair Wage Methodology uses the following steps
1. Baseline assessment and in-house support (through worker and management surveys andqualitative case studies). The purpose of the baseline assessment is to understand the existing wage
system, create a wage risk matrix and identify priority areas for intervention. In-house expert
support/training was offered, including meetings with both management and workers to brainstorm on
possible improvements to be implemented. An individual report with a list of possible improving
measures was developed, which served as a reference document for each factory in elaborating its
action plan.
2. Remediation plan. After the baseline assessment a remediation plan was created and all parties
committed to this plan. Training workshops were organized for management and worker
representatives on the different dimensions (pay systems, management-worker dialogue), workersatisfaction), and off-site tailormade support was offered to help factories implementing theirimprovement plan.
3. Final evaluation. The final evaluation was done via worker and management interviews to determine
the results of improvement measures and potential for further actions.
C) Analysis of changes at factory level- The final Fair Wage Analyses showed that factories were paying their workers far above minimum
wage. Furthermore, factories were giving incentives to workers. Proper functioning wage grids wereneeded. Therefore, HR departments received important support from the Fair Wage Network but
would have needed even more than provided and could not fully implement the wage grid.
- Factories learned to conduct the surveys on living wage/fair wage, so that they could monitor theirown wage level compared to the market level and also identify areas where workers have difficulties
to cover their needs.
- Factories has enhanced the social dialogue notably with workers by improving their communication
skills about minimum wage, how to calculate the wages through different training sessions and theinformation board.
- Some significant results were achieved between the initial and final assessment. Factories have
improved their performance in a number of areas such as the payment of wages, payment ofovertime hours, compliance to the payment and communication on minimum wage, on the prevailingwages (with some progress compared to market rates), communication on wage issues, social
dialogue on wages with workers’ representatives.
- More progress is expected in the following months on wage adjustments (notably according to priceincreases and performance) and also on the living wage front (results from final assessment
compared to initial assessment were encouraging but not sufficient). Although factories started toelaborate a wage grid, they should continue. Improvements in pay systems are also required, notably
to introduce some bonus to performance and progressively reduce the piece rate component in total
pay. Social dialogue is also an area to be developed. While significant progress has been done on
workers’ representation (workers knowing better their representatives who are selected by workers),
such workers’ representatives are not yet sufficiently involved in discussions and possibly
negotiations on wage issues. A follow-up in the above areas will be required to make sure that initialsteps will be confirmed and lead to positive results on wages and human resources policies.
- Pioneering field work has as limitation that there is no manual or guideline to support the factories
during the implementation of the Fair Wage Methodology or best practices yet.
- Time span of the project was one year. However, we have not been able to complete the full
implementation of the methodology on the 12 Fair Wage dimensions. There has been a final
assessment after one year but not with the full implementation of the wage grid as agreed upon in theremediation plan. Implementation time of one year has proven to be too short for some dimensions
like pay systems to see real progress. Experience from other brands shows that an implementation
period of three years for the Fair Wage dimensions that require more structural changes like pay
systems or building social dialogue might be more realistic.
- Process: there were quite a few hiccups that influenced the success of the project, but we hadcommitted partners both in Asia and Europe.

-Scaling up: before scaling up, it would be advisable to continue to fully reform elements in all Fair
Wage dimensions, especially in those identified above, to make sure that they also lead to positive
results in terms of both wage and sustainability. We first want to successfully finish the pilots, or atleast, gain enough knowledge that we know what to improve.

D) Next steps
Based on the findings of the pilot project, G-Star, Lindex and Solidaridad have identified some next steps:- At the moment, we will not continue or expand our collaboration with the Fair Wage Network, norscale up the process to more suppliers before pilots fully produce the expected improvements andresults for the pilot suppliers. Scaling up for small(er) companies with little leverage in the factories
has proven to be too challenging.
- Explore collaboration with other organizations that are more advanced in implementing the Fair Wage
Methodology to learn from each other and to collectively develop a scalable approach.
- Broaden the scope towards social dialogue and involve workers better in the wage negotiations.