A living wage is not just another sustainability topic. It is a fundamental human right and, importantly, an enabling right. Without a living wage, workers cannot afford adequate housing, nutritious food, healthcare, or education for their children. In other words, without a living wage, many other human rights remain out of reach. No surprise that more and more companies are seeking advice on where to get started. This article will do just that: in 5 actionable steps, you will have a first draft of a living wage roadmap.

1. Pick a Supplier

The first step is not to roll out a living wage programme across your entire supply chain. It is to start focused and strategic.

Select a supplier where you have a long-term relationship and sufficient leverage. According to the OECD Due Diligence Guidance, leverage refers to the ability of a company to influence the practices of a business partner (OECD, OECD Due Diligence Guidance for Responsible Business Conduct, 2018, p. 40). You are far more likely to succeed if you work with a supplier who values your business and sees you as a stable, long-term partner.

Before launching the project, formalise expectations in a Memorandum of Understanding (MoU). This document should outline the shared objective, the roles and responsibilities of both parties, the timeline, and the monitoring process. Embedding this in writing aligns with the UNGP requirement that companies integrate their human rights commitments into operational policies and procedures (UNGP, Principle 16).

Many companies worry that wage increases may lead to worker unrest or unrealistic expectations. In practice, the opposite is often true. When workers experience transparent and structured wage improvements, commitment and productivity frequently increase. The ILO has consistently linked fair wages to improved industrial relations and reduced turnover.

One practical consideration is whether the supplier operates multiple locations in close proximity. If so, consider including all nearby sites from the beginning. This reduces internal inequality and prevents tensions between workers in different facilities.

→ Your next step: Identify one strategic supplier and assess your leverage. Document why this supplier is a suitable pilot partner.

2. Pick a Benchmark and Minimum Earning Standard (MSE)

A common misconception is that the legal minimum wage equals a living wage. In most countries, this is not the case. The legal minimum wage is set by governments and may not reflect the real cost of living.

A living wage benchmark is typically calculated based on the cost of a basic but decent standard of living. This includes a food basket sufficient for a typical family size, housing, healthcare, education, transportation, and a small margin for unforeseen events. Methodologies such as those used by the Global Living Wage Coalition rely on local cost-of-living data and family composition to calculate these benchmarks.

Once you select a benchmark, discuss it with worker representatives or trade unions. Meaningful stakeholder engagement is a core element of due diligence (UNGP Principle 18). Workers must understand how the benchmark is determined and what it means in practice.

⤅ Your next step: Select a credible living wage benchmark for your sourcing region and validate it through dialogue with worker representatives.

3. Calculate Your Leverage and the Payment Gap

After selecting a benchmark, the next step is to calculate the wage gap. The payment gap is the difference between the living wage benchmark and the lowest wage currently paid in the factory.

For example:
Living wage benchmark: €400 per month
Lowest wage paid: €300 per month
Payment gap: €100 per worker per month

Then calculate your leverage. This can be done in several ways:
• Based on your purchasing volume (e.g., kilograms of material)
• Based on the number of pieces produced
• Based on the number of labour hours required for your products

Calculating leverage helps determine your proportional financial responsibility. If your brand accounts for 40% of production capacity, your contribution to closing the wage gap may reasonably reflect that percentage. However, some brands chose to fill the gap for the full 100%.

↠ Your next step: Calculate the wage gap per worker and determine your proportional share based on production volume, pieces or labour hours.

4. Practical Implementation: Who Receives What and When?

Implementation details determine success. This is where you consider all the practicalities:

1. Determine who is included. Does the living wage bonus apply only to production workers, or also to supervisors and management? To cleaners and canteen staff? Clear criteria prevent internal tensions.
2. Agree on a payment frequency. Monthly payments are generally preferable because they align with wage cycles and reduce financial insecurity. Quarterly or annual bonuses may not provide the same stability. However, more frequent payments can be a higher administrative burden for your supplier.
3. Agree on the form of payment. In most cases, direct wage payments are preferable to in-kind benefits such as food packages. Cash respects workers’ autonomy and aligns with ILO standards on wage protection.
4. You must also decide whether the additional payment is embedded in the product price or structured as a separate bonus. Embedding it in the garment price is the most sustainable method, but may lead to future discussions about price escalation. A transparent bonus system paid directly to workers can sometimes provide a (temporary) alternative.
5. Distribution should be transparent. Worker representatives should be present during communication about payments. Consider involving a local trade union or third-party organisation to verify that payments are correctly transferred.

⤏ Your next step: Develop a written implementation plan that defines eligibility, payment method, frequency, verification, and communication procedures.

5. Monitor

Living wage implementation is not a one-off intervention. It requires continuous monitoring. Monitoring is not about policing suppliers; it is about assessing whether the intervention achieves its intended outcome.

Monitoring should combine quantitative and qualitative methods:

• Conduct annual worker surveys to understand how additional income is used and whether it improves living conditions.
• Hold regular conversations with factory management about operational impacts.
• Meet separately with worker representatives to ensure safe feedback channels.
• Organise stakeholder dialogues that bring management and worker representatives together.
• Review payslips periodically to verify payments.
• Consider third-party verification by a credible local organisation.
• Check with other brands that regularly buy from the factory and invite them to join the program to close the wage gap together.

➔ Your next step: Create a monitoring framework with clear indicators, responsible persons, and a yearly evaluation cycle.

Moving from Commitment to Action

Implementing a living wage is complex, but it is entirely achievable when approached step by step. Start small. Pilot with one supplier. Use credible benchmarks. Calculate your leverage. Design a transparent payment system. Monitor continuously.

Inspired by this article, but don’t know where to start? Set up a call, and I’d be happy to think things through with you.