Step 3: Verifying calculations of living wage gaps

Facilities complete a self-assessment of living wage gaps by entering wage, bonus and benefits data into the Salary Matrix (or equivalent tool), and comparing the results to living wage benchmarks. This data is then shared with auditors as a pre-requisite for auditing.

Auditors review records, including worker contracts, time records, payroll systems and pay stubs to compare against the wages, bonuses and benefits that are entered into the Salary Matrix. They interview facility managers and HR staff to gain additional context and answer any outstanding questions.

Auditors interview workers that represent each contract type and gender. This often includes year-round full-time and part-time workers, temporary and seasonal workers, piece-rate workers, migrant workers and workers under special contracts. It also includes informal workers that may not have written contracts, as well as workers that are hired through third-parties. When unions and/or worker committees are present, the representatives are also consulted and interviewed. Worker and worker representative interviews are essential for proper verification and risk management.

It is important for auditors to physically check that in-kind benefits meet specific quality requirement and are regularly available. Observation is also helpful for confirming the size of the facility, size of the workforce and job types at a facility.

Living wage projects, led by diverse groups of partners and stakeholders, are taking place all over the world. As focus on this important topic has continued to grow, so too has the need for uniformity around how living wage gaps are calculated and verified. Consistent and aligned living wage gap analysis and verification is crucial to the effectiveness and credibility of strategies to close gaps and achieve decent standards of living for workers.

For buyers or traders that have operations and supply chain partners all around the globe, this alignment is fundamental to building trust and the capacity to scale up. For businesses that are calculating the living wage gap among their own employees – be they at production level or further up the supply chain – uniformity will ensure clarity and reduce inefficiencies.

Unverified Salary Matrices serve as a self-assessment exercise. Ultimately, the desired scenario is that the Salary Matrices can be verified through audits by certification schemes that have living wage requirements in their standards. Currently, several programs are strengthening their certification standards and auditing procedures to include living wage related requirements. IDH recommends certification schemes and trained auditing bodies that can verify Salary Matrix data according to the agreed upon guidelines.

Salary Matrix Audits are performed on-site and involve a four-step process: 1. Documentation review; 2. Management interviews; 3. Worker and worker representative interviews; and 4. First-hand observations.

Pre-audit data checks, on the other hand, involve a process of reviewing Salary Matrix data and interviewing facility managers to help ensure that the data is complete and has been entered according to the Salary Matrix guidance. Reviewers will recommend adjustments to Salary Matrix data if warranted. Data validation is a useful step for preparing facilities ahead of audits, or to inform projects aimed at closing living wage gaps before the Salary Matrix has been verified. However, data checks are not audits and cannot verify the accuracy of living wage gaps.

Please click here to see IDH’s minimum recommendations for organizations performing Salary Matrix data checks. Please follow these links to access the Guidelines for Auditing.

Interest in the training? Please contact IDH’s auditor training partner, Impact Buying Academy, at: www.impactbuying.com/academy 

IDH strongly recommends working with sustainability schemes that have included living wages in their standards and auditing organizations that verify compliance to those standards. In the absence of sustainability scheme, IDH recommends auditing organizations that have been trained to verify wage data entered into the Salary Matrix, and the living wage gap calculations, as a stand-alone process. In some cases, independent trade unions and worker committees may also be able to verify living wage gaps.

IDH recommends selecting schemes and/or auditing organizations that:

1. Adhere to IDH Guidelines for Auditing Living Wage Gaps and deliver the associated base report for certificate holders.
2. Verify living wage gaps against benchmarks developed by methodologies recognized through the Roadmap on Living Wages’ recognition process.
3. Utilize the Salary Matrix  (or equivalent tool) to calculated living wage gaps across all operations, which is then verified.
4. Have trained auditors on the use of the Salary Matrix and the Guidelines for Auditing Living Wage Gaps.

Please click here for the list of auditing bodies that IDH encourages companies to use for verification, and here for consultants that can perform data checks.

You can find the list of trained auditors at Impact Buying Academy.

Important disclaimer: IDH is not responsible for the work that these sustainability schemes and auditing organizations perform. These organizations have their own quality control and assurance programs and any complaint about their work needs to be brought up to them directly.

The purpose of the audit is to verify the accuracy and validity of the data that users have entered into the Salary Matrix tool so as to arrive at a specific living wage gap calculation for their employees during the relevant year. The outcome of the process is a decision by the auditor on whether the information has been verified as ‘positive’ or negative. A ‘positive’ verification means that the living wage gap calculation is accurately represented, and that the data to arrive at the gap calculation has been confirmed with employees representing different contract types and genders which are relevant for jobs at that facility. A ‘negative’ verification means that at least one data point is inaccurate, which has led to the miscalculation of living wage gap and/or that the employees have not agreed with the data entered.