A skilled, motivated and engaged workforce is essential to achieving our growth ambition. Fair compensation is an important factor in achieving this.
Our Framework for Fair Compensation
If economic growth is to be inclusive and sustainable, workers need to receive fair compensation. Not only is this core to achieving the Sustainable Development Goals, it’s vital to our ongoing success as a responsible, sustainable business.
As part of our Unilever Sustainable Living Plan (USLP), in 2014 we set ourselves the target of creating a structured way to define and assess how the elements of our compensation packages deliver fair compensation for our employees. The result was our Framework for Fair Compensation, which we finalised in 2015 and rolled out across our business in 2016. See Targets & performance.
The principles of our Framework for Fair Compensation
Five principles underpin our Framework for Fair Compensation (PDF | 449KB):
- Fair and liveable compensation
- Market-based compensation
- No discrimination in compensation
- Performance-focused compensation providing alignment to our business
- Open and explainable compensation.
We aim to achieve full compliance with these principles, by all our businesses across the world, by 2020.
For each principle, our Framework outlines how we should deliver fair compensation by listing a number of standards. We require each country business to report its status against the standards of our Framework each year, and where appropriate, country reports must include a remediation plan to rectify any issues of concern as soon as possible. This is how we make sure that if any country is falling short of our principles, we can take swift action to put a plan in place to rectify the situation.
A Living Wage for all employees
At the heart of our Framework is the principle of a 'living wage' – that is, one that gives our employees enough to "provide for their family's basic needs, for food, housing, education and healthcare as well as some discretionary income."
While what we pay employees in any country is generally based on that country's ‘market’ for similar jobs (that is, defined by objective analysis of independent pay market surveys), applying the living wage principle means that our lowest-paid employees should always receive pay that is fair and liveable. We audit compliance against this principle to ensure it is upheld.
We have worked closely with the Fair Wage Network (FWN), an independent NGO which works to promote better wage practices. FWN have helped us develop our understanding of living wages, how many of our existing compensation arrangements deliver fair wages and how they fit in to our overall Framework for Fair Compensation. Since 2015, FWN have provided us with access to their global Living Wage database. This gives us an objective external source of the living wage amount for each of the countries (109) where we have employees.
While some of the national benchmarks need further development, we’re using this database to assess whether the current fixed compensation paid to all our lowest pay grade full-time employees (including factory and non-factory employees) in each country is meeting our living wage standard. This standard means employees receive, at the very minimum, fixed and guaranteed levels of earnings that are above their country’s living wage benchmark.
Checking our principles are upheld
By auditing for compliance against our Framework we can check that:
- fixed compensation is achievable without the need to work an excessive number of hours
- our country payroll processes deliver employees’ full pay correctly and on time, every time
- we have no issues of unequal pay between genders.
In 2017 our checks revealed that 7,252 employees from 37 countries were receiving less than the living wage for their country, down from 9,987 across 34 countries in 2016. This is against an employee population of 161,000 in 2017. Remediation plans were put in place to increase pay for these employees so that they gain sufficient guaranteed fixed earnings to be above the living wage. See our Human Rights Report 2017 (PDF | 10MB) for more detail.
Promoting a Living Wage in the UK
We are a founding member of Mercer’s Responsible Employer Forum, which aims to raise industry awareness on fair wage issues and share best practice on how multinational organisations can implement fairness in the workplace initiatives.
In the UK, Unilever became an accredited Living Wage employer in 2015. This is awarded by the Living Wage Foundation, a national charity that promotes the Living Wage. We believe that using this accreditation will help to raise the profile of the issue.
Putting fair compensation in place in Vietnam
Working with others has helped shape our Framework. For example, Oxfam’s 2013 report, Labour Rights in Unilever’s Supply Chain (PDF | 2MB), highlighted a need to improve the compensation arrangements for the lowest level workers at our Vietnam factory. This was more than just the actual pay amounts and included ensuring the workers understood how their pay was set, what it covered, what benefits were available and clarifying whether they were direct employees or contractors.
The publication coincided with the launch of our global HR for Factories project to introduce consistent practices to how our factory employees are developed and importantly, how they are rewarded. This provided our Vietnamese leadership team with a template to identify how to make the necessary changes needed to address the issues highlighted by Oxfam.
Oxfam’s follow-up report was released in 2016. Labour Rights in Vietnam – Unilever’s Progress and Systemic Challenges acknowledges the significant improvements made. See Working with others on Human Rights for more.
Sharing our principles with suppliers & partners
Through our Responsible Sourcing Policy (PDF | 5MB) (RSP), we also aim to extend the concepts of the Framework to the many organisations that supply our business with materials, services or contingent labour. Similarly, our Responsible Business Partner Policy (PDF | 3MB) sets out the employment terms we expect our network of distributors and sales agents to adopt.
Ensuring that fair wages are paid throughout our value chain remains a challenge, particularly as the cost of living rises. We are continuing to raise awareness of this issue with our suppliers and partners. When it comes to our RSP, we are focusing our conversations initially with our providers of temporary labour.
Over 2015–2016, audits of our RSP’s fundamental principle 6 (“All workers are paid fair wages”) showed 2,039 non-conformances. The majority of these were attributed to four factors: the lack of fair and equal wages for all workers; local legal requirements not being respected; payments to workers not being transparent; and records not maintained consistently.
A good example of the improvement audits can trigger is provided by one of our Turkish suppliers. The audit revealed inconsistencies between time records and production records, which meant normal and overtime working hours and payments could not be verified. To fix this, the supplier organised extra training for staff on correct procedures, ensuring better management oversight and control. This non-conformance was resolved and verified in a follow-up audit which confirmed that back-pay had been paid to the workers.
For more detail of our approach, see our Human Rights Report 2017 (PDF | 10MB).
Better pay for tea sector workers
While we have significant influence in some of our own supply chains and can use our policies to catalyse change, often progress in compensation can only be made through collaboration with others – collaboration that seeks to improve wages while ensuring the market remains competitive and respects anti-trust rules.
We are members of the Malawi Tea 2020 Coalition, which is aiming to revitalise the country’s tea sector. In its first year, the Coalition helped to bring about a 20% rise in tea sector wages following the first-ever collective bargaining agreement between the tea industry and the Plantation Union.
While there is much more to do, and Malawi’s inflation rate threatens to erode pay increases in real terms, this is a significant step forward in a country where average wages in the rural economy are significantly below living wage levels. See our sustainable tea section and our Human Rights Report 2017 (PDF | 10MB) for more detail.
See No discrimination in pay for details of how we’re progressing the third principle of our Fair Compensation Framework.