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 also 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 compensation to our employees which is open, fair, consistent and explainable. 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.
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
What is a living wage?
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.
Since 2015, we have worked closely with the Fair Wage Network (FWN), an independent NGO which works to promote better wage practices. FWN has helped us develop our understanding of living wages and how many of our existing compensation arrangements deliver fair wages and how they fit into our overall Framework for Fair Compensation. FWN provides an objective external source of the living wage amount for each of the countries where we have employees.
We use these thresholds to assess whether the fixed compensation paid to all our full-time direct 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.
While we have identified that some of the national living wage benchmarks need further development, the data sources for specific countries have continuously improved. And more regional data is becoming available, enabling us to make our analysis more granular.
In 2017 we increased our ambition on the Framework’s living wage element by advancing our target for achieving it from 2020 to 2018. By the end of 2019, we were paying at or above a certified living wage in most places and are actively working through the small number of remaining issues which are in areas with complex pay arrangements.
The importance of benchmarks
Daniel Vaughan-Whitehead, Chair, Fair Wage Network.
“Following its commitment to pay a living wage to all its employees, Unilever has systematically monitored the wages of all its individual workers using the Fair Wage Network living wage benchmarks. And it’s succeeded in closing the living wage gap almost everywhere.
Unilever’s continuous search for new living wage thresholds has also stimulated us to search for more regional data (in all continents) and to carry out workers' expenditure surveys for additional benchmarks of workers' family needs at local level.
This process led to a further consolidation and extension of our living wage database to continue to support Unilever and other brands in their living wage payment monitoring.”
It's important to check that we’re living up to the principles we’ve set out in our Framework, so we’ve established clear audit mechanisms.
By auditing compliance against our Framework each year 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.
We’re proud to be an accredited Living Wage employer. According to research carried out by The Living Wage Foundation and Cardiff Business School, implementing a living wage has significant mutual benefits for employers and employees. These include:
- enhancing the organisation’s reputation
- improved relations between staff and managers, and
- increased commitment and motivation of Living Wage employees.
Promoting a living wage in the UK
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.
We’re also a founding member of Mercer’s Responsible Employer Forum, which aims to raise industry awareness of fair wage issues and share best practice on how multinational organisations can implement fairness in the workplace initiatives.
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 | 8MB) 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. But we’re determined to tackle this and are continuing to raise awareness of its importance with our suppliers and partners.
When it comes to our RSP, we’re focusing our conversations initially with our providers of temporary labour, where we’re continuing to implement our internal policy on the Sustainable Employment of Temporary Workers. This requires in-sourced third-party temporary workers on our manufacturing sites to be given comparable terms and conditions, including the payment of a living wage.
In 2018, audits of our RSP’s Fundamental Principle 6 (All workers are paid fair wages) showed 927 non-conformances. Around 35% related to the transparency of workers’ payment records and pay slips, and a further 25% related to wages not being fair and equal for all workers. Issues in relation to fair wages were predominantly found in the South Asia and South East Asia regions, as was the case in 2017.
For more detail of our approach, see our Human Rights Audit Supplier Audit Update 2019 (PDF | 4MB).
Better pay for tea sector workers
While our employees in our own tea plantations are paid above a living wage, often progress on compensation in our extended tea supply chain 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 have significant influence in some of our own supply chains and can use our policies to catalyse change.
One example of this is in Malawi, where 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. In 2019, 50,000 workers on tea plantations were earning 18% more than Malawi’s agricultural minimum daily wage. The partnership has developed a sustainable procurement model, which members of the partnership will look to replicate in other tea-sourcing locations.
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, our Human Rights Report 2017 (PDF | 10MB) or www.malawitea2020.com for more detail.
This work contributes to the following Sustainable Development Goals
See No discrimination in pay for details of how we’re progressing the third principle of our Fair Compensation Framework.