Using due diligence in labour costing to meet wage compliance

Date: 20/02/2019

In FWF’s newest discussion paper, we examine the application of human rights due diligence in the area of wages. You can read the full report here.

In order for wage compliance to be achieved and for wages to improve, both a greater transparency in cost price negotiations between apparel buyers and their suppliers, and a precise determination of the labour component must take place.

In the area of labour costing, four main areas require discussion:

  • the mandatory wage elements payable to a worker including employer wage related on-costs
  • the total of direct and indirect labour costs divided by the available capacity minutes
  • the standard allowed minutes agreed for the apparel item in question
  • and a factory’s efficiency.

Transparent garment costing will not succeed without know-how and an understanding of the rationale behind this. Both buyers and suppliers will need to invest time and effort into revisiting their respective costing procedures. Read more about this in FWF’s report ‘Using due diligence in labour minute costing to meet wage compliance’.

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