Assessing Adequate Wages S1 & S2

Under ESRS S1 and S2, companies need to include Adequate Wages in their Double Materiality Assessment.

DP 69 in DR S1-10 requires companies to disclose whether all own workforce employees are paid an adequate wage, in line with applicable benchmarks.

If so, stating this is sufficient and no further information is needed. (Information regarding non-employees in own workforce is optional.)

If not, the company needs to disclose the countries where employees earn below the applicable adequate wage benchmark and the percentage of employees for each of these countries.

ESRS defines an Adequate wage as follows:

“A wage that provides for the satisfaction of the needs of the worker and his / her family in the light of national economic and social conditions” (based on a full-time employment relationship).

The lowest wage shall be considered separately for each country in which the company operates, except outside the EEA when the adequate wage is defined at a sub national level.

The adequate wage benchmark used for comparison with the lowest wage shall not be lower than:

In the EEA

The minimum wage set in accordance with Directive (EU) 2022/2041 of the European Parliament and of the Council on adequate minimum wages in the EU.

It references both indicative reference values commonly used at international level such as 60 % of the gross median wage and 50 % of the gross average wage, and/or indicative reference values used at national level.

Data can be obtained from the European Labour Force Survey.

Outside of the EEA (b.i)

The wage level established in any existing international, national or sub-national legislation, official norms or collective agreements, based on an assessment of a wage level needed for a decent standard of living.

Computing living wage estimates is data-intensive, requiring information on needs and prices that is timely and context-specific.

There are a number of international initiatives, such as the Fair Wage Network, the Global Living Wage Coalition and the WageIndicator Foundation, specialized in this.

Paying legal minimum wages, such as the SMIC in France, is not always a guarantee.

As an example, French tire-maker Michelin has recently established its own global living wage.

“The minimum wage in France is not sufficient in Michelin’s eyes to meet what we consider to be a decent wage,” Florent Ménégaux, president of the Michelin group, told Le Figaro.

Read more about Michelin here >>

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Posted in CSRD, ESRS.