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H&M Touts New Wage-Management System for Fairer Wages

H&M is implementing a new wage-management system that it claims will result in better work environments and fairer wages at 500 supplier factories worldwide.

“We want textile factories producing for H&M Group to have a positive and motivating workplace environment,” the Swedish retailer announced last week. “This not only benefits factory employees but also, to the same extent, management and buyers such as H&M group. It’s a win-win—and a foundation for fair wages.”

Among the facilities included in this shift is Ekpen Tekstil, a 200-employee garment factory in Denizli in western Turkey that has manufactured clothing for H&M for 16 years. After working with H&M’s local team for the past two years to improve its wage-management system, Ekpen Tekstil is now taking part in H&M’s program for “strengthened wage management systems and improved workplace dialogue,” H&M said, noting it recommends suppliers use the Fair Wage Method, a 12-step self-assessment tool, developed by Daniel Vaughan-Whitehead of the United Nations’ International Labour Organization, to help companies suss out the fairness of their wage practices.

Improving productivity

To create a “positive and motivating work environment,” according to H&M, wages must be commensurate with a person’s individual skills and experience. Previously, employees at a factory might receive the same basic wage, minus compensation for overtime, independent of their aptitude on the job.

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“With the new, improved wage management system, implemented by factories such as Ekpen Tekstil, wages are now based on different parameters which create a fairer wage setting,” H&M said. “This new way of working has also resulted in that many factories now offer their employees skill development, which in turn leads to a happier work environment and a possibility for motivated employees to earn a higher wage.”

Turkey aside, H&M is training suppliers in nine other supplier countries—Bangladesh, Cambodia, Indonesia, India, China, Myanmar, Vietnam, Ethiopia and Pakistan—on how parameters such as skills, experience and level of responsibility should factor in their wage-management decisions.

Factories participating in H&M’s program must also ensure that workers have “relevant knowledge” about their wages, including what it’s based on, how it relates to the national minimum wage and rules for overtime compensation. “This decreases the risk of misunderstandings and makes it possible for the employees to check if they receive the correct wage,” H&M said.

H&M also says it helps suppliers to create a “well-functioning dialogue” between employers and employees. More than 600,000 textile workers globally now have democratically elected worker representatives who advocate on their behalf, the retailer said. In the case of Ekpen Tekstil, meetings between management and worker representatives are held every other week, “allowing the workers to raise problems at the workplace as well as suggestions on improvements” such as the type of skills development the factory should offer, H&M said.

“I believe this system makes the workers aware of their contribution to the company through their work, but also of that they can have a career plan and develop through vocational training,” said Ahmet Yavuçehre, owner of Ekpen Tekstil. “It gives workers more opportunities and increase their trust in the company. It also contributes to a happier work environment as well as improved productivity.”

“Turn Around, H&M”

Not everyone is convinced, however. Worker rights groups have called out the fast-fashion chain for reneging on its promise to deliver a “fair living wage” to more than 850,000 workers across 750 factories by the end of 2018.

“H&M is trying to distract from the fact that it no longer plans to pay its workers a living wage, as it promised to do in 2013,” Sarah Newell, a campaigner at the Washington, D.C.-based International Labor Rights Forum (ILRF), told Sourcing Journal. “Nowhere in the description of the ‘wage management system’ does the company acknowledge that the core reason workers make poverty wages is the downward price pressure exerted by H&M.”

In May, ILRF, in partnership with the international Clean Clothes Campaign, launched “Turn Around, H&M,” a campaign to hold the retailer up to its original ambition of paying workers a living wage in a transparent, measurable way.

“All the management systems in the world can’t give workers the income they need to live on if the price H&M pays the factory is too low to allow for that,” Newell said. “H&M notes how important it is for workers to know how their wage is calculated, yet when it listed the factors that influence that, it neglected to include the brand’s contribution—perhaps the most significant factor in what a worker’s wage is.”

H&M, labor advocates argue, has the financial wherewithal to live up to its commitment. What it lacks so far, on the other hand, is political will.

“There’s a small window of time left for the company to keep its promise to the workers in its supply chain, and H&M consumers will be watching closely to make sure the company doesn’t back out of its pledge,” said Judy Gearhart, executive director of ILRF. “H&M made an ambitious pledge five years ago to be an industry leader on wages, and now it needs to commit the resources to make that happen.”