IDH’s Salary Matrix enables facilities to evaluate how workers’ remuneration compares to the relevant living wage benchmark. To measure workers’ remuneration, the tool evaluates workers’ wages earned during a standard work week, plus bonuses, plus the value of in-kind benefits.
Workers – The Salary Matrix measures remuneration for workers which can be listed individually or grouped into job categories. A job category consists of any group of employees who are paid the same base or piece-rate amount, in the same way, perform generally the same tasks and receive the same in-kind benefits. For example, if a group of workers all pick bananas and are paid $1 per box, they will be in the same job category. If some workers are paid $1 per box and others are paid $1.10 per box, they will be in two different job categories. Each Job Category can range in size from one singular worker up to 10% of the workforce as long as the previous requirements are met.
This 10% limit and stipulation for joining workers into a single job category is intended to limit the negative effects of averaging. When workers whose remuneration varies significantly are joined into a single job category, averaging these into a single figure may hide wages that are lower than the average. For that reason, we recommend including workers individually in the salary matrix —therefore using each worker as a job category—if the payroll system easily facilitates this.
Standard Work Week Wages – Wages consist of gross wages earned during standard working hours (excluding overtime). Standard working hours are defined by the country or sector specific to the facility and are the number of hours before which overtime pay is mandatory by law. In countries where the standard work week surpasses ILO’s standard work week of 48 hours, the 48-hour workweek applies. To be earning a Living Wage, workers must be earning sufficient remuneration during a standard work week. Thus, there is no inclusion of overtime pay. Therefore, in cases were workers work more than 48h a week, the tool won’t consider the exact take-home pay but will only consider the wages earned in 48h and use this prorated wage to compare to the living wage.
The standard work week wage is derived by first gathering or calculating the hourly payment (excluding overtime).To do such calculations, the hours worked per week and hours worked per day must be recorded. For employees who receive time-related payments such as per hour, day, week or month, the calculation is simply the total amount (excluding overtime) divided by the total hours worked (excluding overtime.) (Hours worked per month is equal to hours worked per week multiplied by 4.35)
To derive the hourly rate when workers are paid per unit of productivity, the average productivity throughout the day (excluding overtime) is multiplied by the rate that they are paid for such productivity. Then, similarly to above, the total value is divided by the number of hours worked (excluding overtime).
Then, each hourly rate is multiplied by the standard work and by 4.35 weeks to represent a monthly figure.
It is important to consider that many facilities do not keep strict records of this information. This significantly limits the ability to confidently measure wages against the living wage benchmark: if hours are not properly tracked, this adjustment cannot be done accurately. For instance, most banana farms (with or without certifications) do not track the actual hours that employees work each day.
Also, some employment schemes avoid paying overtime by requiring workers to produce a certain amount before receiving any pay. When these productivity amounts are developed with workers or worker-representatives, there are likely labor violations that must be resolved.
Bonuses – Monthly or annual bonuses that are not mandatory by law but that employees can expect in advance and are regularly provided are included in the calculation of remuneration in the Salary Matrix. This includes additional pay given for high productivity and bonuses that are normally provided during the year such as end-of-year, 13th or 14th month, tenure and holiday bonuses. Profit sharing is not included. Bonuses are divided by the number of months worked in order to be compatible with the monthly value of wages.
In-kind benefits – In-kind benefits are only considered as remuneration if they are accepted by workers as being valuable, directly reduce the cost of basic living for a worker, are provided during regular working hours, are regularly provided, are expected in advance, and are not mandatory by law. Such in-kind benefits include food, transportation, family housing, healthcare, children’s education, and childcare.
The Salary Matrix values in-kind benefits based on the total cost to the employer for providing the benefit to all workers who receive the benefit. If the workers must pay a subsidy for the benefit, this amount should be removed from the total. The remaining cost to the employer is divided by the number of workers in the job category. This calculation is done automatically in the “Job categories that receive in-kind benefits” section, rather than by the user.
Except in extreme situations, the total value of all in-kind benefits may equal no more than 30% of the total remuneration (wages, bonuses, and in-kind benefits). Similarly, individual benefits may be equal to no more than 10% of the total remuneration that an is paid (aside from housing, which may be equal to no more than 15% of remuneration). If workers must pay (even partially) for any in-kind benefit, the value of their contribution will be subtracted from the cost to the employer for providing this benefit. If the employer provides cash for any of the of the below-listed benefits directly to the worker, this cash will be considered in the bonus category.
Read more about which in-kind benefits can be included in the Salary Matrix.
Living Wage Benchmark – Remuneration can be compared against any living wage benchmarks published by an IDH-recognized living wage benchmark methodology. Some living wage benchmarks include reports that provide details beyond the living wage benchmark for a region. For example, an alternative living wage amount for when sector-typical bonuses or in-kind benefits are provided. Because the Salary Matrix V.2 already includes bonuses and in-kind benefits that workers receive, there is no need to use this adjusted benchmark.