Wages in our supply chain

We believe every garment worker should earn a wage that provides a decent standard of living. This means earning enough during normal working hours to cover basic needs for themselves and their families, with some left over for additional expenses or savings, taking into account the country circumstances.

Like most fashion companies, we work with independent suppliers and manufacturers to produce our products. We do not own the factories where our products are made, and we do not directly pay garment workers’ wages. Despite not owning factories or having a full say in wage distribution, there are measures we can take to support improved wages at our suppliers’ factories.

We use factory data to guide our approach and work on wage-related topics in our supply chain. This means we work at factory level, within our own operations and at industry level. We also look at the state of industrial relations, which is an important foundation for how wage-related issues are discussed and addressed.

We set clear standards and expectations on wages for every supplier in our Code of Conduct, The H&M Group Sustainability Standards for Business Partners, which all suppliers must sign. As a minimum, wages must meet local legal requirements or collective bargaining agreements, whichever is higher. Overtime must be compensated at a premium rate, and all payments should be made correctly, in full and on time.

We regularly collect wage data and monitor performance at supplier factories. Our local teams carry out regular virtual checks and make in-person visits to factories to review wage-related practices and conditions. We also rely on third-party audits.

If we discover that our requirements are not met, we take action to define corrective actions with the supplier where needed. This may include cases where, for example, overtime premiums, bonuses or allowances are not consistently reflected in payroll records; discrepancies exist in working hours, leave days or wage payments; wages are not updated in line with skill levels; or certain wage components are delayed.

We are rarely the only buyer in a factory, and wages must reflect the local context. This means we cannot address this issue alone. We work with peers, experts, trade unions, multistakeholder initiatives such as ACT and UN Global Compact, and other stakeholders to support positive wage-related approaches across the garment industry.

We take a broad approach to supporting wage-related work across our supply chain. Our global wage strategy is implemented through country-specific activities adapted to local contexts and legislation.

The strategy consists of six parts, developed through research and dialogue with external partners. Each part reinforces the others, addressing risks at different levels and helping to address wage-related issues for workers.

Purchasing practices

Our purchasing practices — for example how we plan, place and pay for orders –—affect how suppliers run their factories and pay their workers.

We have strengthened our purchasing practices by adding clear procedures to our daily production work. These routines are based on supplier feedback, known risks and the need for continuous improvement. Orders we place include a breakdown of costs, with a dedicated section for labour costs.

This part of our strategy sits within our own operations. Our influence is high, but the impact on workers’ wages is indirect. We continue to review these practices and work with others to encourage better approaches across the industry.

Read more about our purchasing practices here.

Wage management systems

Wage management systems can link wages to skills, responsibilities and performance. They are intended to support payment processes based on working time and work performed. Effective wage management systems also give workers clear information about different wage components, how wages are set, and how performance is evaluated and how they can influence their own wages. For suppliers, wage management systems provide structure for wage-setting and payroll processes. They support business performance and help factories attract, retain and develop workers effectively.

We support better wage management systems through our factory programme. The programme provides training and tools on pay processes, wage-setting and structured wage grids, including how skills and responsibilities can be reflected in wage structures.

This is one of the areas where we have the most direct influence within our wage strategy. We work with suppliers to establish these systems in factories and provide training and tools to support implementation. In 2023, findings from an external study by University of Toronto were published in a peer-reviewed academic paper. The study assessed wage outcomes linked to wage management systems and workplace dialogue programmes and found that participating factories were associated with higher average wages than comparable factories not participating in the programmes.

Productivity 

Efficiency also plays a role. When factories work more efficiently, they can produce more with the same resources. We support suppliers to create long-term efficiency roadmaps, including seasonal and long-term volume planning. These measures can indirectly support factory planning, competitiveness and wage-related improvements.

Collective bargaining

Collective bargaining is the process through which employers and worker representatives, such as Trade Unions, negotiate working conditions, pay and other terms of employment. The outcome is a collective bargaining agreement (CBA), a legally binding contract outlining the agreed terms to set out fair and consistent workplace standards. This process depends on workers having the freedom and support to speak up.

Our factory programmes support fair discussions between workers and managers by strengthening worker-management dialogue and giving workers ways to make their voices heard. We are also part of ACT, a global initiative between brands and trade unions that promotes social dialogue, collective bargaining and freedom of association.

In 2024 we signed a binding agreement with the global union IndustriALL under which we commit to support and invest in skill development for factories that sign collective bargaining agreements providing workers with a higher base wage, more maternity leave and, for the first time in the country, paid paternity leave in Cambodia.

Social protection 

Social protection helps workers cope with life events such as illness, parenthood, unemployment or injury. It can help reduce financial hardship and lower the pressure to accept unsafe or underpaid jobs.

We track workers’ access to social insurance and work with factories to raise awareness of workers’ rights where needed. For example, in Bangladesh, we joined the ILO, the German development agency GIZ and six other brands to launch a pilot for an employment injury scheme in 2022. Backed by more than 90 brands and covering around four million workers in the export-oriented garment sector, the pilot helps provide compensation for work-related injuries, disabilities and deaths in line with international standards (ILO C.121). The Government of Bangladesh has now committed to transitioning the pilot into a permanent National Employment Injury Scheme by July 2027.

Statutory minimum wage

A statutory minimum wage is the lowest legal wage level, often set by governments to protect workers from very low pay. The rate is usually determined through a mix of economic analysis, expert input and, in some cases, consultation with unions and employer groups.

A minimum wage aims to ensure a basic standard of living and fair competition in the labour market. It should be revised regularly to keep up with increasing living costs and inflation. However, in some cases, the minimum wage is not enough to meet basic needs for workers.

Our local teams monitor wage records to make sure suppliers pay at least the minimum wage. We also work with governments and other stakeholders to call for adequate minimum wages and inclusive and effective wage setting mechanisms. We support harmonised global principles and joint action, while also working directly with governments and social partners, such as trade unions and employer associations, at national level. In 2024, the International Labour Organization (ILO) reached an agreement on the issue of living wages, setting out principles that can support wage-setting processes involving governments, employers and workers’ representatives. This provides an important global reference point for discussions on adequate wages and wage-setting mechanisms.

Industrial Relations

We see strong industrial relations as a key part of our wage strategy. Wages should be set through formal processes, such as statutory minimum wage negotiations or collective bargaining agreements. Our approach follows ILO principles and aligns with our partnership with the global union IndustriALL. Strong industrial relations can provide formal channels for workers, employers and their representatives to discuss wages and working conditions. This can support more structured wage-setting processes in supplier factories.

We are committed to strengthening our work on wages in our supply chain. Findings from different research collaborations help us develop a targeted approach to wage-related challenges in our supply chain factories.

Research on wage outcomes

In 2020, independent researchers Greg Distelhorst and Jee-Eun Shin from the University of Toronto assessed the results of our work so far. They conducted a comparative study using available wage data from 2013 to 2019 to assess the effectiveness of our activities.

Their research showed that:

• Factories taking part in our wage management systems and workplace dialogue programmes paid, on average, 2.8 percent higher wages than those not participating in the programmes.
• When these programmes were combined with wage grids and clear job classifications as part of wage management systems, wages were on average around 5 percent higher.
• Factories with trade unions paid on average around 5.5 percent more than those without.
• When factories became 10 percent more efficient, they raised wages by 4.6 percent on average.

The results of their research were published in a peer-reviewed academic paper in 2023.

Research on gender pay gaps

Since 2021, we have worked with wage expert Professor Raymond Robertson from Texas A&M University to map and understand the gender pay gap in our supply chain. Together, we created a wage survey that collected data for over two years on the wage and skill levels of workers at all our tier 1 suppliers, covering more than 1,300 production units.

Initial findings indicate a gender pay gap in most production countries covered by the survey. The pay gap varies across factories and countries and seems to grow as workers move up the pay scale. It appears to be driven by the skill gap between genders, as men tend to have been able to acquire more technical skills and therefore benefit from higher wages. Men are also generally promoted at higher rates and get higher raises when promoted. Wage management system programmes can help reduce wage gaps at the top of the wage scale.

Research on women’s progression to higher-paid roles

In 2025, together with Texas A&M University, we surveyed more than 6,000 sewing machine operators across Bangladesh, Pakistan and Northern and Southern India, to examine gender differences in aspirations, expectations and opportunities for promotion to higher wage grades or supervisory roles.

The survey found that gaps in how women’s skills are perceived, along with inflated job requirements, often hold women back from advancing in factories. This shows the need for targeted training programmes that strengthen both actual and perceived supervisory skills.