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H&M's fair living wage strategy pays off

Study finds it raises productivity

Refayet Ullah Mirdha
Proper grading of the skilled workers ensures higher take-home salaries and inspires the workforce to improve productivity in garment factories, according to a recent study of Swedish retail giant H&M.
H&M introduced an improved Wage Management System (WMS) in 2013 in factories where it sources apparel items from and it implemented the "fair wage method” in 20 garmentunits in Bangladesh.
Around 930,000 gar-
ment workers work in factories that are either implementing improved WMS or have democratically elected worker representation -- or, as in most cases, both, H&M said in a statement
"This is an important achievement that lays the foundation for structural changes by making sure workers' voices are better heard."
"Over the past five years, we've analysed data from hundreds of factories in some of our most important sourcing markets to gain further understanding of the impacts that have, and can be, created at a factory level," it said.
The WMS helped factories become fairer and more transparent in the way they work with individual wage setting, H&M said.
"Individual wage setting allows the recognition and reward of, for instance, skill, seniority and performance. Combined, these components make up the take-home wage for garment workers." readThe take-home salary for the workers under WMS is a little bit higher than the other workers. For instance, in 2017 the difference ranged from 8 percent higher take-home wages in Bangladesh to 29 percent in Indonesia.
In 2018, the difference ranged from 2 percent in Turkey to 11 percent in Indonesia. Increases are also not driven by a difference in overtime hours, H&M said.
Mohammadi Group is one of the leading garment exporters of Bangladesh where the H&M introduced the WMS.
"The WMS really worked well in selection of skilled workers at the factory level. The productivity of the skilled workers is higher than the other workers.
The WMS also helped assess the performances of the skilled workers," said Rubana Huq, managing director of Mohammadi Group.
"In the WMS, the salary of the skilled workers is usually higher than the other workers. So this is a good practice both for the workers and also for the retailers and manufacturers," said Nazma Akter, president of Sammilito Garment Sramik Federation, a workers' rights platform.
"We have supported our suppliers in
establishing transparent wage grids in their factories, which show workers how they are rewarded for different skills, tasks, education and seniority, ” H&M said.
"This allows the workers to better understand what it takes to influence their wage by improving their skill and performance. But it also strengthens human recourses management systems and leads to an increase in motivation, retention and productivity."
This process led to the development of some key goals for 2018 for H&M supplying companies in different countries.
Some 67 percent of the H&M product volume is made in factories that are implementing improved WMS although the target was 50 percent. This covers 500 factories and about 635,000 workers.
Some 73 percent of the H&M's product volume is made in factories that have democratically-elected worker representatives in place although the target was 50 percent. This covers 594 factories and about 840,000 workers.
"We reached this goal ahead of schedule. 100 percent of our tier 1 supplier factories in Bangladesh had democratically-elected worker representation by December 2017,” according to the statement.