UTZ GUIDANCE DOCUMENTLIVING WAGE (Version 1.0 | August 2016)Guidance for implementation of the living wage requirements in the UTZ Core Code of Conduct for individual and multi-site certification (versions 1.1 & 1.0).

This guidance document is part of a set of documents designed to assist with implementation of specific topics within the UTZ core Code of Conduct.

This document is intended for use by farm managers and technical assistants.

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UTZ AND THE LIVING WAGEA living wage is the remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent Standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs including provision for unexpected events.

WHAT IS DECENT HOUSING?Decent housing is one of the main elements of a decent living. Therefore, both the value and quality of housing has to be taken into account when assessing total remuneration. In the UTZ program, all workers living on site should be provided with clean and safe living quarters.

The UTZ definition of decent housing (I.C.107) includes:

• Adequate hygiene and sanitation including safe drinking water, toilets, clean cooking and eating areas and ventilation,

• Protection against weather conditions such as cold, damp, heat, rain and wind

• Safe storage of personal items including living quarters that can be locked

• Access to electricity where possible

• Separate quarters for families or for men and women where accommodation is provided for individual workers

The UTZ Core Code of Conduct for individual and multi-site certification includes criteria on the living wage (I.C.83). It requires that employers take steps to improve worker wages in line with local living wage levels. This includes: • Comparing worker remuneration, including cash and in-kind wages,

with living wage estimates provided by UTZ in the List of Living Wage Benchmarks (See Annex 3).

• Where wages are below living wage, steps should be taken to increase wages towards living wage levels over time.

• If no process for wage bargaining exists, one should be introduced and a wage improvement plan developed with yearly milestones.

The aim of this document is to • explain the UTZ approach to the living wage • help you to assess wage levels against legal and living wage levels • take action to improve wages towards living wage levels

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This guidance applies to versions 1.1 and 1.0. Version 1.1 is an improved version of version 1.0. As of the 1st of July 2015, groups can be audited against the Core Code of Conduct version 1.0 or 1.1. As of the 1st of January 2016, groups can only be audited against the Core Code of Conduct version 1.1

BOX 2: what does the Code say (version 1.1)

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Why does UTZ require action on the living wage?Agricultural workers are among the lowest paid workers, with average wages lower than those in urban areasi. Ninety percent of countries have set a legal minimum wage but many workers still get paid less than this . In many cases minimum wages are set too low and do not provide a decent standard of living for workers and their families. UTZ aims to encourage improvements in worker wages towards a living wage for all agricultural workers.

To improve workers’ wages, UTZ is also working with five other sustainability standards and the ISEAL Alliance to develop a common approach to measuring and implementing the living wageii.

BOX 3: LIVING WAGE CALCULATIONS

To help producers improve worker wages, UTZ is providing guidance on what a living wage should be in each region. To develop these calculations, we are using an established method known as the Anker methodology, also used by organisations such as Fair Trade International, Rainforest Alliance, Sustainable Agriculture Network, Social Accountability International, GoodWeave and Forest Stewardship Council.

The living wage is calculated based on the estimated cost of living in a particular place. The methodology requires detailed documentation and analysis to ensure that the estimate is solid and credible. The price of a low cost nutritious diet is taken into account as well as basic but decent housing costs, and education, health care and transport costs to make sure that workers are paid enough to afford these.

Setting the living wage levels involves consultation and participation of local stakeholders including trade unions and employer organizations. The goal is to obtain a credible living wage estimate that stakeholders view as legitimate.

The evaluation of wage levels by certification bodies must take into account not only gross cash payments but also deductions from pay, overtime pay, bonuses, and in-kind benefits.

A global database of living wage estimates, is being developed by UTZ. Newly calculated estimates will be introduced over time. All countries where UTZ operates will be covered. The current list of LW estimates can be found in Annex 3.

i ILO 2008 report, Rural Employment for Poverty Reductionii For more information: https://utzcertified.org/images/stories/site/pdf/downloads/joint_statement_on_living_wage_20131124.pdf

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WHAT TO HAVE IN PLACE?Establish a system for measuring and improving wages.

To assess if you meet the Living Wage requirements set by UTZ, you could carry out the following checks:

STEP 1: ASSESS WAGE LEVELS Review current worker wages focusing on the lowest paid workers (including temporary workers).

Check if wages meet the legal minimum wage, the collective bargaining agreement, and the living wage estimate in the List of Living Wage estimate.

a) Legal minimum wage:Cash wages paid to all workers must be equal to or exceed the minimum wage set by governments. For workers paid per piece, estimate how much a laborer can produce in one day (e.g. kg harvested or hectares sprayed), then calculate the average wage per day and/or per month.

b) Collective Bargaining Agreement (CBA)If an official CBA is in place, make sure that all terms of the agreement are respected including those relating to wage levels and the frequency and quality of in-kind benefits. An official CBA is different from a sector wage agreement and must be recognized by the trade unions/ syndicate involved in reaching the agreement.

c) Living Wage estimateCheck whether worker wages meet living wage estimates, where such estimates are availableiii. Your assessment includes both cash and in-kind benefits: • Cash payments. For workers paid per piece, estimate the average daily

labor productivity (e.g. kg harvested or hectares sprayed), then calculate the average wage per day and/or per month.

REMEMBER THAT...Cash wages on all UTZ certified farms should be increased each year to reflect the national rate of inflation. This ensures that real wage levels are maintained*.

* To find the yearly inflation rate in your country , you can for example refer to the following world bank webpage: http://data.worldbank.org/indicator/NY.GDP.DEFL.KD.ZG

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iii The setting up of a global Living wage database is on-going. For some countries the living wage estimate is not yet completed. In such cases, the monitoring of wage levels remains mandatory but not the assessment against the estimate. New estimates are introduced to the UTZ Code of Conduct and older ones are updated on a regular basis. Please check the UTZ website (www.utz.org) to see if an estimate for your country has been introduced.

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• In-kind benefits. This should include any in-kind benefits the farm provides to workers that assist them in meeting their basic needs (e.g. food, housing, health care and education for children). See Annex 1.

STEP 2: DETERMINE WHETHER A WAGE IMPROVEMENT PLAN IS NECESSARY

If workers’ total remuneration is below the living wage estimate and there are limited or no official processes for wage negotiation in place, a wage improvement plan should be set up. The agreement should cover ALL WORKERS including non-union members and temporary workers. If some workers are not covered by the CBA then a wage improvement plan will be required.

If workers’ total remuneration is below the living wage estimate but there is a process in place for wage negotiation based on credible worker representation, for example a collective bargaining agreement, this may be sufficient to comply with the UTZ criteria. An additional improvement plan may not be needed, see below.

STEP 3- SET UP A WAGE IMPROVEMENT PLANA wage improvement plan should: • be agreed upon based on consultation between workers (or their official

representatives) and management. • Include measurable yearly increases in cash wages and/or improvements

in the quality or quantity of in-kind benefits provided.

IN PRACTICE: ASSESSING AND ADDRESSING WAGE LEVELS

WHICH WORKERS’ WAGES SHOULD BE ASSESSED?

Identify and assess wages for the lowest paid workers, usually unskilled agricultural workers. Auditors may also require an assessment of wages for other agricultural and non-agricultural workers employed at the farm.

DOS AND DON’TS FOR VALUING IN-KIND BENEFITS

• DO respect relevant national regulations governing in-kind quality and valuation. For example, if national law defines that total in-kind benefit shall not represent more than a specific percentage of total remuneration this rule must be followed when assessing total remuneration. See overview in Annex 2.

• DO check the balance between the percentage of remuneration covered by in kind benefits and cash wages. In general, the value of in-kind benefits should not constitute more than 30%-40% of total remuneration.

• DON’T include benefits that do not directly contribute to meeting basic needs, for example recreation activities.

• DON’T include benefits or wages that fluctuate significantly or are highly unpredictable (such as variable bonuses).

GOOD TO KNOW

Is it my responsibility as a producer to calculate workers’ total remuneration?

As a producer, you are advised to estimate the wages of the lowest paid workers and compare these with the Living Wage estimates, if available. Once auditing takes place, the auditors will either confirm your calculations and/or conduct their own calculation of remuneration levels to assess compliance. They will make an assessment...>> >>...of total remuneration based

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HOW TO DOCUMENT ACTIONS IN RELATION TO THE LIVING WAGE Keep the following records in relation to the UTZ living wage requirements (I.C.83):

• Up-to-date records of workers’ wages and contracts • CBA documents • Results of your comparisons with Living Wage estimates and calculations

used to assess the value of in-kind benefit (if relevant)

IS A CBA ALWAYS AN ACCEPTABLE ALTERNATIVE TO A WAGE IMPROVEMENT PLAN?

A credible and respected CBA is an acceptable alternative to a wage improvement plan because it enables workers to negotiate their wages which should lead to gradual improvements in remuneration. However, for a CBA to be considered a valid alternative to a wage improvement plan it must: • Be regularly updated and recognized by the elected/legal workers’

representatives • Be communicated to workers • Be fully implemented and respected. • Cover all workers to comply with the living wage criteria.

If the CBA does not meet one or more of these requirements, a wage improvement plan should be developed.

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on checking wage records and spending on specific in-kind benefits, reviewing information you provide to the team and using their knowledge of the cost of living in the region. They can also compare their estimates of the value of in-kind benefits to the estimated in-kind valuation of similar farms in the region based on research by UTZ and its partners. The final responsibility for assessing remuneration levels and compliance with the UTZ living wage criteria lies with the auditors.

What happens if a living wage estimate is not yet available for my region or country?

The assessment of total remuneration and wage levels is still required in the first year. Auditors will communicate to UTZ if wage levels and a legal Collective Bargaining Agreement (CBA) are in place. The full assessment of compliance will take place once the living wage estimate becomes available.

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ANNEX 1: EXAMPLE OF TOTAL REMUNERATION CALCULATION TABLE

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ANNEX 2: MAXIMUM PERCENTAGE ALLOWED FOR IN-KIND BENEFITS AS PARTIAL PAYMENT OF WAGE BASED ON NATIONAL LEGISLATIONS.

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ANNEX 3: LIVING WAGE BENCHMARKS

Dominican Republic

Country

DOP 15,258.00

KES 19,284.00

MKW 36,173.00

ZAR 3,410.00

USD 348.00

USD 217.00

USD 78.00

USD 294.00

Living wage standard adjusted December 2014

Kenya

Malawi

South Africa

Brazil*

Ethiopia*

Ghana*

*Studies presently in preparation / execution

Refer to Core Code of Conduct Individual Certification; Control point I.C. 83 ‘Wages and Contracts’

List of Living Wage Benchmarks – issued July 2015

Living Wage reference for the countries where a benchmark study has been carried out, to be used for comparison with actual wage levels being paid.

Updated: 22 July 2015 (will be updated with results of future studies)