FLA's Living Wage Pilot in Việt Nam

Issues Fair Compensation

With funding from the Initiative for Global Solidarity, implemented by the German development agency Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), plus on-the-ground support from the Research Center for Employment Relations (ERC), FLA launched its Việt Nam living wage pilot in 2022. This pilot seeks to understand the complexities in buyer-supplier relationships in multi-buyer apparel and footwear factories, and improve purchasing and costing practices, wage transparency, and worker engagement.

While buyers hold most of the purchasing leverage, many buyers may feel they do not have enough influence to support progress toward living wages. However, buyers’ purchasing practices impact a supplier’s ability to uphold labor standards ranging from factory compliance with compensation and employment requirements to ambitious living wage targets.

In Việt Nam, the minimum wage is regularly updated; this commitment from the government ensures that minimum wages for garment sector workers have increased steadily following the COVID-19 pandemic. Viêt Nam continues to improve its labor code and ratify International Labour Organization conventions to better working conditions. FLA member companies use the Global Living Wage Coalition’s living wage estimates for Viêt Nam to benchmark progress toward living wages.

Through this pilot, FLA worked with two factories with at least three suppliers to conduct a desktop and payroll review, as well as interviews with workers and management. ERC offered insight and recommendations on how the factories and buyers can support wage progress by improving costing practices, diversifying product categories, forecasting and incentives, and worker engagement and dialogue.

FLA reviewed buyers’ overall purchasing practices policies and procedures, providing recommendations for companies to improve responsible purchasing practices policies across their supply chains. The pilot was previewed for local stakeholders in Viêt Nam, including buyers, suppliers, NGOs, and representatives from the Vietnam General Confederation of Labour and Ministry of Labor in October 2022.

FLA will conclude its living wage pilot in Việt Nam in June 2024 and then share findings, challenges, and best practices to support progress toward living wages in apparel and footwear supply chains.

Our communication [with the buyers] is good, but we want them to understand us more… the buyers have difficulties but we wish they [would] visit us in person. We have to support 6,000 workers… we cannot close down our factory to wait until they overcome their difficulties.
Interviewed member of a factory's merchandising team
October 4, 2022