The idea of a living wageLiving wage (as defined by the Anker Research Institute)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. is that workers – and their families – are able to afford a decent standard of living that is considered acceptable by society at its current level of economic development. A fair compensation approach goes further than this. It considers the fairness of the wage that a worker is paid by benchmarking whether wages meet all legal requirements, are paid in full and on time, reflect a worker’s performance and skills, follow price increases paid for the products they make, are linked to their employer’s profits and sales, are negotiated individually or collectively with the workers and are clearly and formally communicated to them, among other factors.
The workers employed in our supply chain should not have to face hardship in their daily lives. Our aspiration as a responsible business – and as set out in the core principles of our Workplace Standards – is that workers earn enough for themselves and their families’ basic needs and have income remaining to cover discretionary spending as well as savings. We seek business partners who progressively raise employee living standards through improved wage systems, benefits, welfare programs, and other services which enhance quality of life.
OUR AMBITION
TO SEE PROGRESSIVE IMPROVEMENTS ACROSS ALL FAIR COMPENSATION BENCHMARKS AND ACHIEVE GENDER WAGE PARITY FOR WORKERS IN EACH OF OUR CORE TIER 1 SUPPLIERS BY 2025
MEASURING PROGRESS ON FAIR COMPENSATION
Calculating and paying fair compensation within global supply chains is complex. Wages are determined by the general economic conditions and cost of living in a country, by national laws and government policy, and a number of other variables. We recognize we cannot do this alone and continuously seek to work and collaborate with other entities to make fair compensation a reality for workers in the supply chain.
As a member of the Fair Labor Association (FLA), we align our approach with the FLA Benchmarks and their Fair Compensation Methodology. We have also joined the Anker Research Institute (ARI) as a Corporate Sponsor to leverage their technical expertise and broader living wage community. As part of our fair compensation strategy, we have adopted ARI’s living wage definitionARI’s Living Wage DefinitionThis includes key components like food, water, housing, education, health care, transportation, and discretionary income to help deal with unexpected life events. . The elements included in the ARI living wage definition inform ARI’s wage estimates, which we use to assess wage progress using available benchmarks from the Global Living Wage Coalition.
OUR FIVE LEVERS SUPPORTING WAGE PROGRESSION
Our approach to the payment of fair compensation in our global supply chain is built around five levers that influence wage development. For each lever, we have a program of work to support fair compensation and wage progression. The five levers include:
LEGAL OBLIGATIONS
Fair compensation starts with compliance and cannot be achieved without first ensuring factories meet the legally required minimum wages and benefits. We require our suppliers to pay all legally mandated wages and benefits, on time and in full, and we monitor this closely. We also expect equal pay for men and women.
RESPONSIBLE PURCHASING PRACTICES
Our commitment to responsible sourcing and purchasing led to the launch of our Responsible Sourcing & Purchasing Practices Policy at the end of 2017. This policy ensures that our sourcing and purchasing decisions support the adidas Workplace Standards, including how wages are paid to workers, rather than conflict with them. In 2020, we added 10 Buyer Commitments to further guide our responsible purchasing.
PRODUCTIVITY
Calculating and paying fair compensation within global supply chains is a complex issue that is often linked to productivity and efficiency. We support productivity initiatives and technologies that reduce work hours and improve pay for performance. As technology and automation increase demand for skilled workers, we see an opportunity to improve wages and benefits.
GOVERNMENT ENGAGEMENT
Governments have a duty to protect and promote human rights by upholding ILO labor conventions and core principles at work. They play a crucial role in supporting fair industrial relations and ensuring workers can freely organize and bargain collectively. Achieving lasting, sector-wide improvements in wages and welfare depends on active engagement with policymakers and national governments.
INDUSTRIAL RELATIONS
Strong industrial relations are essential for fostering dialogue, transparency, and effective problem-solving between employers and workers. They empower workers to negotiate fair wages and working conditions through collective bargaining -- a right protected under two core ILO conventions: the Freedom of Association and Protection of the Right to Organize (No. 87) and the Right to Organize and Collective Bargaining (No. 98).
DATA COLLECTION
To measure and track wage progress over time, we have continued to use the FLA’s Fair Compensation Data Collection Tool to collect wage data from a sample of our core global suppliers. This data covers three reference years: 2020 (our baseline), 2023 (our mid-point), and 2025 (our final year). The results help us evaluate how wages are evolving, identify priority countries, and understand the influence of our five wage levers.
In 2024, we completed 2023 wage data collection across our six in-scope countries, the results can be found below. For 2020 results, please go here.
Benchmark Results
We compared the average net wagesNet Wage Formula (as defined by the Fair Labor Association methodology)Net wage includes the basic contracted wage, in-kind and cash benefits, and deducts taxes and other deductions. Net wage does not include incentive or leave wages, unless otherwise specified, and never includes overtime wages. In our data collection samples, we have included incentive and leave wages if they meet FLA applicability requirements. at the factory level for each country against four benchmarks: the legal minimum wageMinimum wage (as defined by ILO)The minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract. , the FLA Country AverageFLA Country AverageThis is the average of all wage data reported through the FLA Fair Compensation Dashboard by Dashboard users for the applicable calendar year. This benchmark is only available as a country-wide average. To avoid inaccuracies, we only apply this benchmark in countries where the minimum wage is calculated for the entire country and not by various regions or groups. (where applicable), the GLWC–ARI Living Wage Reference Value or EstimateGLWC–ARI Living Wage Reference Value or EstimateThis is our living wage benchmark. This value is used only where available and relevant to the factory’s location. It reflects the estimated income required for a decent standard of living. , and the World Bank International Poverty LineWorld Bank International Poverty LineAlthough this benchmark measures extreme poverty, and our aim is to move our suppliers further away from it, it is a constant benchmark across all applicable countries which allows us a cross-country comparison. It is shown in gross terms. . Although the figures exclude overtime, we also collected and presented that data to offer a more complete picture of take-home pay. The results are based on factory averages, meaning some workers earn more and others earn less; however, in all cases, legal minimums were met. All amounts, except for the minimum wage and the World Bank International Poverty Line benchmarks, are in their net format (excluding legal deductions).
The factories within our data collection scope are located within nine different minimum wage groups in Indonesia, with vast differences in their requirements. Due to changes in our supply chain, there were two fewer minimum wage groups in 2023 than in 2020. In 2023, the minimum wage requirements for our factories ranged from 2,018,836.92 IDR to 4,584,519.08 IDR based on their location. We did not have an applicable GLWC-ARI Living Wage benchmark for any of our factories in the country.
Our 2023 data collection shows that, across all minimum wage groups, factory net wages exceeded the various applicable benchmarks as such:
- Their applicable minimum wage requirement by between 8% and 40% (2020: 9% and 66%, respectively).
- The World Bank International Poverty line by between 76% and 314% (2020: 89% and 450%, respectively).
Group No | 2023 Group Net Wage Avg. (IDR) | Net Wage vs. | Net Wage vs. World Bank International Poverty Line (Gross) |
|---|---|---|---|
Group 1: District Minimum Wage: Kabupaten Brebes (Central Java) | 2,423,290 | Exceeded by 20% | Exceeded by 76% |
Group 2: City Minimum: Kabupaten Boyolali | 2,459,812 | Exceeded by 14% | Exceeded by 79% |
Group 3: City Legal Minimum Wage: Kabupaten Jepara | 2,686,233 | Exceeded by 18% | Exceeded by 96% |
Group 4: City Legal Minimum Wage: Kota Semarang | 3,298,544 | Exceeded by 8% | Exceeded by 140% |
Group 5: City Minimum Wage: Kabupaten Sukabumi | 4,702,321 | Exceeded by 40% | Exceeded by 242% |
Group 6: City Minimum Wage: Kota Cimahi | 4,174,701 | Exceeded by 19% | Exceeded by 204% |
Group 8: Sectorial Minimum Wage: Kabupaten Serang (Sector II: Textile, Leather, Apparel, Bags and Shoes) | 5,538,222 | Exceeded by 23% | Exceeded by 303% |
Group 9: Sectorial Minimum wage: Kota Tangerang (Sector IV: Leather, Footwear) | 5,681,498 | Exceeded by 24% | Exceeded by 314% |
OTHER FACTORY CHARACTERISTICS
APPLYING OUR LEVERS
LEGAL OBLIGATIONS
LEGAL OBLIGATIONS
Beyond individual factory compliance, we monitor supplier performance and take enforcement action when standards are not met. Where systemic wage challenges exist, we take targeted action at the country level. Below are two examples where we applied this lever to address broader wage-related issues:
- El Salvador – Final Severance Pay-Out: In 2023–2024, we commissioned special audits across suppliers in El Salvador in response to the FLA’s 2022 Advance Severance Payments to Garment Workers in El Salvador Issue Brief. The audits gave us detailed insights into supplier practices where annual severance advances (‘indemnizaciones’) are made but not regulated by local law. While improvements have been achieved across several factories, remediation plans remain in place for others.
- Mexico – Overtime Pay (OT): Together with other participants in the Americas Group initiative, adidas supported the drafting and implementation of a memo requiring overtime premiums to be based on full integrated wages, including incentives and benefits, rather than based on hourly wages. After verifying Tier 1 supplier compliance, we expanded enforcement to Tier 2 suppliers.
RESPONSIBLE SOURCING & PURCHASING PRACTICES (RPP)
RESPONSIBLE SOURCING & PURCHASING PRACTICES (RPP)
To better understand and improve the impact of our purchasing practices, we actively seek feedback from our manufacturing partners, both anonymously and openly. We do this through subscription to the Better Buying InstituteBetter Buying InstituteAn independent organization that assesses and reports on the purchasing practices of participating brands. and through our own engagement with our suppliers. Based on this feedback, we have implemented several RPP improvements related to fair compensation, including:
- Enable greater transparency on demand forecasts to help suppliers plan ahead. This includes monthly market forecasts, qualitative outlooks, and an annual capacity roadmap (at least two seasons forward). These detailed forecasts significantly help suppliers manage financials, impacting on their ability to pay workers on time and in full.
- In 2025, we updated our standard Apparel lead time from 60 to 90 days to give suppliers more flexibility, more accurately reflect material preparation time, and bring us in line with industry standards.
- Revised costing framework to better reflect inflation in overhead calculations.
- Provide greater visibility into existing financial support programs such as prepayment options and vendor financing programs.
- Adopt new ways of working from 2023 that give suppliers greater ownership and self-governance, along with clear expectations and transparent guidelines.
- We are continuously working on simplification projects that target to simplify the ways we work and create more efficient processes for both us and our suppliers
Furthermore, in partnership with Better Buying, we have implemented an e-learning training on responsible purchasing practices that has been rolled out to all Product Development and Sourcing colleagues. In 2023, the training was also shared with the US Demand Planning team and adidas strategic licensee partners to further improve their understanding of effective responsible purchasing policies. Refresher trainings are planned for 2026 to ensure the information remains top of mind.
PRODUCTIVITY
PRODUCTIVITY
We understand that fair compensation across our global supply chain is closely tied to productivity and efficiency. As part of our efforts, we continue to explore ways to align productivity gains with wage growth. We are also focused on harnessing the benefits of technology to improve operations, while carefully considering its impact on jobs and evolving work environments.
From 2022-2024 we participated in an FLA-sponsored pilot in Vietnam making use of our productivity lever amongst other fair compensation levers:
- Vietnam – FLA Pilot: Between late 2022 and mid-2024, adidas participated in an FLA-sponsored pilot project in Vietnam, funded by GIZ’s Initiative for Global Solidarity with field support from the Research Center for Employment Relations (ERC). The project aimed to enhance responsible purchasing and production practices, social dialogue, and wage progression. FLA reviewed adidas’ RPP policies, factory management and compensation systems, and worker-management communication on wages and benefits. In 2024, adidas submitted its final remediation plan. FLA’s final report is expected by mid-2025.
GOVERNMENT ENGAGEMENT
GOVERNMENT ENGAGEMENT
To support countries’ ongoing efforts to strengthen wage-setting mechanisms or social protection systems, we actively engage with governments and other stakeholders to support progress. This includes co-hosting training, contributing to policy dialogue, and promoting frameworks that help strengthen labor rights and improve wages at scale. Through these efforts, we aim to contribute to more resilient and inclusive labor systems.
- Jordan – Multi-Stakeholder Training (2024): Co-hosted with Better Work Jordan and the FLA, adidas facilitated two seminars on effective internal monitoring for labor and occupational safety and health (OSH) compliance. Participants included Ministry of Labor officials, labor inspectors, and factory compliance officers. Led by adidas’ SEA team and FLA staff, the sessions aimed to improve oversight, promote fair recruitment, and strengthen working conditions across the sector.
INDUSTRIAL RELATIONS
INDUSTRIAL RELATIONS
The path to improving the general welfare of workers is supported by the creation of wage-setting mechanisms that are transparent and have been developed with the direct input of workers. Ideally, this occurs through negotiation or collective bargaining with established and freely elected trade unions, or through alternative legal means, such as workers’ councils or welfare committees. Below are some examples of how we supported stronger industrial relations in 2024:
- Cambodia – Freedom of Association (FOA): Dispute Prevention and Resolution Program: Since late 2023, adidas suppliers in Cambodia have joined a capacity-building program led by the Arbitration Council Foundation (ACF) and supported by local civil society, the government, and international donors. The initiative trained trade union leaders, factory HR staff, and workers’ and employers’ representatives to strengthen social dialogue and lawful dispute resolution. By the program’s end, the ACF had helped establish worker-management committees and factory ground rules. Over half of adidas’ Cambodian suppliers completed the training and reached an agreement with their unions to establish and/or revise their worker-management committees’ ground rules.
- El Salvador – FOA Guidance Rollout: As a participant of the Americas Group, and following up on the 2023 launch of The Employer Guidance in El Salvador, we have continued to increase knowledge and awareness of the guide. In 2024, we sponsored a training session led by one of the guide’s co-authors for all local suppliers. A longer-term implementation program is now in development, with a rollout planned in late 2025.
- Indonesia – Training on the FOA Protocol: In 2024, we delivered a refresher training to suppliers on the 2011 FOA Protocol, a multi-stakeholder framework, to which adidas was an original signatory. The sessions emphasized legal obligations for collective bargaining and reinforced the importance of ongoing implementation.
OUR PROGRESS
We completed 2023 benchmarking across our in-scope suppliers in six countries. We joined forces with another FLA-participating company, the Anker Research Institute, and improvingworklife to develop a gender pay parity e-learning program for suppliers (for a 2025 launch).
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OUR PROGRESS
We completed 2023 benchmarking across our in-scope suppliers in six countries. We joined forces with another FLA-participating company, the Anker Research Institute, and improvingworklife to develop a gender pay parity e-learning program for suppliers (for a 2025 launch).
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Fair Compensation
Workers in the Supply Chain
Our concern for the well-being of workers in the supply chain led us to establish our ’Workplace Standards.’ These standards cover workers’ health and safety, and provisions to ensure environmentally sound factory operations. Key topics of interest to our stakeholders include fair wages, measures against child labor, freedom of association, and health and safety.
Fair Compensation
Workers in the Supply Chain
Our concern for the well-being of workers in the supply chain led us to establish our ’Workplace Standards.’ These standards cover workers’ health and safety, and provisions to ensure environmentally sound factory operations. Key topics of interest to our stakeholders include fair wages, measures against child labor, freedom of association, and health and safety.