H&M Group: “Low wages are an operational risk”

29 June 2026

For a company with retail operations in over 80 markets and production spread across dozens of countries, keeping a meaningful grip on wages is no small task. H&M Group has been trying to do exactly that for over a decade, not just as a moral commitment, but as something they describe as a ‘business necessity’.

Johan Genneby, who leads the global work on wages within the H&M Group, is honest about where the company stands. "It's a journey," he says. "It’s one of the most complex topics in global supply chains, progress can be slow and we don’t have all the answers yet, but we stay committed to learning, adapting and advancing the work in this important area". In the past years, H&M Group has built into how it tracks, reports, and acts on wage data, both for its own employees and for the workers in its supply chain since 2013.

Defining Adequate Wages

H&M Group sustainability reporting refers to both "Adequate Wages" and "Living Wage” benchmarks. The distinction is largely a product of regulatory language. The EU's Corporate Sustainability Reporting Directive (CSRD) introduced specific disclosure requirements around "adequate wages", a term with a particular legal meaning under European reporting frameworks. In practice, however, the intent behind both terms is the same: are workers earning enough to meet the real cost of living?

“For H&M Group, the commitment to fair wages is deeply embedded across the entire business. From sustainability and total rewards to regional teams, it is treated as a shared value chain responsibility, and not an isolated KPI”.

A Business Case for paying Living Wages

It would be easy to frame Living Wages purely as a social obligation. H&M Group, like many other corporate leaders, agree is a business case too: "Fair and well-functioning wage-setting systems support stable supply chains, lower turnover, better skills retention, and higher motivation," Johan says. "Over time, that contributes to quality, resilience, and reliability, which are critical for a global industry like ours."

The risks of low wages are, in this framing, operational risks. Poor pay drives high turnover, which erodes skill levels. It creates quality problems. It undermines the kind of long-term supplier relationships that a complex global supply chain depends on. The investment case for Living Wages, H&M Group argues, is not just about doing the right thing, it is about building a system that is resilient, predictable and transparent for all.

Why Access to Quality Wage Data is Crucial

For H&M Group's direct workforce - approximately 132,000 employees - the company uses WageIndicator's Living Wage estimates as the benchmark for its global salary-setting process. In 2025, H&M Group confirmed that all employees earn an Adequate Wage.

The choice of WageIndicator was, Johan explains, a deliberate one made after a competitive review around five years ago. The key factors were accessibility to quality data, wide geographic coverage, and methodological rigour. "We have over 80 retail markets and over 900 tier 1 factories in more than 30 production countries. We wanted to be able to get data from all those countries and do this properly, not just doing a pilot or looking at a few countries at a time."

In practical terms, H&M Group's regional total rewards managers receive training to run the calculations themselves. They annualise salaries, apply definitions for allowances and benefits, and then assess whether adjustments are needed in light of changes in living costs or inflation. The methodology draws on guidance from both the OECD and the ILO, giving it a recognised international grounding.

Critically, performance-related pay is excluded from the calculations. "We don't take into consideration performance-based or other variable remuneration," Johan explains, "the aim is to ensure clarity and predictability in what employees can expect, while reflecting their cost of living. Take-home pay should be sufficient on its own - not something employees can only reach an adequate income from in a particularly good month.

The process is also designed to be flat, not top-down. Regional teams are trained and empowered to run their own assessments, report to global, and flag concerns. “H&M Group operates with a very flat structure,” he explains. “Our focus is on strengthening capabilities and building knowledge across all teams.”

Beyond the data itself, H&M Group has found value in being able to discuss specific concerns directly with wage experts from WageIndicator. "That has been very helpful for us to deeply understand how these calculations are made, beyond simply purchasing a dataset.”

Working on Supplier Wages for Over a Decade

For workers in the factories that make products for H&M Group, the wage question is necessarily more complex, and it varies per country. The company does not employ those workers directly, and therefore does not set their wages. What it can do (and has been doing since 2013) is collect, monitor, and act on wage data at factory level.

Johan explains that the company gathers a set of data points from all of its supplier factories on a quarterly basis, including the number of workers and average gross wages. This data is made public on hmgroup.com.

"I don't think you can really work constructively without having proper wage data to some extent," Johan says. "How would you know where the risks are? We need to look at the high risk areas and look where we can make the most impact"

The data feeds into an internal risk management system. H&M Group sets targets together with suppliers, provides support through training programmes and works together with them to develop their own action plans and ensure wages are managed adequately. The emphasis on supplier ownership is deliberate: "We are pushing for change with our suppliers with several initiatives, but the ownership of wages is with the supplier."

Johan explains that one key factor for progressing wage conversations with factories is the fact that H&M Group has local representation in its major production markets; both production offices with sustainability and compliance teams on the ground help bridge the gap between global policy and factory-floor reality.

One example is the groups’ Wage Management System programme. In practice, it means that it supports factories to build transparent, skill based wage structures, improve payroll systems, strengthen worker engagement, develop unbiased workers evaluations and competitive compensation schemes that link wages to performance, experience and skills. The aim is to make wage increases structured, predictable and fair over time. As a result, factories in general experience lower absenteeism and turnover, and improved average wages - benefiting all.

Ring-Fencing Labour Costs

One additional component of H&M Group's wage strategy for workers in the supply chain is their purchasing practices. Working on constant improvements on how the company buys, plans and works with suppliers aim to improve partnerships but also enable improved working conditions and wages for workers in our suppliers’ factories. Forecasting and planning of orders are cornerstones as it impacts suppliers' predictability to plan and invest.

One of the more technically specific elements of H&M Group's approach is how they itemise and "ring-fence" labour costs. The principle is straightforward: when the company negotiates prices with a supplier, it separates out the labour cost component and treats it as non-negotiable.

"We review the wage data, calculate and agree together with the supplier on the labour cost for the orders," Johan explains. "Then we separate it, ring-fence it, so make sure that labour costs are not part of price negotiations. When wages increase, the labour cost is recalculated and adjusted. We can negotiate on other costs, but we ensure that wage improvements are reflected in the prices we pay our suppliers."

The logic here depends directly on the quality of the underlying wage data. The baseline figures must be reliable to ensure the negotiation, the ring-fence, and the assurance that workers are not bearing the cost of a commercial squeeze. It is another reason why H&M Group places such emphasis on having access to rigorous, current, and geographically comprehensive wage benchmarks.

Working with Others to Raise the Pay Floor

H&M Group is transparent about the limits of what any individual brand can achieve on wages in a shared supply chain. Garment workers are employed by independent suppliers, often producing for many brands at once. This means workers receive the same compensation regardless of the brand or the price tag of the final product.

"This is why it calls for industry solutions," Johan says. For example, the group is one of the founding members of ACT (Action, Collaboration, Transformation), an initiative in which he is a board member, and that brings together over 18 global brands and the global trade union federation IndustriALL to advance Living Wages in the garment and textile sector through collective bargaining, responsible purchasing practices and freedom of association.

In Cambodia, H&M Group and other brands have been working through ACT to support collective bargaining agreements between the employer association and trade unions. The mechanism is significant: brands commit to provide the commercial stability and support skills development to give manufacturers the confidence to sign collective bargaining agreements. The result, as Johan describes it, has been an additional $6 per worker per month in signed factories, roughly double the standard annual minimum wage increase. Workers also receive more leave days, improved contracts, and increased maternity and paternity leave, in addition to regulated levels.

H&M Group was also one of the original brands to support the Employment Injury Scheme (EIS) pilot in Bangladesh, an initiative developed with the ILO and GIZ to provide workers with compensation in the event of workplace injury or illness; a layer of protection that contributes to the broader picture of fair and dignified work beyond wage levels alone. As a result of the pilot, 4 million workers are now protected and more than 90 brands have joined the initiative.

A Long Term Approach

H&M Group is not claiming to have solved Living Wages in its supply chain. "This is one of the most complex topics, there are no quick solutions. We need to continue to consult and work with experts, peers and stakeholders, building and developing our approach to wages," Johan acknowledges. The structural challenges - shared production facilities, varying national contexts, the complexity of global purchasing- mean that full supply chain wage assurance remains a long-term goal rather than a current reality.

What the company has done is build a system: data collection since 2013, ring-fencing of labour costs in negotiations, long-term purchasing commitments that give suppliers planning certainty, transparent payment terms, developed and implemented different factory programmes and active participation in the multi-brand initiatives that are most likely to move the needle at scale.

“Not perfect, not an easy fix, but a pragmatic and structured approach to support wage improvements that can make the difference in worker’s lives. Seeing results is what really makes me happy,” Johan concludes.