How IKEA Implements Living Wages - A Case Study in Fair Pay Practice

IKEA's Responsible Wage Practices

This Responsible Wage Practices framework is an IKEA approach to provide decent work at fair income across the full value chain. The initiative includes Living Wages, pay principles, dialogue, equality and competence. Marjolein, the IKEA compensation specialist leading the Living Wages implementation, explains: "To achieve decent work and fair income, we do not only look at Living Wages. It's also about being inclusive, having a dialogue, having the opportunity to become a member of a union, and being transparent about pay principles."

Selecting a Living Wage Data Provider

IKEA chose WageIndicator as the independent data set provider in its Responsible Wage Practices. Before choosing WageIndicator IKEA evaluated multiple vendors against a few criteria:

• Data accessibility
• Global coverage
• Up-to-date data
• Reliable and objective sources
• Standardized and transparent methodology
• Family size and number of family incomes taken into account
• Relevant basket of goods
• Proven track record

WageIndicator emerged as the top choice, meeting the IKEA requirements for global coverage and transparent methodology. Both elements are crucial for a multinational organisation operating across diverse markets.

Implementation Challenges and Solutions

At the start, a clear gap emerged between the global ambition of frontrunner companies and the practical knowledge needed to deliver it. In some parts of the IKEA organisation—though among a small minority—people wanted to understand the calculations of the Living Wage calculations, particularly in relation to housing costs and local economic conditions.

IKEA chose a different path forward, rooted in openness, dialogue, and learning. The focus was on extensive stakeholder engagement and building capability through training in Responsible Wage Practices across the organisation. “We had meetings with many departments from IKEA all over the world,” Marjolein explains. “There were challenging questions: Why is this number so high? Why is it so low? Housing here looks different, etc..”

Rather than pushing back against resistance, IKEA invested time in transparency and training to build understanding and trust. This approach took patience—but it paid off. As Marjolein puts it, “When you then bring the approach to the organisation, people have already heard about it. There is already support.”

Living Wage Implementation: Lessons for Other Companies

When asked about lessons learned, Marjolein identifies several elements:

• Start early, stay flexible: "Just start. Don't wait for the ideal circumstances. Waiting until the last minute before the 2030 implementation goal would make addressing challenges much more difficult,” Marjolein notes;
• Respect business realities: This doesn't mean negotiating on principles, Marjolein clarifies. "It is not about negotiating on the content but on the timeline. The framework is firm, but timing can be adjusted for legitimate operational constraints.”
• Stay open to feedback: Despite extensive testing, IKEA gave business units the opportunity to provide input if the methodology didn't work for them. "We could tweak if we genuinely noticed it was valid," Marjolein says. "That really supports the whole process."
• Build internal expertise: Marjolein strongly recommends involving colleagues with compensation knowledge. "The quality of the dialogues you have with the business, or with a provider like WageIndicator, becomes stronger when you know how wages are set."

Current Progress and 2030 Goals

For IKEA, the biggest lesson until now is to keep a pragmatic and realistic approach to Living Wages. "We strive to pay all our employees a Living Wage, but we have a realistic approach to being 100% Living Wage compliant," Marjolein explains. "Even if that might be the case today, something could happen in the world tomorrow, and the reality would be different."

Instead, the company focuses on setting up the process in a robust way so that it works throughout all parts of the organisation. Making sure that they conduct annual benchmarks, identify any gaps, and implement corrective action plans. “With Responsible Wage Practices we enable people and families in the IKEA value chain to live a decent life wherever they are, with an aim to achieve this in 2030 the latest”, says Marjolein.

Fair Pay is More Than Just Living Wages

Rather than viewing 2030 as a finish line, Marjolein sees Responsible Wage Practices as continuous evolution. As living costs change, data providers improve methodologies, and global standards develop, IKEA's approach will adapt accordingly.

The goal is for Living Wage knowledge to spread beyond HR and sustainability departments to all managers and team leaders who influence wage setting; which is why IKEA has strong practices in place.

Why Living Wages Matter for Retail Brands

Ultimately, Marjolein presents the initiative not as a business model to be proven, but as an expression of the IKEA identity. "It is an important part of our culture and values to be a responsible employer and to pay at least a Minimum Wage but to strive for a Living Wage. and we are committed to that." Marjolein concludes: "In the end, this is also about living up to our core values and maintaining consistency between the IKEA products and what happens behind the scenes, ensuring customers can shop being confident that we treat all our workers fairly."

Written by:

Paulien Osse, Co-Founder and Global Lead Living Wages

Irina Raiu, Global Lead Content