Don't Let Economic Pressure Derail Your Living Wage Programme

31 March 2025

For organisations operating across multiple markets, the gap between a Minimum Wage and a Living Wage is becoming impossible to ignore. In this expert conversation, Paulien Osse, co-founder and global lead for Living Wages, sits down with Daniela Ceccon, Director of Data at WageIndicator, to address the questions that boardrooms and HR teams are quietly grappling with.

From knowing where to begin, to maintaining momentum when costs put pressure on margins, the guidance of Paulien and Dani is clear and practical. Whether you lead a global corporation or a smaller organisation, meaningful progress on Living Wages is possible.

When the Gap Feels Insurmountable

Paulien: What if the Living Wage gap is so big that you feel you’d ‘kill’ the organisation if you force it to close the gap?

Dani: Well, as you may have learned by now if you followed our webinars, there are always options. First, you can decide not to start a Living Wage project in a country where the gap is huge, at least not yet. That can be a valid choice if you’re honest about it, and if you can explain what you will do instead and under what conditions you would start later. Second, if you do decide to start, then the most important thing is: hold yourself accountable. Don’t make it a vague promise. Make a plan, set milestones, and then follow that plan year on year.

If you can’t close the gap this year, fine, then next year. But you need to explain why, what changed, and what you are doing to get back on track. The credibility comes from being consistent: decisions, a realistic timeline, and transparent reporting, not from claiming you’ll fix everything immediately. Nobody expects that because it is just in many cases not feasible.

Why Large Companies Have the Advantage

Paulien: But Dani, there are companies that close the gap wherever they operate, just because it’s part of their policy.

Dani: Yes, absolutely. And typically, the big and powerful firms have an advantage here: they can sometimes ‘just decide’ because they have stronger margins, more control over pricing, and more room to absorb cost increases. And once they decide, they immediately give their employees more purchasing power. Ideally, that also has a local economic effect: employees can spend more, and in some cases they can even afford the products or services the company sells in that country. So paying a Living Wage on a large scale can actually help create new clients or strengthen demand, especially for companies that sell locally, not only export.

But I’d add one thing: the ability to do this also depends on the business model. A global brand with pricing power can move faster than a supplier operating on thin margins. So yes, policy matters, but the company’s position in the value chain and its ability to influence prices matters too."

A Step-by-Step Approach for Smaller Organisations

Paulien: What is the most realistic approach when you’re a smaller company?

Dani: Let’s be realistic: as I said smaller companies don’t have the same room to manoeuvre as big multinationals. And yes, in some contexts we even hear stories of serious pushback against CEOs who want to raise wages (sometimes even threats!). That’s extreme, but it does remind you that wage improvements can be politically and socially sensitive in some places. But even then, the basic point is: minimum wages are the law and must be paid. And when a country raises the minimum wage, companies adjust, so the idea that any wage increase is impossible doesn’t really hold.

For a smaller company, the most realistic approach is often step-by-step. You don’t jump 30–40% in one go if it would destabilise the business. You move in planned increments (for example, 5% - 10%) and you close the gap over a few years. The key is that it’s not random: you set a pathway, you communicate it, and you actually follow it. Even if you’re not there yet, you can credibly say: ‘We’re closing the gap, and here’s the timeline and progress.

The Risk of Relying on Bonuses

Paulien: If the Living Wage gap is huge, is it wise to work with special bonuses that are not integrated into the basic wage structure?

Dani: Yeah, so a company might opt for a one-off or temporary bonus in a given year, especially if they need a quick fix or they’re testing what’s financially possible.

But if you do that for a couple of years in a row, then honestly, there’s almost no way back. People start to depend on it, it becomes ‘normal pay’ in practice, and it creates uncertainty because it can be removed or changed more easily than base wage. So long-term, it’s usually wiser to build a proper Living Wage policy and move the improvement into the wage structure, step by step if needed.

Of course, there’s one important exception: if there’s short-term disruption, like a period of hyperinflation or a sudden cost-of-living shock, then temporary allowances or bonuses can make sense as an emergency stabiliser. But even then, the goal should be clarity: what’s temporary support, and what’s the path to a stable base wage that keeps up.

Why Economic Pressure Is Not a Reason to Stop

Paulien: As you know, in some countries petrol is already sky-high and more prices are going up. What would you do if you worked in a company with a Living Wage programme: stop the programme, or…?

Dani: I would never stop the programme. You might slow it down for a period, or let it ‘sleep’ for a year if the company is under real pressure, but then you have to be very honest about what that means. The whole reason you started a Living Wage programme in the first place is because employees can’t make ends meet. And when prices go up (fuel, food, rent) that problem gets worse, not better.

So my view is: don’t stop. If you have to adjust the pace, do it transparently, explain why, protect the lowest-paid as much as you can, and set a clear moment to restart or accelerate again. Because cost-of-living pressure is exactly when Living Wage commitments matter most.