Introduction

Workers receiving a living wage are paid sufficiently to afford a decent standard of living for themselves and their families. A living wage gap represents the difference between actual earnings and the independently calculated living wage estimate for a specific location and employment context. Verification of this gap is essential for substantiating claims, tracking progress, and taking informed action. Currently, verification practices remain fragmented, leading to inconsistent methodological rigour and differing interpretations of results.

What is a living wage and living wage gap?

In April 2024, the International Labour Organization (ILO) adopted principles defining a living wage as the level necessary for a decent standard of living, taking into account country circumstances and calculated for work performed during normal hours. This includes costs for food, water, housing, education, healthcare, transport, and clothing. A living wage gap can be expressed as a percentage of the living wage or as an absolute monetary value.

Purpose and scope of the guidance

This document, produced as part of the IDH Roadmap on Living Wages, provides tool-agnostic guidance for verification service providers. It distils common principles applicable across various data collection tools and verification models. The guidance consolidates criteria for the full verification process, including the validation of wage data, the selection of estimates, and the calibration of auditors. It is intended to support consistent outcomes across diverse and complex supply chains.

Remuneration data: structure, definitions and verifiability

Verification quality depends on the accessibility, completeness, and reliability of wage-related data. Site-level capacity is a critical pre-condition; organisations must be able to compile, document, and explain wage and working-time data. Structured remuneration systems should ensure the traceability of source records back to payroll and contracts. Consistency of interpretation over time is vital, meaning wage definitions and pay codes should be clearly documented and applied uniformly across reporting periods.

Complex pay structures and in-kind benefits

Piece-rate payment systems present specific challenges for wage gap assessment. A key condition for credible verification is whether a typical worker can reliably reach living wage levels within normal working hours. Worksites must maintain individualised working-time and production records to enable reconciliation between hours worked and total remuneration. Verification providers should also assess whether task allocation practices are fair and non-discriminatory.

In-kind benefits (IKBs), such as food and housing, are complex areas for valuation. This guidance adopts the Anker Research Institute (ARI) 2025 approach as current good practice, which uses a replacement value methodology. Under this model, IKBs are valued based on the expenditure a worker would otherwise incur to obtain equivalent goods, rather than on employer-reported costs. This shift aims to reduce reliance on employer data and better reflect the value of benefits to workers. Acceptable IKBs must meet defined criteria, including being regularly provided and of verifiable quality.

Living wage estimates and living wage gap calculation

Verification providers do not generate living wage estimates but must assess if the estimates used meet recognised credibility criteria, such as the ILO principles or the IDH recognition process. A single estimate should be applied consistently for a given location and workforce to maintain coherence. Verification-specific checks include confirming that geographic references, time periods, and currency conversions are transparently documented and appropriate for the payroll period under review.

Core criteria for robust living wage verification

ISEAL research identifies five cross-cutting criteria for credible verification: methodological rigour in assessment; consistency and comparability of results; alignment with recognised frameworks; transparency of verification methodology; and the inclusion of worker voice. These principles guide providers in designing activities that are technically robust and transparent across different delivery models.

Practical verification activities for wage data and gap calculations

Providers should conduct data system readiness assessments to identify structural limitations, such as paper-based records or manual calculations. Key activities include testing whether payroll records correspond to working-time records and confirming that full-time-equivalent (FTE) normalisation is applied accurately. Where data systems are fragmented, providers must document limitations and adjust their sampling strategy or assurance levels accordingly.

Triangulation and sampling strategies

Triangulation is a necessary condition for credible verification, involving the cross-checking of information from multiple independent sources. This includes documentary cross-checks, worker interviews, and engagement with worker representatives or trade unions. Robust, risk-informed sampling should reflect workforce diversity, including gender balance and the intentional inclusion of the lowest-paid workers. Safeguards must be in place to ensure workers can participate in interviews safely and without fear of retaliation.

Independence, impartiality, oversight, competence

The integrity of a verification system operates across governance arrangements, provider controls, and oversight mechanisms. Verification personnel must possess technical expertise in wage structures and living wage methodologies. Oversight is particularly important in structured assurance systems, where performance is monitored to ensure consistency. The ISEAL Code of Good Practice provides a reference for designing robust oversight, including managing integrity risks and establishing impartial dispute resolution systems.