Appendix 11 – Method for Calculating a Living Wage Gap

by Contact on 30 October 2026

This Appendix details the methods for calculating comparable employee remuneration and assessing it against the Living Wage estimate to determine a living wage gap, as required in Criterion 3.8 (Indicator 3.8.2).

Section
11.1 Step 1: Select the living wage estimate
11.2 Step 2: Identify employees to include in the calculation
11.3 Step 3: Choose the calculation tool
11.4 Step 4: Calculate allowable wages and bonuses
11.5 Step 5: Calculate in-kind benefits
11.6 Step 6: Calculate total comparable remuneration
11.7 Step 7: Calculate the living wage gap

11.1 Step 1: Select the living wage estimate

Select the relevant living wage estimate for the UoC’s location and reference year. The UoC shall use an ASC-approved living wage estimate, following the ‘Living Wage Benchmarks’ guidance document available via the ASC Programme Centre.

Simplified assessment where a living wage estimate is not available

Where a living wage estimate is not available for the UoC’s location because the estimate provider has determined that the statutory minimum wage exceeds the living wage, the UoC can conclude that the living wage gap is 0%. Based on this, the UoC conforms with Indicator 3.8.2 and shall report a living wage gap of 0% under Indicator 3.8.3.

Checklist before moving to Step 2

Selected the appropriate living wage estimate for the UoC’s location and reference year.

11.2 Step 2: Identify employees to include in the calculation

The employees included in the living wage gap calculation shall be determined using the ASC definition of ‘employee’.

The UoC shall include data on employee remuneration following one of two options:

Option A: Anonymised data from all employees.
Option B: Anonymised data from the majority of employees (>50%), ensuring that at least the following categories are included:
- The four largest job categories (the occupations or job grades with the highest number of employees); and
- Lowest-paid employees; and
- Temporary employees.

For UoCs under multi-site or group certification, employees from all sites may be combined into a single living wage gap calculation. In such cases, the UoC shall ensure that the data collected is representative of all sites included in the certification scope.

Simplified assessment where guaranteed base wage exceeds the living wage estimate

Where the guaranteed base wage of an employee category meets or exceeds the relevant living wage estimate, a full living wage gap calculation is not required. Instead, the UoC can apply a simplified assessment to confirm the living wage gap is 0% by following the steps below:

Identify the guaranteed base wage: Identify the guaranteed gross monthly base wage (excluding any bonuses, overtime pay, allowances, or other extras) for each employee category. It is recommended to start with the employees with the lowest wage.
Compare with the living wage estimate: Compare the guaranteed base wage to the applicable living wage estimate using a like-for-like comparison (gross monthly remuneration, based on standard working time, same reference year).
1. If the guaranteed base wage meets or exceeds the living wage estimate:
  1. Living wage gap = 0%
  2. No further remuneration calculation is required for those employees.
2. If the guaranteed base wage is below the living wage estimate:
  1. Complete the full living wage gap calculation for those employees.

If the guaranteed base wage exceeds the living wage estimate for all employees, the UoC can conclude that the living wage gap is 0%. Based on this, the UoC conforms with Indicator 3.8.2 and shall report a living wage gap of 0% under Indicator 3.8.3.

Grouping employees into categories

Grouping employees into categories can make the calculation process easier, particularly for UoCs with many employees. Employees can be grouped into a category where:

They have the same gender; and
They perform the same or substantially similar tasks; and
Their working hours and remuneration components (wages, bonuses, in-kind benefits) do not deviate by more than 10%.

Where these conditions are not met, employees shall be assessed separately.

Checklist before moving to Step 3

List of employees to include in the calculation
Employees grouped into categories (optional)

11.3 Step 3: Choose the calculation tool

The UoC can calculate a living wage gap using several different tools. All calculations shall follow the approach described below, which is based on the Anker Research Institute’s methodology144144https://www.ankerresearchinstitute.org/anker-methodology. The key difference between the options is how the calculation is performed. The following options may be used:

The IDH Salary Matrix145145https://www.salarymatrix.idhtrade.org/; or
Manual calculation; or
Other measurement tools aligned with the Anker methodology.

ASC strongly recommends the use of the IDH Salary Matrix. The IDH Salary Matrix automates key steps in the calculation including the capping of in-kind benefits, conversion of remuneration to full-time equivalent (FTE) values, and comparison against the living wage estimate. The tool automatically generates a report for verification and data needed for reporting (See Indicator 3.8.3). This saves time, prevents calculation errors, and ensures accurate results.

Manual calculation requires the same steps to be performed explicitly, including the proration of remuneration to FTE values and comparison with the living wage estimate. The tool is easy to use, available in multiple languages, and guidance is embedded. Further training on living wage concepts and the IDH Salary Matrix is available via the ASC Programme Centre.

Checklist before moving to Step 4

Selected a tool for the calculation
Accessed ASC training resources on living wage

11.4 Step 4: Calculate allowable wages and bonuses

Table 1 below lists the annual wages and bonuses that are allowed to be included in the calculation. All payroll information must be gross figures (no tax deducted) taken from the previous calendar year.

To ensure accuracy, four conditions shall be met for a payment to be counted towards the employee remuneration calculation146146From Living Wages Around the World by Martha and Richard Anker, Chapter 15 Measuring Prevailing Wages to Compare to a Living Wage, page 271.:

Guaranteed to receive: Employees shall be able to rely on receiving the wage, bonus or benefit for ongoing expenses.
Received within one year: Employees shall receive the payment within a year.
Earned during standard working hours: The wage shall be earned within standard working hours, not including overtime or excessive work.
Received in legal tender: Payment shall be in cash or by bank transfer (excluding in-kind benefits and medical insurance).

Table 1. Description of the Wages and Bonuses included in the living wage gap calculation

Wage/Bonus	Always include	Do not include	Rarely include	Rationale/Notes/Examples
Basic wage and any cost-of-living adjustment	✔
Overtime pay and pay supplements for holidays, weekends, and night work		✘
Cash allowances and bonuses	✔			This shall include as a minimum: 13th month’s bonus. National holiday cash bonuses. Birthday cash bonus. Transportation cash allowance. Housing cash allowance. Health insurance cash allowance.
Production incentive bonuses			✔	Production bonuses should only be included when received by the majority of employees and not associated with an especially fast work pace or overtime.
Time off for holidays, annual leave, and sick leave		✘		Does not add to disposable income of employees. However, if employees with short term contracts are paid an extra daily rate for holidays/vacation, this amount may be included when it increases take-home pay.
Maternity and paternity leave		✘		Does not add to disposable income of employees.
Pension, provident fund, and severance payment		✘		Not received within one year.
Employer contributions required by applicable law, such as for social security programs, unemployment insurance, and employees’ compensation/ injury insurance		✘		Does not add to disposable income of employees.

Checklist before moving to Step 5

Assessed payroll data on working hours, wages, and bonuses for each employee category

11.5 Step 5: Calculate in-kind benefits

In-kind benefits are considered in the living wage gap calculation, as they reduce the amount of cash wage that employees require to cover living expenses. The UoC shall calculate allowable in-kind benefits according to the following three-part process147147From Living Wages Around the World by Martha and Richard Anker, Chapter 15 Measuring Prevailing Wages to Compare to a Living Wage, page 299.: Part A: Identify allowable in-kind benefits

In-kind benefits marked with a check in Table 2 below can be included in the living wage gap calculation.

Part B: Value the in-kind benefits

To value in-kind benefits, the UoC shall calculate the total cost to the employer and divide this by the number of employees receiving the benefit. The value of each in-kind benefit shall not exceed any of the following:

Its cost to the employer; or
Its replacement cost if purchased by the employee; or
The cost of an equivalent home-prepared meal in cases of provided food; or
The amount allocated for the item in the Living Wage estimate.

If an in-kind benefit requires that the employee share some of the cost, the employee’s cost should be subtracted from the total value.

Part C: Ensure in-kind benefits fall within the maximum limits

To ensure that employees have a sufficient income they can spend as they choose, and in line with applicable legal requirements in many countries, the percentage of total income that is provided to employees in-kind is limited. Employees shall not receive more than:

30% of total wage for all in-kind benefits combined.
15% of total wage for housing.
10% of total wage for other in-kind benefits like food and transport.

If valuation of in-kind benefits exceeds any of the above percentages, the amount included in the calculation shall be reduced to comply with limits. The IDH Salary Matrix tool automatically limits in-kind benefits.

Table 2. In-Kind Benefits

In-Kind Benefits	Shall include	Do not include	Rationale/Notes/ Examples
Meals at work	✔		Reduces food expense.
Food rations or food commodities given for free or sold at concession rates	✔		Reduces food expense.
Family housing (including electricity, water, and fuel)	✔		Reduces housing expense.
Transport to and from work (and to town on weekends from agricultural estates)	✔		Reduces transport expense.
Childcare	✔		Reduces childcare expense.
School for children of employees	✔		Reduces education expense.
Medical clinic and medical care not required by applicable law and not for work-related matters	✔		Reduces medical expense.
Medical insurance not required by applicable law	✔		Reduces insurance expense.
Employer payment of private medical insurance	✔		Reduces insurance expense.
Visas or work permits for migrant employees.		✘	Employer obligation.
Clothing, equipment, and supplies for work		✘	Employer obligation.
Dormitories or shared housing		✘	Does not reduce family housing cost.
Drinking water provided to employees at work		✘	Employer obligation.
Land for kitchen garden		✘	Does not reduce employees’ expenses.
Charitable contributions to the community that do not go exclusively to employees		✘	Does not reduce employees’ expenses.
Employers’ contributions to Social Security or National Health Service required by applicable law		✘	Employer obligation.
Time off work for vacation, sick leave, maternity leave, or public holiday		✘	Employer obligation.
Any other benefit that does not reduce the cash income necessary for employees to meet their needs		✘	Does not reduce employees’ expenses.

Checklist before moving to Step 6

Determined monetary values corresponding to the in-kind benefits received by each employee category

11.6 Step 6: Calculate total comparable remuneration

To enable comparison with the living wage estimate and determine the gap, the UoC shall calculate total comparable remuneration for each employee category. All remuneration components (wages, bonuses, and in-kind benefits) identified in Steps 4 and 5 shall be converted into full-time equivalent (FTE) values for comparison with the living wage estimate, which is based on FTE.

Using the IDH Salary Matrix:

When using the IDH Salary Matrix, total comparable remuneration is calculated automatically. The tool:

Converts all remuneration components to FTE values based on actual working hours; and
Aggregates all components into total comparable remuneration for each employee category, separated by gender.

Manual calculation:

When calculating manually, the UoC shall:

Convert all remuneration components to yearly FTE values; and
Sum all components to determine total comparable remuneration for each employee category; and
Divide yearly comparable remuneration by 12 to determine monthly comparable remuneration.

The UoC shall maintain records of all calculations to enable effective verification.

Example – Manual calculation of total comparable remuneration

This example is based on a standard working week of 48 hours.

To calculate comparable remuneration for an employee category, gather information on the actual number of hours worked and the wages, bonuses and in-kind benefits received. Then, complete the following calculations:

Determine the FTE rate by dividing standard working hours by actual working hours. 48 standard working hours ÷ 36 actual working hours = 1.33 FTE conversion rate.
Then, multiply the remuneration components by the FTE rate to determine yearly comparable remuneration. (9,000 wages + 300 bonuses + 300 in-kind benefits) x 1.33 = 12,768 yearly comparable remuneration
Finally, divide the yearly figure by 12 to arrive at monthly comparable remuneration. 12,768 ÷ 12 months = 1,067 monthly comparable remuneration

Category	#	Hours	Wage	Bonus	In-kind benefits	FTE conversion	Monthly comparable remuneration
Pond workers	8	36 hours / week	9,000 / year	300 / year	300 / year	48 ÷ 36 = 1.33	(9,000+300+300 x 1.33) ÷ 12 = 1,067
Feed technicians	6	48 hours / week	15,000 / year	600 / year	600 / year	48 ÷ 48 = 1	(15,000+600+600 x 1) ÷ 12 = 1,350
Harvest workers	5	24 hours / week	6,000 / year	200 / year	100 / year	48 ÷ 24 = 2	(6,000+200+100 x 2) ÷ 12 = 1,050

Checklist before moving to Step 7

Determined monthly comparable remuneration for each employee category*

*For manual calculation only. Steps 6 and 7 are automated in the IDH Salary Matrix.

11.7 Step 7: Calculate the living wage gap

Monthly comparable remuneration for each employee category shall be compared to the applicable living wage estimate for the same reference year. For example, for an audit taking place in 2026, employee remuneration data from January-December 2025 shall be compared against the 2025 living wage estimate.

Using the IDH Salary Matrix:

The IDH Salary Matrix will automatically calculate living wage gaps for each employee category, the employees below living wage (as % of workforce), and an average living wage gap.

Manual calculation:

For manual calculation, the following calculations need to be performed:

1. Living wage gap for each employee category

$Employee category living wage gap (%) = \frac{Living wage estimate - Comparable remuneration}{Living wage estimate} X 100$

Where comparable remuneration equals or exceeds the living wage estimate, the living wage gap shall be 0% for that employee category.

2. Employees below living wage (% of workforce)

The percentage of employees below living wage shall be calculated as the proportion of employees with a living wage gap.

$Employees below living wage (%) = \frac{Number of employees in categories with a living wage gap}{Total number of employees} X 100$

3. Average living wage gap

The average living wage gap shall be calculated for all employees with a living wage gap. This shall be calculated as the sum of each employee category’s living wage gap multiplied by the number of employees in that category, divided by the total number of employees with a living wage gap.

$Average living wage gap (%) = \frac{SUM (Category living wage gap x Number of employees in category)}{Total number of employees with living wage gap} X 100$

Example – Manual calculation of the living wage gap

In this example, the monthly living wage estimate is 1,200.

1. Living wage gap for each employee category

Category	#	Monthly comparable remuneration	Living wage estimate	Living wage gap (%)
Pond workers	8	1,067	1,200	(1,200 – 1,067) ÷ 1,200 x 100 = 11.1%
Feed technicians	6	1,350	1,200	(1,200 – 1,350) ÷ 1,200 x 100 = -12,5 → 0%
Harvest workers	5	1,050	1,200	(1,200 – 1,050) ÷ 1,200 x 100 = 12,5%

2. Employees below living wage (% of workforce)

Pond workers (8) and harvest workers (5) have a living wage gap. Together, they make up 68% of the workforce.

$68 % = \frac{8 + 5}{19} \times 100$

3. Average living wage gap

The average living wage gap across all employees with a living wage gap is 12.1%.

$12.1 % = \frac{(11.1 \times 8) + (12.5 \times 5)}{(8 + 5)} \times 100$

$12.1 % = \frac{(Pond LW gap \times employees) + (Harvest LW gap \times employees)}{Pond employees + Harvest employees} \times 100$

Results

Completed living wage gap calculation
Determined datapoints for reporting under indicator 3.8.3

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Appendix 11 – Method for Calculating a Living Wage Gap