For the definition of fair wages, PUMA follows the requirements for compensation set out in the Code of Conduct published by FLA. The Fair Wage Network conducts wage assessments and evaluates the wage systems of selected factories across 12 dimensions, focusing on five major areas: Legal compliance, wage levels, wage adjustments, pay systems and social dialog and communication.
Increasing cost of living is an emerging risk for PUMA. During 2021 we purchased a license for the living wage database of the Fair Wage Network. In 2021 and 2022 we used this database to check the payment of a living wage to all PUMA employees globally. In 2022, our global leadership team implemented performance KPIs - tied to bonuses - related to ensuring PUMA employees earned a living wage. The results of this internal assessment show that globally all regular PUMA employees who are working full time are paid according to a living wage thresholds at regional/city level or above with regards to the Living Wage Adjusted Mean as defined by Fair Wage Network.
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As part of our efforts to ensure fair wage practices at the factories of our suppliers, we have defined the failure to make a full payment of at least the minimum wage a zero-tolerance issue. This means that to be taken on as or to remain active PUMA suppliers, companies must pay minimum wages in full compliance with local regulations. Provisions around the payment of overtime hours and social insurance are also clearly articulated in PUMA’s Code of Conduct and are scrutinized regularly based on our Compliance Audit Program. The performances of PUMA’s suppliers on other Fair Wage dimensions are also assessed through field work assessment surveys carried out by the Fair Wage Network.
In 2022, 99.3% of our core factories paid workers digitally, only one out of the 147 core factories have 717 employees who have not yet received their payment digitally. 238,314 employees are now paid digitally.
At PUMA, we have collected wage data annually from our core Tier 1 factories for several years. We use this data to report S-KPIs (table T. 10). In 2021, we used the FLA’s Fair Compensation Dashboard* to analyze 2020 wage data of 46 strategic Tier 1 suppliers and 2021 wage data of 59 in 2022. We use the Dashboard to compare aggregated and anonymized data from industry peers and, where available, against living wage benchmarks of the Global Living Wage Coalition (GLWC). For this purpose, the Anker Methodology** was used.
*Industry average wage data from FLA Fair Compensation Dashboard from November 2020 and October 2021. Users of the FLA’s Fair Compensation Dashboard have access to live anonymized monthly average net wage calculations based on all wage data uploaded per country and year. Averages are updated as wage data is uploaded into the dashboard.
**Anker’s living wage methodology: Net Wage = Basic (Contracted) Wage + Cash Benefits + In-Kind Benefits – Mandatory Taxes and Legal Deductions. Payment of overtime is excluded.
The dashboard shows the results of our benchmarking for 59 core Tier 1 factories, in local currency, covering wages in 2021. This data covers approximately 75% of PUMA’s global production volume.
All our strategic factories in Vietnam and Cambodia (except for two factories in VN), pay on average a living wage set by the Global Living Wages Coalition to workers. These 23 factories cover approximately 32% of PUMA’s production volume and 32% of PUMA’s global production value; 70,832 production workers work in these 23 factories.
Our strategic suppliers pay workers clearly above the industry average in all countries for which we have this benchmark.
Our suppliers in Indonesia fell short of the average industry payments in 2020. In 2021 we see an increase of workers' wages above the industry average up to 115% (89% in 2020) of the industry average.
Our suppliers in Pakistan reach 89% (83% in 2020) of the Global Living Wage Coalition Benchmark.
The payments in Bangladesh, despite being above industry average, fall well short of the Global Living Wage Coalition Benchmark and reached 70% of the Global Living Wage Coalition Benchmark (69% in 2020).
In Indonesia, China and Turkey, country-level GLWC benchmarks were not available in 2020 and 2021. In Turkey, the average wage increased by 19,6%, mainly due to the high inflation rate. Vietnam Rural fell by 6% due to the newly reported suppliers being in a lower minimum wage region.
In 2022 we conducted fair wage assessments with seven factories in Bangladesh, Pakistan and Vietnam, and worked on remediation in six factories in Bangladesh, Cambodia and Indonesia.
We asked the Fair Wage Network (FWN) to conduct formal fair wage assessments at our core suppliers based in Bangladesh (2018), Cambodia (2019), Cambodia and Indonesia (2021), Bangladesh, Vietnam and Pakistan (2022) in total 21 factories. Out of these 21 factories, six factories obtained a Fair Wage Certificate. Meaning that among the 12 dimensions of fair wage, wage and overtime payment, communication, and social dialog, for example, each certified factory must receive at least 280 out of 400 points with no more than two dimensions below a 40% score.
It was positive that several factories had continued to strengthen some institutional elements, such as wage grids and schemes relating pay to performance. At the same time, similar developments were not always reported on social dialog, with workers’ representatives not always involved in wage discussions, and with collective agreements being rarely signed at factory level, something that gives valuable information for follow-up and remediation in these specific factories, but also for our 10FOR25 sustainability targets to ensure our core Tier 1 factories will have freely elected workers’ representatives.
Overall, workers’ satisfaction with wages and working conditions was found to be relatively good, in average, with 95% workers being either ‘fully’ or ‘partly’ satisfied with their wages and 86% workers being either ‘fully’ or ‘partly’ satisfied with working conditions.
In 2022 a total of six factories (three in Bangladesh, one in Cambodia and two in Indonesia) which went through a Fair Wage assessment decided to implement a remediation phase with the support of Fair Wage Network.
The FWN team conducted training as part of such remediation process in October 2022 for the two factories’ management and workers’ representatives in Indonesia. A social dialog round was conducted in 2022, and an agreement between workers’ representatives and the management was reached to implement a seniority bonus that was then approved by the Ministry of Labor.
In Bangladesh, a Fair Wage Implementation Committee was formed in each participating factory, consisting of two worker representatives and two management representatives, with the task to discuss and implement internally the different objectives and steps of the Fair Wage Remediation plan.
As a technical support to this remediation process in Bangladesh, two training sessions were conducted by the FWN for the implementation committee members. The first training in August 2022 was on possible improvements on pay systems and wage adjustment mechanisms and also the other Fair Wage dimensions while the second one in January 2023 focused on how to improve the Wage Grid and how to carry out regular Living Wage Survey to better capture workers’ living conditions and eventual difficulties. Improvement areas were identified in a corrective action plan. Workers were trained to better understand the factory wage system. We witnessed concrete outcomes, such as more diversified pay systems, an improved dialog between workers and factory management on the topic of wages, even if workers’ lack of basic literacy remains a challenge for them to fully understand the wages calculation. In 2023 a living wage survey will be conducted to analyze and determine how to make wages a competitive advantage. The factory wages grid and performance evaluation system will also be reviewed.
In Cambodia the Fair Wage remediation was launched in August 2022. The factory agreed on a remediation plan in October and formed the Fair Wage Committee in November. In 2023 the Fair Wage Network team will organize training programs and follow-ups to implement the remediation plan.
PUMA signed the Fair Labour Association/American Apparel and Footwear Association Commitment to Responsible Recruitment in 2018. Since then we have actively engaged with suppliers, industry peers as well as with the United Nation’s International Organization for Migration with the objective to ensure that the labor rights of foreign and migrant workers are upheld in our supply chain.
We map on a yearly basis if our factories employ foreign migrant workers and if any recruitment fees were paid by workers and how much. We then engage with our sourcing leaders, supplier top management, and in some cases other brands this supplier produces for, to come up with an agreement on a timeline to pay migrant workers back. The back payment could in certain cases be made in different installments and not a lump sum to not disturb the factory as not all workers are entitled to this payment, and this could create misunderstandings amongst workers.
PUMA has used e-learning from the International Organization for Migration in employer guidelines. 79 factory representatives from 36 factories from Mauritius, China (Taiwan), South Korea, Thailand and Japan completed this 90 minute English course and were certified in October 2022. The training provided an overview on different migration corridors and economic sectors, from fashion through to electronics and food manufacturing and the risks faced by migrant workers throughout their labor migration journey and what they can do to mitigate and prevent those risks. The e-course provides practical guidance on how to establish sustainable practices to safeguard migrant workers’ rights, human rights policies, due diligence processes and remediation systems, and supports businesses to involve migrant workers to create sustainable solutions. Through the efforts of multi-stakeholder engagements, factories paid back more than $ 100,000 to 255 foreign migrant workers, at six factories in Japan, South Korea, China (Taiwan) and Thailand.
In 2023 we will keep monitoring factories’ recruitment practices, and set up training in collaboration with industry peers and the International Organization for Migration for Taiwanese suppliers who employ foreign migrants.
Indonesia
Training on social dialog was conducted by the Fair Wage Network team in October 2022 for one apparel and one footwear factory as part of their fair wage remediation plan.
Social dialog took place at both factories and the wage structure was reviewed as the result of dialog with worker/union representatives. Both new wage structures have been approved by the Ministry of Labor and implemented. 53% of workers had around 0.5-1% increase on their basic wage.
China
We partnered with Timeline Consultancy, a China-based consultant. PUMA invited a Chinese apparel factory to implement a nine-month workplace dialog project since July 2018. The project aims to guide factory freely-elected worker representatives, and create a dialog mechanism between them, which eventually improves employee-employer relationships, workers’ loyalty and productivity.
In 2022, 100% (217) workers’ feedback was provided through worker representatives. Workers’ turnover rate reduced from 3.84% in 2019 to 2.62% in 2022, production efficiency rose from 88% (2019) to 92% (2022), and the product qualification rate went up to 98.8% (2022) from 96.5% (2019).
Given the success of the project, the PUMA sustainability China team was trained by Timeline Consultancy in 2021, and we are then able to replicate the project to another five Chinese factories in 2022.
| Sub-Targets | 2022 | Baseline 2020 | Target 2025 |
|---|---|---|---|
| Digital payment (% of core Tier 1 and Tier 2 suppliers) | 99.3% | 90% | 100% |
| % of workers that are receiving wage payments digitally | 99.7% | * | 100% |
| Percentage of core Tier 1 supplier facilities that have trade unions or freely-elected worker representation | 48% | 33% | 100% |
| Fair wage assessments (Mapping of a specific wage ladder for top five sourcing countries) |
4 out of 5 | 2 out of 5 | 5 out of 5 |
The Platform Living Wage Financials (PLWF) is a coalition of 19 financial institutions that engage and encourage investee companies to enable living wages and incomes in their global supply chains. The 2021 PLWF report presents the annual assessments of investee companies on living wage and living income.
PUMA reached the advanced level for its work on fair income.
Most of our core suppliers pay basic wages that exceed minimum wage, 13.4% on average. When adding overtime and bonus payment, this figure increases to 71%. Nevertheless, the percentage of gross wages including overtime and bonuses above minimum wage decreased compared with 2022. Overtime working hours decreased on average 0.65 hours per week in 2022, which influenced overtime compensation. In addition, in-kind benefits such as dormitories provided to domestic migrant workers in China are no longer included in wages based on the FLA definition update and therefore were excluded this year from the wage calculation.
100% of the workers are covered by social insurance in all countries except for China where 76% are covered. The total average coverage with social insurance increased from 95 to 97%.
This year, we report for the first time on women in managerial positions (49%). Overall, our core Tier 1 suppliers' social performance is steady. The worker turnover rate increases are mostly impacted by four Vietnam factories located in South Vietnam. The fourth wave of the COVID-19 pandemic broke out in Vietnam around the beginning of May 2021, with new fast-spreading and complicated variants developing in many provinces, especially in those with key economic zones. Southern Vietnam was seriously affected by social distancing regulations with production and business operations interrupted for approximately four months, from July to October 2021. However, after October 2021 when the COVID-19 situation was well-controlled, most factories re-started operations leading to massive recruitment.
The permanent worker percentage decreased slightly, mainly due to a large factory, which has opened a new workshop for another brand and recruited more than 1,000 employees in 2022. New workers are considered temporary during their probation period.
"PUMA started carrying out Fair Wage assessments among its suppliers in different markets already few years ago. Through this systematic process that included remediation activities it succeeded to increase the number of suppliers being certified as Fair Wage employers and thus to progressively increase the percentage of its supply chain concerned. This also brings coherence with PUMA’s wage policy for its own employees."
DANIEL VAUGHAN-WHITEHEAD
Co-Founder and Chair, Fair Wage Network
| SOUTH ASIA | SOUTHEAST ASIA | EMEA | 2022 | 2021 | 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| KPI | Bangladesh | Pakistan | China | Cambodia | Indonesia | Philippines | Vietnam | Turkey | Average | |||
| Gross wage paid above minimum wage excluding overtime and bonuses (%) | 20.1 | 33.8 | 6.7 | 6.7 | 0.9 | 0.0 | 31.5 | 7.8 | 13.4 | 14.5 | 13 | 17.6 |
| Gross wage paid above minimum wage including overtime and bonuses (%) | 67.0 | 41.3 | 188.5 | 68.1 | 44.0 | 20.5 | 116.4 | 22.1 | 71.0 | 80.2 | 54.7 | 73.1 |
| Workers covered by social insurance (%) | 100.0 | 100.0 | 76.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 97.0 | 95.1 | 95.6 | 93.6 |
| Overtime (hours per week) | 11.1 | 0.5 | 17.2 | 7.6 | 6.6 | 6.6 | 7.5 | 4.2 | 7.7 | 8.3 | 5.4 | 7.1 |
| Workers covered by a collective bargaining agreement (%) | 0.0 | 0.0 | 95.0 | 40.0 | 40.0 | 0.0 | 100.0 | 0.0 | 34.4 | 37.2 | 26.9 | 25.4 |
| Female managerial position (%) * | 6.5 | 6.4 | 56.8 | 60.4 | 77.0 | 70.6 | 71.2 | 43.6 | 49.1 | |||
| Female workers (%) | 41.5 | 8.9 | 61.9 | 82.8 | 87.5 | 64.0 | 75.4 | 58.3 | 60.0 | 59.5 | 58.8 | 59.4 |
| Permanent workers (%) | 100.0 | 100.0 | 31.5 | 51.1 | 93.5 | 74.1 | 43.2 | 100.0 | 74.2 | 75.5 | 74.4 | 69.1 |
| Annual turnover rate (%) | 43.5 | 24.0 | 53.6 | 42.2 | 21.4 | 19.5 | 50.7 | 29.9 | 35.6 | 34 | 29.9 | 38.2 |
| Injury rate (%) | 0.6 | 0.0 | 0.3 | 0.4 | 0.2 | 0.2 | 0.1 | 0.3 | 0.3 | 0.3 | 0.4 | 0.5 |
| Number of suppliers | 10 | 2 | 20 | 5 | 5 | 1 | 21 | 1 | 65 | 63 | 58 | 59 |
Data received from 65 PUMA core suppliers representing 77.1% of 2022 production volume, 80.4% of 2022 production value; reporting period for data collection: November 2021 – October 2022
