Most compliance teams can answer whether their suppliers pay minimum wage. Far fewer can answer whether those workers are paid a living wage, and a lot of people assume that’s not a real distinction, just two names for the same thing.
It isn’t. The two numbers are calculated in completely different ways, and the gap between them is often bigger than most companies realise.
Two numbers, built the opposite way round
Minimum wage is a legal floor, set by government. It comes out of a political and economic negotiation: what the labour market can bear, what employers can absorb, inflation, political appetite. It isn’t calculated from what a worker actually needs to live on in a given place. It’s calculated from what’s judged affordable and enforceable to mandate.
A living wage is worked out the other way round. Organisations such as the Living Wage Foundation or WageIndicator start from a real basket of local costs, housing, food, transport, childcare, and calculate what it actually takes to cover that basket where the worker lives. It’s not a policy compromise. It’s closer to a cost calculation.
Because they’re built differently, they don’t move together. Minimum wage tends to lag behind actual cost of living increases, since no government wants to raise it faster than the economy can absorb. Living wage moves whenever costs do, which in high-inflation periods can be far more often, and by more.
In the UK, this is baked into the terminology itself. The government’s statutory minimum, confusingly rebranded the “National Living Wage” in 2016, sat at £12.71 an hour from April 2026 for workers 21 and over. The Living Wage Foundation’s real Living Wage, a separate voluntary standard, runs at £13.45 across the UK and £14.80 in London. The gap adds up to over £1,400 a year per worker, enough to cover several months of food or transport for a household. Two rates, similar names, different logic entirely.
What this actually means in practice
A worker paid strictly at minimum wage can be completely legal, and still not earning enough to cover their actual cost of living. That’s not a compliance failure on paper. An audit checking against minimum wage alone would pass it without issue. The gap only becomes visible once you check against a different, cost-based number, and until recently, most supplier programmes had never run that second check, but that is starting to change.
SMETA 7.0 now raises this directly, as a Collaborative Action Required rather than a standard pass or fail finding, reflecting the fact that closing a living wage gap usually isn’t something a single brand can solve alone. Under 5.A, suppliers (and the brands sourcing from them) are expected to review total pay, including benefits, against a credible living wage benchmark, work out what proportion of the workforce falls short, and put a wage improvement plan in place with a stated timeframe for closing that gap. It’s a meaningful shift: the check is no longer optional or brand-specific, it’s built into the audit standard itself, and it’s framed from the outset as something that requires coordination across every brand linked to that supplier.
Why this is becoming harder to ignore
This used to be a reputational question. It’s turning into a regulatory one. The CSDDD requires companies to evaluate and adapt purchasing practices to support living wages and incomes for suppliers and workers. The CSRD goes further on disclosure, requiring companies to report whether employees are paid an “Adequate Wage,” a threshold set above minimum wage specifically because minimum wage was never designed to answer the question of whether someone can actually live on it.
That’s a different kind of check to what most audit programmes currently run. Checking against a legal minimum is pass or fail. Checking against a living wage benchmark is a gap analysis, and it asks a question minimum wage compliance was never built to answer.
The part that sounds harder than it is
The usual hesitation here is reasonable: living wage estimates vary by source and methodology, some cover only a handful of countries, and picking a credible number for every sourcing country looks like its own research project.
It mostly isn’t, because it’s already been done. WageIndicator publishes free benchmarks across 173 countries. The Global Living Wage Coalition and IDH’s Benchmark Finder do the same for their respective regions. Sedex has built living wage requirements directly into its SMETA 7.0 audit standard, with an entry point that’s been deliberately kept achievable. The benchmark isn’t the hard part. Comparing your actual supplier data against it is.
There’s also a common objection that turns out not to hold up: the assumption that this requires individual worker salary data, which raises data protection concerns in jurisdictions with strict privacy rules. It doesn’t. Living wage benchmarks are built around average family size for a region, so the comparison runs at an aggregate level, not an individual one.
Where to begin, in practice
Map current pay across every contract type, full-time, part-time and temporary, since wage risk concentrates disproportionately in the least secure contracts. Identify what counts as compensation beyond base pay, bonuses, in-kind benefits, employer-provided social protections, since some of this can legitimately be included in the comparison. Then compare the total against the relevant regional benchmark, starting with your highest-risk suppliers rather than trying to cover every tier at once.
None of this needs to be precise on day one. The bar auditors are working to is whether the basic comparison has been done and is broadly correct, not whether every figure is exact.
Where this leaves compliance and audit teams
Most audit programmes were built to check whether a legal floor was met. That was never the same question as whether the floor is actually enough to live on, it’s just been easy to treat them as one and the same. The tools to check the real question already exist, and they’re free. What’s missing in most supplier programmes isn’t data or method, it’s a structured place for that comparison to live and be tracked over time, supplier by supplier, rather than repeated from scratch every reporting cycle.
If you’re working out how living wage benchmarking fits into your existing audit and CAP programme, speak to us. We can help guide you through where it sits and how to prioritise it across your supplier base.
