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Workers’ Minimum Wage Awareness and Corporate Compliance

Can brands credibly report that workers are being paid what they are owed?

In 2025 corporations that are active in the EU will be required to report on material issues impacting or constituting a risk to workers in their supply chains under the Corporate Sustainability Reporting Directive (CSRD). The current situation in Bangladesh should be of concern to entities reporting under the CSRD, given the lack of information workers have about what determines how much they are paid. Part of the problem lies with the structure of the minimum wage in Bangladesh.

The Minimum Wage in the Bangladesh Apparel Sector

Bangladesh’s Labour Law defines the minimum wage in a manner similar to the labor laws in many other countries–a minimum monthly amount for a set, regular work week. In Bangladesh the regular work week is 48 hours. But the Bangladeshi minimum wage has some additional characteristics that are not as common in other countries. 

 

First, there are different minimums set for workers at different work/skill grade levels, with higher grades having higher minimums. Second, the minimum wage is composed of multiple components: a basic salary plus several different allowances (housing, transportation, food, and medical). In the 2023 minimum wage regulations, allowances makeup between 44% and 46% of the overall minimum depending on the grade.  This distinction is important because workers’ overtime pay, which is supposed to be two times their regular pay, is calculated based on their basic salary only–it excludes the allowances. Finally, there is an automatic annual adjustment to the minimum wage of 5%, regardless of inflation.

 

Bangladesh’s New Minimum Wage Structure, 2023
Grade Total Allowances Basic Salary Gross Salary
       
Grade 4 5,800 6,700 12,500
Grade 3 6,150 7,400 13,550
Grade 2 6,391 7,882 14,273
Grade 1 6,645 8,390 15,035

 

What Workers Know about their Pay

GWD interviewed workers in November when the Minimum Wage Board announced the new minimum wage, which went into effect on December 1, 2023. Our interviews took place at a time of heightened public discussion of the minimum wage in the media and among workers, many of whom were protesting the amount set by the government. In this context, 2 out 3 workers said they were aware of the new minimum wage and almost everyone of them were able to state what the new minimum was going to be. 

 

But when we asked workers if they could name the allowances they were entitled to as part of their pay package, only about half of them were able to name all the allowances, while just under a quarter were not able to name any. The rest were able to name some. We also asked them if they knew what their base salary was, excluding allowances. Almost half were able to tell us the amount. This is consistent with someone we have found in past Dialogues with workers: they do not know  what grade level they are in and so cannot tell us what their base pay should be. Finally, we asked workers about the annual increment. Almost all (94%) told us they are aware of the increment, but only 3 in 4 said that they had been receiving it.

 

You can learn more about what workers told us by visiting our Dashboard. And view the GWD Catalogue for the different access options we offer.

Challenges Ahead for Workers and Corporations

These data suggest some challenges for workers in the future, and for those corporations that source from Bangladesh and need to report on the conditions of workers in their supply chains. Workers do not have enough information to be able to determine if they are being paid correctly, just in terms of their regular pay. In addition, as GWD has documented extensively, workers in Bangladesh work many hours of overtime. They do so to be able to make ends meet. The fact that as many as half of these workers do not know what their base salary is means that they do not have the information they need to make sure they are being paid correctly for overtime. 

 

GWD will be talking to workers again in March 2024 to determine whether they have started to receive any additional pay due to the minimum wage increase. We will also be checking in to see whether they know what grade they are in under the new grade system and whether they have become more aware of the composition of their wages, making them less vulnerable to being underpaid.