Living Wage: A wage sufficient to meet basic living expenses, as defined by the ILO and ESRS

DATE

18.08.2026

AUTHOR

Paulin Streit

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A living wage—known in German as an “existenzsicherender Lohn”—is, according to the definition adopted by the International Labor Organization in 2024, the wage level that enables workers and their families to maintain an adequate standard of living while working normal hours. It is determined on a country-by-country basis and based on evidence, and therefore should not be equated with the statutory minimum wage.

Distinctions: Living Wage, Minimum Wage, and Living Income

These three terms are often confused. They differ in terms of who establishes them, to whom they apply, and whether they are legally enforceable.

CriterionLiving WageStatutory Minimum WageLiving IncomeTarget GroupEmployed individualsEmployed individualsHouseholds with any source of income, primarily self-employed individuals and small-scale female farmersDetermined byScientific and private benchmark providersLegislators or the Minimum Wage CommissionBenchmark providers, using a methodology based on the Living WageLegal NatureVoluntary reference value, not a legal entitlement; binding and enforceable; voluntary reference value; Scope: local, depending on price levels and household sizes; national, partly industry-specific; local; Germany 2026; no freely available established benchmark; 13.90 euros per hour since January 1, 2026; no established benchmark

A globally uniform amount is not possible: The reference value depends on local prices for a basket of goods, the typical household size in the area, and the number of earners per household. For this reason, benchmarks exist on a regional basis, not on a company-by-company basis.

How a living wage is calculated

In 2024, the ILO did not adopt a calculation formula, but rather ten principles for estimation—including evidence-based methodology, the involvement of employer and employee organizations, transparency regarding data sources, specifying whether figures are gross or net, and regular adjustments to account for the cost of living. It specifies that the minimum scope of the basket of goods includes food, housing, health, and education, as well as other necessary goods and services.

Specialized providers perform the calculations themselves. The IDH’s Living Wage Roadmap recognizes three methodologies: the Global Living Wage Coalition’s Anchor methodology, the WageIndicator Foundation, and the Fair Wage Network. There is no uniform standard—the WageMap initiative, launched in 2025, was created specifically because differing methods lead to varying results. Anyone calculating a wage gap should therefore always specify the benchmark used; without this information, a gap figure cannot be verified. This also includes which pay components were included: The Anchor Methodology compares standard working hours and explicitly excludes overtime and non-guaranteed bonuses.

For Germany, the data available is more limited than is often assumed: The Anker methodology does not cover any European country, and the publicly available figures for Germany come primarily from secondary sources without a reliable base year.

Relevance for Businesses

The most important difference in practice: There is no obligation in the EU to pay a living wage—but there is an obligation to report on it. Disclosure requirement ESRS S1-10, “Fair Compensation,” requires companies subject to reporting to state whether all employees are fairly compensated and, if not, to specify the countries affected and the percentage of employees involved. Companies that cannot measure this cannot make the disclosure.

Two points are regularly overlooked in this context. First, ESRS S2 does not contain a specific reporting requirement regarding wages for workers in the value chain—fair remuneration is addressed there only as a subtopic. The supply chain comes into play through human rights due diligence: While the CSDDD explicitly mentions a living wage in Recital 34 and in the human rights annex, under Amending Directive (EU) 2026/470 of February 2026, this requirement will not apply until July 2029 and will apply to a significantly narrower group of companies. Second, the benchmark has shifted: On November 11, 2025, in Case C-19/23, the European Court of Justice declared the binding adequacy criteria of the EU Minimum Wage Directive to be invalid. The revised ESRS accordingly realign the choice of benchmark with ILO principles rather than minimum wage benchmarks.

Since 2023, the EcoVadis rating has included questions about policies, measures, and results related to living wages. The network data published by EcoVadis reveals an insightful pattern: The share of companies with a living wage policy rose from 9 to 13 percent between 2022 and 2024, while the share of companies with measures to close the wage gap remained at around 8 percent. While making a voluntary commitment has become widespread, measuring and closing the gap has not. The statement “we pay above the minimum wage” does not answer the question, because minimum wage compliance and living wage performance are two different assessments. Added to this is a time limit that is often overlooked: EcoVadis recognizes policies and measures as evidence for eight years, whereas key performance indicator reporting is valid for only two years. A wage gap analysis is therefore not a one-time project, but an ongoing process.

Our recommendation: First determine the wage gap for your own workforce at the locations with the largest share of employees before implementing supplier programs. One argument against this is that the material risks usually do not lie within your own workforce but in upstream stages—if you don’t look there, you’re measuring in the wrong place. Nevertheless, the pragmatic rationale for this order is sound: a company’s own wage data is available and verifiable, whereas that of suppliers is not; and without an in-house methodology, it is impossible to demand reliable information from suppliers. Five Glaciers Consulting supports the implementation of reporting requirements under the CSRD and ESRS and incorporates wage data into the materiality analysis.

Frequently Asked Questions About a Living Wage

What is the difference between a living wage and the minimum wage?

The statutory minimum wage is set by the government and is enforceable; in Germany, it has been 13.90 euros per hour since January 1, 2026. A living wage is a voluntary benchmark derived from the actual cost of living in a region and is intended to ensure a decent standard of living for workers and their families. The two figures may differ, and compliance with the minimum wage does not prove that a living wage is being paid.

Are companies required to pay a living wage?

No. Within the EU, the obligation to pay arises solely from national minimum wage laws. The living wage is a voluntary benchmark. What is binding is the reporting requirement under the ESRS and, starting in July 2029 and for a limited group of companies, the human rights due diligence requirement under the CSDDD. Ratings such as EcoVadis express an expectation, not a legal obligation.

Where does the living wage appear in the ESRS?

In ESRS S1 on the company’s own workforce, disclosure requirement S1-10, “Fair Compensation.” It requires disclosure of whether all employees are fairly compensated and, if not, the countries concerned and the percentage of employees affected. ESRS S2 on workers in the value chain does not contain a specific disclosure requirement regarding wages; there, fair compensation is listed only as a subtopic.

What types of documentation does EcoVadis accept as proof of living wages?

The assessment covers policies, measures, and results. The only evidence accepted is what is stated in the submitted document itself—a reference to a benchmark database is not sufficient; the value and source must be included in the document. Policies and measures are valid for eight years; key performance indicators are valid for two years. It is not publicly documented which evaluation criterion EcoVadis assigns to this topic; the only documented information is its assignment to the “Labor and Human Rights” topic area.

How does a company choose the right benchmark?

There is no single, uniform standard. The IDH Living Wage Roadmap recognizes three methodologies: the Global Living Wage Coalition’s Anchor Methodology, the WageIndicator Foundation, and the Fair Wage Network. Because different methodologies yield different figures, the choice should be justified once, then maintained over the years, and disclosed in reporting. A change in the benchmark alters the reported wage gap without any actual change in pay.