ESRS S1-10 Adequate Wages
ESRS S1-10 requires companies to disclose whether their employees earn an adequate wage — defined as sufficient to meet the needs of workers and their families in their location. This is the first time EU mandatory reporting has addressed living wages rather than just minimum wage compliance, making S1-10 one of the most commercially and socially significant CSRD disclosures.
ESRS S1-10 requires companies to disclose whether their employees earn an adequate wage — defined as sufficient to meet the needs of workers and their families in their location. ESRS S1-10 requires companies to disclose whether their employees are paid an adequate wage — and if not, what proportion are not and what actions are being taken.
What ESRS S1-10 requires
ESRS S1-10 requires companies to disclose whether their employees are paid an adequate wage — and if not, what proportion are not and what actions are being taken.
The adequate wage definition: ESRS defines adequate wages as wages that provide workers and their families with a standard of living consistent with human dignity — covering food, water, housing, education, healthcare, transport, clothing, and a modest discretionary element. This is substantively equivalent to the living wage concept — above the legal minimum wage in many jurisdictions.
Key disclosures required: Whether all employees in all countries of operation earn at or above the applicable adequate wage benchmark. Where workers do not earn adequate wages — the percentage of employees below the benchmark and the countries or locations where this is the case. Actions the company is taking to achieve adequate wages for all employees.
Living wage benchmarks: Several organisations publish living wage benchmarks by geography that can serve as the 'adequate wage' reference: Living Wage Foundation (UK — London Living Wage and UK Living Wage); Global Living Wage Coalition / Anker Research Institute (global — by country and region); WageIndicator Foundation (global benchmark data); and ISEAL-affiliated standards (where sector-specific living wage methodologies apply).
The legal minimum wage distinction: In most EU member states, minimum wages are set at or near adequacy — particularly following the EU Minimum Wage Directive (2022) which requires member states to set minimum wages at levels that provide adequate living standards. In non-EU countries where the company operates, the minimum wage may be substantially below any adequate wage benchmark.
Calculating and assessing adequate wage compliance
S1-10 adequate wage assessment requires comparing actual wages against benchmark adequate wages by location — a data-intensive exercise for multinational companies.
Step 1 — Identify the benchmark: For each significant country of operation, identify the applicable living wage benchmark. Use the most credible locally accepted reference — Living Wage Foundation rate for UK locations; Anker Research Institute country-specific figure for global locations. Document the source and the benchmark value.
Step 2 — Identify the lowest-paid employee category: The adequate wage assessment focuses on the lowest-paid roles — these are most likely to be below the benchmark. Identify your entry-level or minimum wage roles in each country.
Step 3 — Compare lowest actual wage to benchmark: For each country, compare your lowest actual gross wage (including all guaranteed pay elements — base, allowances) to the benchmark adequate wage. Express as a ratio: actual lowest wage ÷ benchmark adequate wage. A ratio above 1.0 means adequate wages are paid; below 1.0 means some workers earn less than adequate wages.
Step 4 — Calculate coverage: Determine the percentage of employees earning below the adequate wage benchmark in each country. Aggregate to a global percentage for the headline disclosure.
Step 5 — Action plan: Where workers earn below adequate wages, disclose the planned actions and timeline for achieving adequacy. This may include: wage increases phased over 2–3 years; living wage accreditation programmes; minimum wage adoption policies.
The EU Pay Transparency Directive and S1-10 alignment
The EU Pay Transparency Directive (EU 2023/970, transposition by June 2026) creates parallel obligations that align with ESRS S1-10 and significantly increase the legal pressure on companies to address pay adequacy.
Key Directive requirements: Employers must provide salary range information to job applicants before interviews. Employees have the right to request information on average pay for comparable roles. Employers with 100+ employees must report gender pay gaps annually (250+ employees) or every 3 years (100–249 employees). Where the gender pay gap exceeds 5% and cannot be justified by objective, gender-neutral criteria, a joint pay assessment with worker representatives is mandatory.
S1-10 and the Directive: Both require transparency about wage levels — S1-10 against an adequacy benchmark, the Directive against equal pay standards. A company compliant with both produces the most comprehensive pay disclosure: adequate wages for all (S1-10), no unjustified gender pay gap (Directive), and transparent pay ranges (Directive).
For CSRD companies: build one pay data infrastructure that satisfies both obligations. Extract lowest wage by role and country for S1-10 adequacy assessment; extract average pay by gender and role category for S1-12 gender pay gap and Directive compliance. Coordinate between sustainability reporting (S1-10) and HR/legal (Directive) teams to prevent parallel data collection efforts.
Reputational sensitivity: S1-10 adequate wage disclosure may reveal that low-wage workers in certain geographies earn below benchmark adequate wages — a potentially sensitive finding for consumer-facing brands. Legal review and stakeholder communications planning before first S1-10 disclosure is strongly recommended.
Frequently asked questions
What if there is no official living wage benchmark for a country we operate in?
Use the best available proxy — the Anker Research Institute publishes living wage estimates for 60+ countries; WageIndicator provides data for additional geographies. Where no credible benchmark exists, construct an estimate using a standard cost-of-living methodology (housing, food, transport, healthcare basket) and disclose the estimation approach. Engage with local NGOs or labour organisations for contextual validation.
Do benefits count toward adequate wage assessment?
It depends on the benefit type. Cash-equivalent benefits that directly address cost-of-living needs (housing allowances, food vouchers, transport subsidies, employer-paid healthcare) can be included in the adequate wage comparison where they reduce worker expenditure on those items. Pension contributions, equity awards, and discretionary bonuses are not typically included — adequate wage assessment focuses on regular predictable pay.
We pay above minimum wage in all countries — does that mean we pay adequate wages?
Not necessarily. In many non-EU countries, minimum wages are set significantly below living costs — paying the minimum wage is legally compliant but not adequate. In EU countries, the 2022 Minimum Wage Directive is pushing national minimum wages toward adequacy — but coverage varies. Check your lowest wages against living wage benchmarks in each country regardless of whether you exceed the minimum wage.