Decent work: a framework for investors

The United Nations unveiled its 17 Sustainable Development Goals (SDGs) in 2015. These included SDG 8, "decent work and economic growth: to promote inclusive and sustainable economic growth, employment and decent work for all.”

At Aberdeen Investments, when analysing the alignment of potential investee companies with decent working practices, we define ‘decent work’ as work that provides seven widely accepted key features:¹

A living wage
Guaranteed secure employment
Safe working conditions
Equal employment opportunities and treatment
Social protection for workers and their families
Prospects for personal development and encouragement of social integration
Workers are free to express concerns and to organise (workers’ voice)

Aligning companies with SDG 8 has been difficult. There’s no universal standard or framework in place. Companies haven’t historically reported on decent work. Meanwhile, there are large variations in the rates that these criteria can be found globally. For example, informal employment (with zero contracted hours) is significantly higher in developing and low-income countries.

There are variations in sectors, too. Those traditionally viewed as ‘low skilled’, such as agriculture, construction or domestic work, tend to have higher rates of informal employment. This contrasts with sectors like education, information and communications technology, and finance, which offer better opportunities for decent work.

Why does decent work matter to investors?

Decent working practices – and their influence on efficiencies and risk – directly affect corporations and the individuals they employ. Decent work within organisations can make for a more productive workforce, increased operational efficiency, and reduced reputational risks.²

A report by the PRI (Principles for Responsible Investment), stated that income disparities lead to increased inequality at financial and system levels. This, in turn, can negatively affect investor portfolios. The same report also highlighted that by considering supply chain, governance, and labour issues, investors were able to reduce their beta risks (the volatility of an investment or portfolio in relation to the overall market).

It’s important to recognise and understand a company’s alignment with decent working practices.

The OECD (Organisation for Economic Co-operation and Development) has similar findings. It demonstrated a connection between income inequality and certain decent work issues that negatively affect political and social stability while reducing economic performance. We believe it’s important to recognise and understand a company’s alignment with decent working practices. This could make it easier for investors to include businesses that offer employment in line with decent working practices in their investment strategies.

What are the investment risks and opportunities?

Numerous companies have made the headlines for poor labour practices, resulting in significant financial losses. Boohoo is a high-profile example. In 2020, it was discovered that employees in its supply chains were working in slavery, and two of its suppliers were paying workers between £3.50 and £4 per hour. This revelation knocked off more than £1.5 billion from the company’s value, according to The New York Times.

Our research identifies several investment implications of decent work, outlined below.

ICT
The UK’s tech sector has grown by 20% since 2023, making it the “largest innovation economy in Europe – and the third globally, behind only the US and China”³. Despite this, the UK is amongst the top five countries with skills deficits in the technology sector, according to a report published by Hays⁴.There are more ICT-related jobs than workers to fill them in general, while the sector lacks skilled employees. Companies are therefore incentivised to provide decent work opportunities to attract and retain talent.
Healthcare
Ageing populations around the globe are driving sector growth. It’s no secret, however, that nurses are often overworked and underpaid. Decent work practices must be implemented to support such a critical part of the workforce. In the UK, 13.5% of jobs are in the health and social care sector – a significant part of the workforce⁵. High-skilled workers in healthcare will remain in demand, this includes researchers to meet R&D needs for innovation and new products. Offering decent work opportunities is one way to attract and retain talent.
Care
Ageing populations are likely to propel the sector’s expansion, creating investment opportunities. Looking only at care homes for the elderly, in the UK, there are currently over 7,000 care home providers and over 520,000 registered beds. The workforce in the sector is over 780,000 people, making it one of the largest sectors for employment in the country⁶. Investors should be mindful that, at present, care work is often low-paid and informal. It’s generally considered a ‘low-skilled’ sector and, subsequently, opportunities for decent work are lower compared with high-skilled sectors. The care sector employs a higher proportion of women than men, meaning companies have an opportunity here to help address societal gender inequality issues. Women tend to take on more of the caregiving and unpaid work responsibilities at home than men. One way the sector can provide support is to offer flexible working patterns, for example.
Energy transition
There has been a significant increase in the UK’s renewables capacity. Despite being offtrack to meet its 2030 targets, the UK's wind capacity remains one of the largest globally, for example⁷. Investors must be mindful that not all ‘green’-related jobs are automatically ‘decent’, and it is essential to undertake proper due diligence on company and supply chain labour practices.
Gender, race, and ethnicity
Gender, race, and ethnic inequality can prevent people from realising their full economic potential and, therefore, results in an economic cost. Companies that have strong diversity, equity, and inclusion (DEI) policies face less risk of high turnover rates. There’s also less risk of scandals due to DEI discrimination.
Youth unemployment
Youth unemployment reduces individuals’ career potential and earnings. On a macro level, it can exacerbate inequalities and increase the costs of unemployment support. In 2024, the UK’s youth unemployment rate was low (12.4%) compared to global standards, but slightly above the World Bank average (11.6%) for High Income countries⁸. Investing in companies actively employing young people aligns with SDG 8.6, “By 2020, substantially reduce the proportion of youth not in employment, education or training”.
Informal unemployment
Informal jobs are generally not regarded as decent workand people often take them as a last resort. These are jobs that usually lack social protection, have lower pay, fewer rights, and diminished opportunities for social dialogue. Those in informal jobs are more likely to be in in-work poverty and have greater exposure to economic shocks. In the UK, the informal economy makes up 10.8% of GDP, a substantial proportion⁹. However, this is low by global standards and on the lower end of the spectrum compared to many European countries.

UK Good Work Plan

The UK Government’s Good Work Plan aims to improve working conditions and bolster employment rights. Many of the plan’s proposals align with decent work criteria. One of the key proposals was the right for those working variable hours to request a more stable contract, meeting certain criteria¹⁰. Policies like these, if properly implemented and enforced, can have a significantly positive impact on a country’s workforce, and in turn, reduce investor concerns around poor labour practices.

How do we help determine alignment with decent work?

While alignment with SDG 8 decent work is difficult, we believe it’s possible. To that end, we’ve produced a decent work framework - a best practice checklist and a list of engagement questions on decent work as a starting point when speaking to companies.

These can be used to identify leaders and laggards. They also set milestones for companies adopting best practices. The absence of such a framework may prevent, or at least complicate, investment alignment with decent work.

Decent work framework

Decent work outcome	Engagement questions	What a good answer should include
1) Living wage	•Do you pay your workers a living wage? If not, why not? •How do you calculate a living wage?	• Employees are paid a living wage. • Living wage is calculated based on the cost of living for the relevant location.
2) Guaranteed secure employment	•Do you issue formal employment contracts? If not, why not? •What policies do you have on fair dismissals?	• Formal contracts for employees. • Robust policies on fair dismissals.
3) Safe working conditions	• How do you identify, prioritise and mitigate health and safety issues? • How are health and safety practices incentivised at different levels of management? • Are incidents measured? If so, how? • How are incidents responded to? How are they escalated? • What health and safety training is provided to staff? • Do you offer hybrid/working from home options? (Where relevant)	• Transparent H&S record (fatalities, accidents, near misses; clear consideration of occupational health and relevant ongoing exposures) • H&S is integrated into the group’s risk assessment process • H&S is linked directly to board and executive remuneration • Relevant H&S training provided • Hybrid (with safe transport) and working from home options offered if employee safety is a concern
4) Equal employment opportunities and treatment	•What policies do you have on equal opportunities?	• Clear strategy with incentives at senior management and board levels.
5) Social protection for workers and their families	•What social protections do you have for employees (e.g. parental benefits, sickness benefits, etc)? •Do these protections extend to employees' families?	• Parental leave, sickness leave, childcare leave, etc provided. • Protections available for families such as healthcare.
6) Prospects for personal development and encouragement of social integration	• What training and development is provided?	• Relevant training and development courses offered at no cost to employees.
7) Workers free to express concerns and to organise (worker voice)	• How many of your employees are part of unions? • How do you work with labour unions? • What grievance/whistleblowing mechanisms for employees does the company have?	• Open and transparent discourse with unions and employees, no negative repercussions. • Grievance and whistleblowing mechanisms available, these must protect employees identities.
*Do these apply to temporary and contract workers?