Key Takeaways
- How to determine scope for ESRS S1 (who counts as “own workforce” under paragraph 5, and where the boundary with ESRS S2 falls)
- How to structure the 17 disclosure requirements into a working paper sequence that follows the standard’s own logic
- What specific metrics S1-6 through S1-17 require, with paragraph references and practical data collection guidance
- How to document the gender pay gap calculation under ESRS S1-16 when the client’s payroll system wasn’t designed for this analysis
Who counts as own workforce?
ESRS S1 paragraph 5 defines own workforce as two groups: employees, and non-employees who supply labour to the undertaking. The non-employee group includes self-employed contractors working on the client’s premises and people employed by third parties engaged in “employment activities” (agency workers, posted workers, temporary staff filling roles that permanent employees would otherwise perform).
This boundary matters for your working paper. Workers in the client’s upstream or downstream value chain are covered by ESRS S2, not S1. A subcontractor’s employees who manufacture components at the subcontractor’s own facility fall under S2. The same subcontractor’s employees who are dispatched to work on the client’s production line fall under S1. The distinction is where and under whose operational control the work happens, not who signs the employment contract.
The November 2025 EFRAG draft tightens this further. Once own workforce is assessed as material, the disclosure on employee characteristics (S1-6, previously S1-5 in the original numbering) is mandatory. Disclosure on non-employees (S1-7, previously S1-6) is required only when non-employees are connected to material impacts, risks, or opportunities. This is a proportionality measure. A professional services firm with 500 employees and 4 freelance translators doesn’t need the same level of non-employee disclosure as a logistics company with 200 permanent staff and 350 agency drivers.
For the assurance practitioner, documenting the scope decision is the first step. Your working paper should record which individuals are included in “own workforce,” the source system for each population (HRIS for employees, contractor management system or procurement records for non-employees), and the rationale for including or excluding borderline cases. The ESRS S1 paragraph 5 definition notes explicitly that classifying someone as a non-employee under S1 does not affect their status under applicable labour law. That footnote exists because the boundary question has employment law implications that the standard deliberately sidesteps.
The 17 disclosure requirements: structure and sequence
ESRS S1 follows the same architecture as every topical standard. The first block (S1-1 through S1-4) covers impacts, risks, and opportunities management: policies, engagement processes, grievance channels, and actions taken. The second block (S1-5 through S1-17) covers metrics and targets: workforce composition, collective bargaining, diversity, wages, social protection, health and safety, work-life balance, training, pay gap, and human rights incidents.
Two additional disclosures come from ESRS 2 and must be presented alongside S1: SBM-2 (how workforce interests and views inform strategy) and SBM-3 (how material impacts on the workforce interact with the business model). These are easy to miss because they’re housed in ESRS 2, not S1, but they’re mandatory when S1 is material.
The phase-in provisions are important for first-year reporters. Undertakings with fewer than 750 employees may omit all S1 information in their first reporting year (ESRS 1 paragraph 132). Undertakings with more than 750 employees may still omit certain data points in year one: non-employee workers (S1-7), employees with disabilities, and specific metrics on health and safety, work-life balance, collective bargaining, social protection, and training. These phase-in provisions don’t mean the client avoids data collection. They mean the client has one additional year before external reporting begins, which your engagement timeline should account for.
The CSRD/ESRS glossary entry on double materiality covers the assessment that determines whether S1 is in scope. For most companies subject to CSRD, own workforce will be material. EFRAG’s own guidance acknowledges this: workforce topics are among the most commonly material across all sectors.
Qualitative disclosures: policies, engagement, and remedy (S1-1 through S1-4)
S1-1 (paragraph 17, as amended) requires the client to describe their policies for managing material impacts, risks, and opportunities related to own workforce. The policy can be a standalone workforce policy or part of a broader sustainability or ethics policy. ESRS S1 AR 12 links the policy disclosure to alignment with the UN Guiding Principles on Business and Human Rights and the ILO Declaration on Fundamental Rights and Principles at Work. If the client’s policy references these frameworks, your working paper should verify that the policy actually addresses the specific principles cited, not just name-drops them.
The standard expects the policy description to specify whether it covers all workers or targets specific groups. A manufacturing client with production workers on shift patterns, office staff on standard contracts, and agency workers on seasonal peaks should have policies that address the distinct impacts on each group. If the policy is generic (“we treat all employees fairly”), the disclosure is unlikely to satisfy S1-1 paragraph 19, which asks whether policies cover “specific groups within its own workforce.”
S1-2 (paragraph 25) covers engagement processes. The client must disclose how they engage with workers and workers’ representatives about actual and potential impacts. In the Netherlands, this means documenting the role of the ondernemingsraad (works council) and how its input feeds into sustainability decisions. ESRS S1 AR 20 notes that Global Framework Agreements with international trade unions can be disclosed here. For mid-market Dutch firms, the works council is typically the primary engagement mechanism, and your working paper should record the frequency of consultation, the topics covered, and whether the works council reviewed the sustainability report.
S1-3 (paragraph 30) addresses grievance mechanisms. The client must disclose whether a complaints handling mechanism exists for employee matters, how issues are tracked and addressed, and whether protections exist against retaliation for individuals who use the mechanism. If the client has already disclosed this under ESRS G1-1 (business conduct), they can cross-reference rather than repeat. Your working paper should confirm that the cross-reference is accurate and that the mechanism genuinely covers workforce matters, not just anti-corruption.
S1-4 (paragraph 35) requires disclosure of actions taken to address material impacts. The November 2025 draft adds a specific requirement: the client must explain what they do when workforce actions conflict with other business pressures. This is new. It forces the client to acknowledge, for example, that reducing overtime hours (a worker wellbeing action) may conflict with production deadlines (a commercial pressure). The disclosure is qualitative, but it tests whether the client’s sustainability commitment has substance beyond the policy document.
For the assurance practitioner, S1-4 is where the connection between sustainability disclosures and financial statement audit work becomes visible. If the client discloses significant investment in workplace safety improvements under S1-4, but capital expenditure in the financial statements shows no corresponding increase, that’s an inconsistency worth investigating. Conversely, if the financial statements include a restructuring provision affecting 50 employees, but S1-4 doesn’t mention the restructuring as a material negative impact, the sustainability disclosures may be incomplete.
The qualitative disclosures (S1-1 through S1-4) often get treated as boilerplate by first-year reporters. Clients copy policy language into the report without adapting it to the disclosure requirements. Your working paper should test whether each disclosure actually answers the question the standard asks. S1-1 asks what policies exist. S1-2 asks how the client engages workers. S1-3 asks what channels exist for raising concerns. S1-4 asks what actions the client has taken. If the disclosure for S1-2 reads like a restated version of S1-1 (describing the policy rather than the engagement process), it doesn’t satisfy the requirement.
How targets work under S1-5
S1-5 (paragraph 44) requires the client to disclose time-bound, outcome-oriented targets for managing material workforce impacts. The target framework follows ESRS 2 MDR-T, which means each target needs a defined baseline, a target value, a target date, and a description of the method for tracking progress.
Most mid-market clients don’t have formal workforce targets beyond generic statements like “we aim to be an employer of choice.” That’s not a target under ESRS 2 MDR-T. A target looks like this: “Reduce the accident rate from 21.2 per million hours worked (FY2025 baseline) to below 15.0 per million hours worked by FY2028.” It has a number, a baseline, and a deadline.
The client must also disclose whether they engaged workers or their representatives in setting the targets, tracking performance against them, and identifying improvements. In practice, this means the working paper should contain evidence of works council consultation on the targets, or a documented explanation of why consultation didn’t occur.
Workforce metrics: the data-heavy requirements (S1-6 through S1-17)
This is where ESRS S1 generates the most work for both the client and the assurance practitioner. Each metric requirement has specific disaggregation expectations, and the data often lives in different systems.
S1-6: employee characteristics (paragraph 48)
The client must disclose total headcount by country (for countries with 50 or more employees that are also in the top ten by employee count), by contract type (permanent vs. temporary), and by employment type (full-time vs. part-time). The November 2025 draft adds a turnover disclosure: leavers (from voluntary departure, dismissal, retirement, or death in service) divided by average employee headcount.
If the reported employee number differs from the most representative number in the financial statements, the client must provide a qualitative explanation. Differences between HRIS headcount and financial statement employee numbers are common. The explanation usually involves timing differences (HRIS as at 31 December vs. average FTE used in financial reporting), or scope differences (financial statements include entities consolidated under IFRS 10 that the HRIS doesn’t cover). Your working paper should reconcile the two figures and document the explanation.
S1-8: collective bargaining coverage (paragraph 58)
The client must disclose the percentage of employees covered by collective bargaining agreements. In the Netherlands, this is typically high for production and logistics firms (covered by sector-level CAO agreements) but lower for tech companies and startups. The client must also disclose the extent to which employees are represented in social dialogue in the EEA at establishment and European level. For a single-country Dutch firm, this means disclosing works council coverage. For a multi-country group, it means mapping social dialogue structures across jurisdictions.
S1-9: diversity metrics (paragraph 64)
The client must disclose gender distribution at top management level and age distribution among employees. Top management is not defined by the standard; the client must apply their own definition (which they disclose). The most common definitions are the management board, or the management board plus one level below. Age distribution typically uses bands (under 30, 30–50, over 50). Verify that the population used for the diversity calculation matches the total headcount disclosed under S1-6.
S1-10: adequate wages (paragraph 67)
The client must disclose whether all employees receive adequate wages. “Adequate” is defined by reference to applicable benchmarks: the statutory minimum wage in the relevant country, or where no statutory minimum exists, a recognised living wage benchmark. For a Dutch client, the statutory minimumloon is the floor. The disclosure requires the client to state whether any employees are paid below the applicable benchmark and, if so, the percentage of employees affected.
S1-14: health and safety metrics (paragraph 86)
The client must disclose whether an occupational health and safety management system is in place, the percentage of workers covered by it, accident rates per one million hours worked, and days lost to work-related injuries and illness. The November 2025 draft tightens the structure of this disclosure. The accident rate denominator (one million hours worked) is standardised, which means the client must track actual hours worked, not just headcount. For salaried employees with no time-tracking system, the client will need a standard assumption (typically 1,720 hours per FTE per year in the Netherlands). Your working paper should document the hours assumption and its source.
S1-15: work-life balance (paragraph 91)
The amended draft focuses on entitlement to family-related leave, not usage. This simplification reduces the data burden: the client discloses which categories of workers are entitled to parental leave, paternity leave, and other family-related leave, rather than tracking actual take-up rates. For a Dutch client covered by the Wet arbeid en zorg, the entitlements are statutory and apply to all employees. The disclosure is straightforward. Your working paper should confirm that the client’s leave policies match statutory requirements and identify any categories of workers (non-employees, for instance) who are excluded.
S1-16: remuneration metrics (paragraph 97)
Two metrics here. First: the unadjusted gender pay gap, calculated as the difference between the average gross hourly earnings of male and female employees, expressed as a percentage of male average gross hourly earnings. Second: the ratio of the highest-paid individual’s total annual remuneration to the median employee’s total annual remuneration.
The gender pay gap calculation is the single most complex data extraction in ESRS S1. The client’s payroll system must produce gross hourly earnings by gender. For salaried employees, this means converting annual salary to hourly (using actual or standard hours). Bonuses, allowances, and overtime payments may or may not be included depending on the client’s methodology, and the methodology must be disclosed. The November 2025 draft tightens what’s included in “pay” for this calculation. Your working paper should document the pay components included, the hours basis used, the population included (all employees, or full-time equivalents only), and any exclusions.
S1-17: incidents of discrimination and human rights (paragraph 101)
The client must disclose the number of work-related incidents and complaints, the number of severe human rights impacts, and any material fines, penalties, or compensation recognised in the financial statements. The November 2025 draft clarifies that “incidents” means substantiated instances (judicial or non-judicial proceedings initiated, or incidents registered through internal processes). This is a sensitive disclosure. Zero incidents is a valid answer if it’s accurate, but the working paper should document how the client defines “substantiated” and what internal processes exist for registering incidents. A client with no formal incident tracking system and a reported figure of zero has a documentation gap, not necessarily a misstatement.
Worked example: De Vries Techniek B.V.
De Vries Techniek B.V. is an industrial equipment manufacturer based in Zwolle, Netherlands. Revenue: €41M. One production facility, one sales office in Düsseldorf. 186 employees (174 in the Netherlands, 12 in Germany). 24 agency workers on the production line. First CSRD reporting year: FY2025.
1. Scope determination
Own workforce is material. Impact materiality: De Vries employs production workers on rotating shift patterns with documented musculoskeletal injury rates above the sector average. Financial materiality: a tight Dutch labour market creates recruitment and retention risk, with average replacement cost per production worker estimated at €18,000. The 24 agency workers are included in scope for S1-7 because they work on the same production line as permanent employees and face the same health and safety risks.
Documentation note
Record the materiality conclusion and link to the double materiality assessment. Document the rationale for including agency workers in scope.
2. S1-1: policies
De Vries has a workforce policy covering working conditions, health and safety, equal treatment, and training. The policy applies to all employees and agency workers performing work on De Vries premises. It references the ILO Core Conventions and is reviewed annually by the works council.
Documentation note
Obtain the policy document. Verify the annual review by inspecting works council meeting minutes from the most recent review cycle.
3. S1-6: employee characteristics
| Netherlands | Germany | Total | |
|---|---|---|---|
| Permanent, full-time | 148 | 10 | 158 |
| Permanent, part-time | 14 | 2 | 16 |
| Temporary, full-time | 12 | 0 | 12 |
| Total employees | 174 | 12 | 186 |
Employee turnover (FY2025): 22 leavers / 183 average headcount = 12.0%.
The financial statements report 189 FTEs. The difference of 3 arises because the financial statements count part-time employees as fractional FTEs, while S1-6 reports headcount. De Vries discloses this difference and the methodology in a reconciliation note.
Documentation note
Reconcile HRIS headcount to financial statement FTEs. Obtain the turnover calculation and verify leavers against HR exit records.
4. S1-14: health and safety
De Vries operates an occupational health and safety management system covering 100% of employees and agency workers on site. FY2025 metrics:
| Metric | Value |
|---|---|
| Fatalities from work-related injuries | 0 |
| Recordable work-related injuries | 8 |
| Hours worked (all covered workers) | 378,000 |
| Accident rate per 1,000,000 hours | 21.2 |
| Days lost to work-related injury | 142 |
The sector average accident rate (reported by the Arbeidsinspectie for metal manufacturing in the Netherlands) is approximately 15.0 per million hours. De Vries is above average. The disclosure notes that four of the eight injuries occurred in Q1 2025 before the installation of new ergonomic workstations on production line 2.
Documentation note
Verify injury records against the incident register. Confirm hours worked against payroll records (use standard 1,720 hours per FTE for salaried staff, actual recorded hours for hourly workers). Obtain the Arbeidsinspectie sector benchmark for comparison.
5. S1-16: gender pay gap
| Male average gross hourly | Female average gross hourly | Gap | |
|---|---|---|---|
| All employees | €28.40 | €24.10 | 15.1% |
The gap is driven by occupational segregation: 91% of production workers (higher-paid due to shift premiums) are male, while 62% of administrative staff are female. De Vries discloses this context alongside the metric. The highest-paid-to-median ratio is 6.8:1 (CEO total remuneration of €285,000 versus median employee remuneration of €41,900).
Documentation note
Obtain the gross hourly earnings extract from the payroll system. Verify that the calculation includes base salary and shift premiums but excludes one-off bonuses, as per De Vries’s disclosed methodology. Reconcile the total population to S1-6 headcount.
6. S1-17: incidents
De Vries registered one substantiated discrimination complaint through its internal grievance mechanism in FY2025 (related to language-based discrimination reported by a German-speaking employee at the Zwolle facility). No judicial proceedings were initiated. No fines or penalties were recognised in the financial statements.
Documentation note
Inspect the grievance register. Verify that the complaint resolution process was followed per policy. Confirm zero fines/penalties against the legal provisions in the financial statements.
Practical checklist for your next ESRS S1 engagement
- Before fieldwork: confirm the scope of “own workforce.” List every category of worker (permanent employees, temporary employees, agency workers, self-employed contractors) and document which fall within S1 versus S2. Record the rationale per ESRS S1 paragraph 5.
- Request a headcount reconciliation between the HRIS and the financial statements. If the numbers differ, draft the explanation before the client does. The most common causes are FTE versus headcount methodology, consolidation scope differences, and reporting date timing.
- For S1-14 (health and safety): verify that the client tracks actual hours worked, not estimated hours. If they use a standard assumption (1,720 hours per FTE), document the assumption and confirm it’s reasonable for the client’s working patterns.
- For S1-16 (gender pay gap): request the payroll extract by gender before fieldwork. Confirm which pay components are included. Flag any exclusions (board members, part-time workers, employees on extended leave) and verify they’re disclosed.
- Cross-check S1-17 incident data against the client’s legal provisions in the financial statements. If the financial statements include a provision for an employment dispute, but S1-17 shows zero incidents, that’s an inconsistency that needs resolution.
- For first-year reporters with fewer than 750 employees: confirm which phase-in provisions the client is applying and document the disclosure of which data points are omitted under ESRS 1 paragraph 132.
Common mistakes
- Reporting employee headcount without country-level disaggregation: the standard requires a breakdown for every country with 50 or more employees that is also in the top ten by employee count. A client with 600 employees in the Netherlands and 55 in Germany needs both countries reported separately.
- Calculating the gender pay gap using median instead of mean: ESRS S1-16 requires the unadjusted gap based on average gross hourly earnings (the mean), not the median. The median is a common labour market statistic but is not what the standard prescribes. The November 2025 draft retains the mean-based calculation.
- Omitting the SBM-2 and SBM-3 disclosures from ESRS 2: these are mandatory when S1 is material, but because they’re housed in ESRS 2 rather than S1, they’re frequently missed. SBM-2 requires disclosure of how workforce interests and views inform strategy. SBM-3 requires disclosure of how material workforce impacts interact with the business model. Both need to appear in the sustainability statement alongside the S1 disclosures.
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Frequently asked questions
Who counts as own workforce under ESRS S1?
ESRS S1 paragraph 5 defines own workforce as two groups: employees, and non-employees who supply labour to the undertaking. The non-employee group includes self-employed contractors working on the client’s premises and people employed by third parties engaged in employment activities such as agency workers and temporary staff. Workers in the upstream or downstream value chain are covered by ESRS S2, not S1.
How is the unadjusted gender pay gap calculated under ESRS S1-16?
The unadjusted gender pay gap under ESRS S1-16 is calculated as the difference between the average (mean) gross hourly earnings of male and female employees, expressed as a percentage of male average gross hourly earnings. The standard requires the mean, not the median. The client must disclose which pay components are included and the hours basis used for salaried employees.
What phase-in provisions apply to first-year ESRS S1 reporters?
Undertakings with fewer than 750 employees may omit all S1 information in their first reporting year under ESRS 1 paragraph 132. Larger undertakings may still omit certain data points in year one, including non-employee workers, employees with disabilities, and specific metrics on health and safety, work-life balance, collective bargaining, social protection, and training.
What does S1-6 require for employee headcount reporting?
S1-6 paragraph 48 requires total headcount by country (for countries with 50 or more employees that are also in the top ten by employee count), by contract type (permanent vs. temporary), and by employment type (full-time vs. part-time). If the reported number differs from the financial statements, the client must provide a qualitative explanation of the difference.
Are the SBM-2 and SBM-3 disclosures from ESRS 2 required when S1 is material?
Yes. SBM-2 requires disclosure of how workforce interests and views inform strategy, and SBM-3 requires disclosure of how material workforce impacts interact with the business model. Both are mandatory when S1 is material, but because they are housed in ESRS 2 rather than S1, they are frequently missed by first-year reporters.
Further reading and source references
- ESRS S1, Own Workforce: the source standard governing all 17 disclosure requirements for own workforce impacts, risks, and opportunities.
- ESRS 1, General Requirements: covers the double materiality assessment framework and phase-in provisions under paragraph 132.
- ESRS 2, General Disclosures: contains SBM-2 and SBM-3, mandatory when S1 is material.
- UN Guiding Principles on Business and Human Rights: the international framework referenced by ESRS S1 for policy alignment and grievance mechanism effectiveness.