Discussion 3
Rewarding Human Resources
a. The Case for Using Formal Evaluation
Of all the relationships between performance evaluation and other HRM
activities, none has been more crucial to understand than the one between evaluations
and equal employment opportunity, especially as it applies to promotions and
terminations. Unless evaluations are considered fair and decisions made using them
treat everyone with dignity, there will likely be intense conflict. A worthy goal of an
evaluation is that employees consider it meaningful, helpful, fair, and honest.
Unfortunately, this goal is difficult to attain because of a number of factors including
unfairness, negative practices, and a short-term focus. Critics of performance
evaluation systems offer some meaningful insights.
The HR Journal provides a detailed analysis of several points raised by the
renowned quality expert W. Edwards Deming. Deming's critique of traditional
management practices, particularly in the context of performance evaluation, offers
profound insights that are essential for understanding and improving these
approaches. His observations are not merely superficial comments but are deeply
rooted in his extensive research and experience in quality management and statistical
process control.
Deming argued that conventional performance evaluations often fail to
account for the systemic nature of work processes. He believed that performance
issues are more frequently due to the system itself rather than the individual worker.
This perspective shifts the focus from blaming individuals to understanding and
improving the underlying processes and systems. Deming's critique emphasizes that
workers are often constrained by the limitations of the system they operate within, and
thus, simply evaluating their performance without considering these systemic factors
is both unfair and unproductive.
One of Deming's primary concerns was the reliance on performance ratings
and rankings. He argued that these methods create competition rather than
collaboration among employees, undermining teamwork and harming overall
organizational performance. Rankings and ratings can lead to a fixed mindset, where
employees are more concerned with their ranking rather than continuous
improvement. This environment can stifle innovation and lead to a toxic workplace
culture where employees are unwilling to take risks or share knowledge.
Furthermore, Deming criticized the use of numerical goals and quotas in
performance evaluations. He believed that these targets are often arbitrary and can
lead to a narrow focus, where employees aim to meet the numbers rather than
improving the quality of their work. This can result in short-term thinking and
behaviors that are counterproductive to long-term success. For example, workers
might cut corners or engage in unethical practices to meet targets, which can
ultimately harm the organization.
Deming also highlighted the problem of performance appraisals being
conducted by supervisors who may lack the necessary understanding of the work
being evaluated. He pointed out that supervisors might not have a clear picture of the
challenges and obstacles faced by their subordinates, leading to evaluations that are
not fully informed. This can result in demotivation and resentment among employees
who feel that their efforts and difficulties are not adequately recognized or
understood.
Additionally, Deming emphasized the importance of intrinsic motivation over
extrinsic rewards. He believed that traditional performance evaluations often rely too
heavily on external rewards such as bonuses and promotions, which can undermine
intrinsic motivation. According to Deming, fostering a work environment that
promotes pride in workmanship and internal satisfaction can lead to more sustainable
and meaningful improvements in performance.
In summary, Deming's critique of traditional performance evaluation
approaches underscores the need for a more holistic and systemic perspective. By
focusing on improving the system, promoting collaboration, understanding the work
context, and fostering intrinsic motivation, organizations can create a more supportive
and effective performance evaluation process. These insights from Deming are crucial
for anyone seeking to learn more about performance evaluation and aim to implement
more thoughtful and constructive approaches in their organization.
A variety of important decisions are based on the results of performance
evaluations, including compensation, promotions, layoffs, transfers, and other critical
HR-related decisions. Organizational decision makers and HR professionals need to
make every attempt possible to use a fair and unbiased performance evaluation
system. This contributes to several positive organizational outcomes including
increased satisfaction, lower risk of litigation, higher levels of motivation, and
reduced turnover. 5 Unfortunately, some performance evaluation systems are
susceptible to bias on the part of supervisors who do the majority of performance
evaluations. Because managers’ judgments have been used during the evaluation
process, bias can exist in these decisions, whether it is intentional or not.
For example, assume a supervisor intentionally gives low performance ratings
to a 60-year-old subordinate who does above-average work but with whom the
supervisor doesn’t get along because the supervisor feels “old people aren’t
productive and should retire.” As a result of the low ratings, the subordinate may end
up experiencing a negative HR-related outcome (e.g., doesn’t receive a raise, is
transferred to an undesirable location, is terminated, etc.) as a result of a low
performance evaluation score. The subordinate would likely feel the performance
appraisal system is biased and unfair, and could possibly initiate legal proceedings
against the employer under the Age Discrimination and Employment Act. Another
form of legal recourse that some employees (i.e., members of protected classes) can
pursue when they feel that they have been subjected to unfair performance evaluations
is with Title VII of the Civil Rights Act.
A number of court rulings have focused on the responsibility of management
to develop and use a performance evaluation system in a legally defensible way. One
of the most important early cases was Brito v . Zia Company (1973), 6 in which the
company was found to be in violation of the law. The court ruled that the company
had not shown that its performance evaluation instrument was valid in the sense that it
related to important elements in the jobs for which the employees were being
evaluated. For example, some raters had little daily contact with the ratees. Since the
decision in Brito v . Zia Company, there have been many other lawsuits concerned
with the adequacy of performance evaluations. These have dealt with issues of sex,
race, and age discrimination in terminations, promotions, and layoffs.
While an organization should be concerned about the validity of its
performance evaluations, the way the system was developed and whether it is applied
consistently currently seem more important from a legal perspective. In age
discrimination cases, it also appears that the type of decision being challenged is
important for determining how much proof a company will be required to produce.
b. Format of Evaluation
The dimensions of performance upon which an employee is evaluated are
called the criteria of evaluation. Examples include quality of work, quantity of work,
and cost of work. One of the major problems with many performance evaluations is
that they require supervisors to make person evaluations rather than performance
evaluations. Most studies indicate that multiple criteria are necessary to measure
performance completely. The multiple criteria are added together statistically or
combined into a single multifaceted measure. The choice of criteria is not an easy
process. One must be careful to evaluate both activities (for example, number of calls
a salesperson makes) and results (for example, dollars of sales). A combination of
criteria using results and activities is desirable. How do you weigh the importance of
multiple criteria? For example, if a salesperson is being evaluated on number of calls
as well as sales dollars and is high on one and low on the other, what is the person’s
overall rating? Management must weigh these criteria.
When should evaluation be done? A survey conducted by the Human
Resources Institute found that only 36 percent of over 1,000 respondents actually
consider performance management essential. Also, only 17 percent indicated that their
employees believe the process of appraisal provides value to the organization. 12 For
those organizations that continue to rely on annual evaluations, there are two choices
for when to actually conduct the evaluations. In many organizations, performance
evaluations are scheduled for arbitrary dates, such as the date the person was hired
(anniversary date). Alternatively, all employees may be evaluated on or near a single
calendar date. Although the single-day approach is convenient administratively, it
probably is not a good idea. It requires raters to spend a lot of time conducting
evaluation interviews and completing forms at one time, which may lead them to want
to “get it over with” quickly. In addition, it may not be related to the normal task cycle
of the employee; this factor can make it difficult for the manager to evaluate
performance effectively.
It makes more sense to schedule the evaluation at the completion of a task
cycle. For example, tax accountants see their year as April 16 to April 15. For most
professors and teachers, the year starts at the beginning of the fall term and terminates
after the spring term. For others without a clear task cycle based on dates, one way to
set the date is by setting goals. Goals can be established in such a way that the
manager and employee agree on the task cycle, which terminates with an evaluation
of the employee’s performance during that cycle.
The operating manager (immediate supervisor) is, however, the person
responsible for conducting the actual appraisal in a vast majority of cases. The
supervisors chosen are those most likely to come into contact with the employee. This
approach has the advantages of offsetting bias on the part of one superior and adding
additional information to the evaluation, especially if it follows a group meeting
format.
In the peer evaluation system, the co-workers must know the level of
performance of the employee being evaluated. For this system to work, it is preferable
for the evaluating peers to trust one another and not to be in competition for raises and
promotions. This approach may be useful when the tasks of the work unit require
frequent working contact among peers. Exxon has used this system, and it is used in
some universities (students evaluate the faculty’s teaching effectiveness). It is used
more for the developmental aspects of performance evaluation than are some of the
other methods. Managers are less likely to accept being rated by subordinates if the
information is going to be used for administrative purposes (for example, raises and
promotions) than if it is used for development. This source of rating information is
also more acceptable if the managers believe that their subordinates are familiar with
the job. Also, subordinates’ evaluations should probably be restricted to “people-
oriented” issues such as leadership and delegation, rather than organizing, planning,
and other less easily observed aspects of the manager’s performance.
Known as the field review technique, this method uses a specialized appraiser
from outside the job setting, such as a human resource specialist, to rate the employee.
This approach is often costly, so it is generally used only for exceptionally important
jobs. It might be used for the entire workforce if accusations of prejudice must be
countered. A crucial consideration is that the outside evaluator is not likely to have as
much data as evaluators in any of the other four approaches. The use of an outside
evaluator represents a somewhat a typical approach to appraising performance.
In this case, the employee evaluates herself or himself with the techniques
used by other evaluators. This approach seems to be used more often for
developmental (as opposed to evaluative) aspects of performance evaluation. It is also
used to evaluate an employee who works in physical isolation. Self-evaluations have
often been met with skepticism by organizations because the selfinterests of the
employee could outweigh an objective evaluation. 15 However, research has
demonstrated that self-evaluations can correlate reasonably well with supervisors’
ratings; especially if the employees have information about their co-workers’
performance, employees can provide accurate appraisals of their own performances.
Surveys and research indicate that most employees are not satisfied with one
or more aspects of performance evaluation systems. 17 It is not surprising, therefore,
that organizations are experimenting with alternatives to the traditional “supervisor
only” downward appraisal. One system of appraising performance that appears to be
growing in popularity is the 360- degree feedback system. As the name implies, this
method uses multiple appraisers, including supervisors, subordinates, and peers of the
target person. In some cases, it also includes selfappraisals. The appraisal is 360
degrees in that information is collected and feedback is provided in full circular
fashion—top to bottom and back to the top. Many organizations now utilize some
form of 360-degree programs. The program at British Aerospace is typical. 18 The
upward portion of the feedback program involves an anonymous system whereby
team members provide information about their supervisors, using a questionnaire.
Then, these results are collated so that a report can be prepared for the manager.
Anonymity is generally considered important, except in an environment where there
is an exceptionally high degree of trust. At Google, employees identify “peer
reviewers” from any part of the entire organization (not just from their team or
department). 19 Once identified, these reviewers complete an online evaluation of the
employee in question. Reviewers are encouraged to use constructive criticism in their
reviews.
Research suggests that including upward and peer feedback in an appraisal can
have positive effects on managers’ behavior. In addition, these effects seem to be
sustainable over time. Thus, there appears to be a future for 360-degree programs.
And, while these programs were originally believed to be useful primarily to develop
feedback, some estimates suggest that 90 percent of companies using 360-degree
programs used the information to help with personnel decisions such as merit pay
increases and promotions. However, improper attempts to introduce 360-degree
systems into cultures not prepared for them (e.g., where there is a low level of trust or
too much competition) can have predictably disastrous effects.
c. Objective of Compensation
The objective of the compensation function is to create a comprehensive
system of rewards that is equitable to both the employer and the employee. This
system aims to balance the needs and goals of the organization with those of its
workforce, ensuring that employees feel valued and fairly compensated for their
contributions while the employer can maintain a sustainable and competitive
compensation structure. The desired outcome is to attract, retain, and motivate
employees who are not only capable of performing their jobs well but are also
committed to the organization's mission and objectives.
To achieve this, a well-designed compensation system must address multiple
dimensions of fairness and effectiveness. It should be structured to provide adequate
financial rewards, recognize individual and team achievements, and offer
opportunities for career advancement and personal growth. Patton suggests that an
effective compensation policy must meet seven key criteria, which provide a robust
framework for evaluating and developing compensation strategies.
This criterion ensures that employees perceive their pay as fair when
compared to others within the same organization. Internal equity involves creating a
clear and transparent salary structure that reflects the relative value of different roles
based on their responsibilities, required skills, and contributions to the organization. It
helps in preventing resentment and dissatisfaction among employees who might feel
undervalued or unfairly treated compared to their peers.
To attract and retain top talent, an organization's compensation levels must be
competitive with those offered by other employers in the same industry and
geographic area. External competitiveness requires regular benchmarking and market
analysis to ensure that the compensation offered is attractive enough to prevent
turnover and attract new talent. This includes not only base salaries but also benefits,
bonuses, and other forms of remuneration.
This principle ties compensation directly to individual and organizational
performance. It ensures that employees who contribute more to the organization
through higher productivity, exceptional skills, or leadership receive greater rewards.
Pay for performance can include merit increases, bonuses, and other incentives that
motivate employees to excel in their roles and contribute to the organization's success.
An effective compensation system must comply with all relevant labor laws
and regulations. This includes adhering to minimum wage laws, overtime pay
requirements, and non-discrimination policies. Legal compliance ensures that the
organization avoids costly lawsuits and penalties while fostering a fair and respectful
workplace. The compensation system should be designed to achieve its objectives
without placing undue financial strain on the organization. This involves finding a
balance between offering competitive compensation and maintaining the
organization's financial health. Cost-effectiveness requires careful budgeting and
financial planning to ensure that compensation expenses are sustainable over the long
term.
Compensation policies should support the strategic objectives of the
organization. This means designing compensation packages that encourage behaviors
and outcomes that align with the organization’s mission, vision, and strategic goals.
For example, if innovation is a key objective, the compensation system might include
rewards for creativity and successful implementation of new ideas.
In summary, the goal of the compensation function is to create a balanced and
effective system that meets the needs of both the employer and the employees. By
adhering to the seven criteria for effectiveness outlined by Patton—internal equity,
external competitiveness, pay for performance, legal compliance, cost-effectiveness,
alignment with organizational goals, and flexibility and adaptability—organizations
can develop compensation policies that attract, retain, and motivate employees while
supporting the overall strategic objectives of the organization. This comprehensive
approach to compensation ensures that employees feel valued and fairly rewarded,
which in turn fosters a more engaged, productive, and loyal workforce.
d. External Influences on Compensation
Although many feel that human labor should not be regulated by forces such
as supply and demand, it does in fact happen. In times of full employment, wages and
salaries may have to be higher to attract and retain enough qualified employees; in
recessions and depressions where there is excess supply of people looking for work,
pay can be lower. Pay may also be higher if few skilled employees are available in the
job market. This situation may occur because unions or accrediting associations limit
the numbers certified to do the job. In certain locations, because of higher birthrates or
a recent loss of a major employer, more people may be seeking work. These factors
lead to what is called differential pay levels . At any one time in a particular locale,
rates for unskilled labor seek a single level, and rates for minimally skilled
administrative work seek another. Research evidence in labor economics provides
adequate support for the impact of labor market conditions on compensation. Besides
differences in pay levels by occupations in a locale, there are also differences between
government and private employees and exempt and nonexempt employees, as well as
international differences.
The increase in labor market diversity is not only changing the way managers
approach their jobs but also how they reward employees. Workforce diversity means
more than simply keeping track of the demographic characteristics of current and new
employees. It means understanding differing value systems (such as liberal versus
conservative and traditional versus futurist), lifestyles, body types—the list goes on
and on. Diversity isn’t limited to multiracial, multicultural, and multiethnic impacts
on the workplace. It refers to any mixture of elements characterized by differences
and similarities among employees. Perhaps the easiest relationship to imagine
between rewards and diversity has to do with benefits. Rapidly changing
demographics will require employers to offer more, and more varied and flexible,
benefits to motivate, satisfy, and retain employees. For example, in order to attract
experienced retirees back to work, Dana Corporation began offering a prorated
benefits package to get employees to work part-time and a flexible contract so that
they could work only part of the year to remain eligible for Social Security.
Yet another dimension of labor market diversity having an impact on reward
systems is the increasing level of formal education. In 2009, over 77 percent of all
adult Americans had some college education, 50 percent of all college students were
over 25, and more than half of all college graduates were women. This increasing
educated population will not hesitate to ask for changes in pay and benefits to fit the
needs of their changing lifestyles. Let’s look at a couple of more diverse groups.
Generation Y has the highest percentage of members who have finished high school
and college. This generation values work–life balance, interesting and socially
responsible work, and vacation time to pursue individual interests. However, some
members of Generation Y aren’t always patient and don’t appear willing to pay their
dues and work their way up through the ranks.
Designing a reward system that would motivate them is in conflict with the
values of some of the older generations of workers within the organization. Another
group of employees who are increasingly filling jobs are temporary or contingent
workers. These nonpermanent workers present challenges with regard to
compensation. 7 Temps in the 21 st century are a permanent fixture, not just people
who fill in for secretaries on vacation but workers ranging from the top to the bottom
of organizations, including marketing specialists, executives, and HR professionals. A
recent survey reported that 10 percent of jobs taken by law school graduates in 2010
were temporary.
Employers have been transporting cheap labor to work on site since the
building of the pyramids. 9 Chinese railway builders were transported to the
American West at the turn of the 19 th century, and workers were flown into Britain’s
Gatwick Airport from Ireland toIwork on the Channel Tunnel. Compensation
specialists must base their plans on a competitive global marketplace.
Economic consideration and the growth of technology have contributed to the
offshore explosion among U.S. organizations. The low cost of living in developing
countries allows management to pay workers less than American workers. A computer
analyst in the United States earns an average of $63,000 a year. In India, the same
worker earns less than $6,000. Note the significant differences in labor costs in
industrialized countries such as Germany, the United States, and the United Kingdom
and developing countries such as Mexico.
Skill levels, the infrastructure, quality of production, cost of transportation,
and political considerations should be evaluated in deciding whether the significant
differences in Mexico’s and Germany’s labor costs warrant shifting production. That
is, should Germany shift manufacturing production offshore to Mexico? The response
requires a more careful and complete analysis than simply weighing the labor cost
differences.
Also affecting compensation as an external factor are the economic conditions
of the industry, especially the degree of competitiveness, which affects the
organization’s ability to pay high wages. The more competitive the situation, the less
able the organization is to pay higher wages. Ability to pay is also a consequence of
the relative productivity of the organization, industry, or sector. If a firm is very
productive, it can pay higher wages. Productivity can be increased by advanced
technology, more efficient operating methods, a harderworking and more talented
workforce, or a combination of these factors.
One productivity index used by many organizations as a criterion in
determining a general level of wages is the Bureau of Labor Statistics’ “Output per
Man-Hour in Manufacturing.” This productivity index is published in each issue of
the Monthly Labor Review . For about 70 years, productivity increased at an average
annual rate of approximately 3Ipercent. The percentage increase in average weekly
earnings in the United States is very closely related to the percentage change in
productivity plus the percentage change in the consumer price index. In 2009, the
productivity index has improved to 3.6.
The government directly affects compensation through wage controls and
guidelines, which prohibit an increase in compensation for certain workers at certain
times, and laws that establish minimum wage rates and wage and hour regulations and
prevent discrimination. Several times in the past the United States had established
wage freezes and guidelines. President Harry Truman imposed a wage and price
freeze from 1951 to 1953, and President Richard Nixon imposed freezes from 1971 to
1974. Wage freezes are government orders that forbid wage increases. Wage controls
limit the size of wage increases. Wage guidelines are similar to wage controls, but
they are voluntary rather than mandatory.
The Fair Labor Standards Act (FLSA) of 1938 is the basic pay regulation act
in the United States. It was passed to try to counteract the abuses encountered by
production (line) workers in the manufacturing sector of the economy who were
working long hours for low pay. In the act, there are four provisions: minimum wage,
overtime, child labor, and the Equal Pay Act of 1963. 14 FLSA is comprehensive,
covering businesses with two or more employees engaged in interstate commerce, in
the production of goods for interstate commerce, or in handling, selling, or working
on goods or materials that have been moved in or produced for interstate commerce.
About 92 percent of nonsupervisory farm and nonfarm wage earners are covered. It is
administered by the Department of Labor, which also acts as the enforcement agency
through the Wage and Hour Division of the Employment Standards Administration
(ESA).
The minimum wage provision of FLSA establishes an income floor for low-
paying jobs. One change was a two-tiered raise from $4.25 per hour to $4.75 in
October 1996 and then to $5.15 per hour in September 1997. The minimum wage law
was changed in 2007 that resulted in a three step change from $5.85 to $7.25 from
2007 to 2009. As of 2011, the average minimum wage remains at $7.25 per hour. The
typical minimum-wage worker is female, over age 25, and employed part-time. In
fact, three in five of these workers are women, often the family’s main or only wage
earner. One-third of the total are teenagers on their first job. 17 Employees under 20
years of age may be paid an “opportunity wage” of one-third of the total per hour
during the first 90 consecutive days of employment. Certain full-time students,
student learners, apprentices, and employees with disabilities may be paid less than
minimum wage under special certificates issued by the Department of Labor.
Employers of workers who get tips (like food servers) must pay a cash wage of at
least $2.13 per hour.
The minimum wage is one of the most controversial provisions. Basic
disagreement about its effects centers on the view of classical economists, who
contend that any rise in the minimum wage will soon be offset by an immediate rise in
the level of unemployment. 18 However, not all economists agree that the minimum
wage is detrimental; some hold that the minimum wage does not raise the level of
unemployment in the long run— rather, it harmlessly raises the wages of the lowest-
paid workers. The impact on the change in the minimum wage on small businesses
(50 or fewer employees) will be a 5.3 percent increase in wage costs for employees
currently earning less than the new minimum. Businesses most likely to be affected
are retailing, food, and lodging.
The FLSA requires that hourly (nonexempt) employees receive overtime
compensation for working more than 40 hours in a given week. The law requires
“time and a half”: one-half the base rate of pay is added to the employee’s regular
base pay for every hour worked beyond the regular 40 hours. 19 Salaried (exempt)
employees do not receive overtime pay. A more precise definition of a salaried
employee is one who regularly receives a predetermined amount (e.g., a fixed salary)
constituting all or part of his or her compensation. Making a distinction between
exempt and nonexempt workers is not always easy. Exempt individuals are those in
executive, administrative, professional, or outside sales positions who are paid on a
salaried basis. To qualify as exempt, an employee must meet certain requirements and
make at least $455 per week.20 But an employee classified as manager, technical, or
professional who is paid on an hourly basis is nonexempt. If federal and state law
conflict, the one that is most generous to the employee applies. Violation of the
overtime provision can result in a requirement to pay for uncompensated overtime,
civil penalties, and liquidated damages.
The Equal Pay Act of 1963 (EPA) is an amendment to the FLSA. Its purpose
is to guarantee that women holding essentially the same jobs as men will be treated
with respect and fairly compensated regarding all rewards of work: wages, salaries,
commissions, overtime pay, bonuses, premium pay, and benefits. 22 Comparisons
cannot be made between individuals holding the same job at different companies.
Employers may pay workers of one gender more than another on the basis of merit,
seniority, quality or quantity of production, or any factor other than sex. The gender
gap in pay in 2010 averaged 23 percent; the average woman made 77 percent of the
earnings of the average white male. 23 Four elements are used to establish the
equality of positions: skill, effort, responsibility, and working conditions.
The difference in wages includes not just the money earned as base pay but
also any type of compensation such as vacations, holiday pay, leave of absence,
overtime pay, lodging, food, and reimbursement for clothing or other expenses. When
filing a claim under EPA, all the plaintiff has to do is to prove that one man or one
woman is making more for doing the same job. In one recent court case, the judge
found that two positions with the same job title (office manager) were not equal
because the man had less supervision than the woman; therefore, it was legal for the
man to make 20 percent more. In an effort to close the remaining earnings gap, there
has been a growing movement in the last few years to have the widely accepted
concept of equal pay for equal jobs expanded to include equal pay for comparable
jobs.
The concept of comparable worth (sometimes called pay equity) is not the
concept that women and men should be paid equally for performing equal jobs.
Rather, comparable worth attempts to prove that employers systematically
discriminate by paying women less than their work is intrinsically worth , versus what
they pay men who work in comparable (equally valuable) positions—and to remedy
this situation. The term comparable worth means different things to different people.
First, comparable worth relates to jobs that are dissimilar in their content (e.g., nurse
and plumber) but of equal value to the organization and society. Second, women
appear to be concentrated in lower-paying, predominantly female jobs.
Yet when men take “women’s work,” they tend to be at the top of the pay scale
there, too. Advocates of comparable worth therefore contend that individuals who
perform jobs that require similar skills, effort, and responsibility under similar work
conditions should be compensated equally regardless of gender. 24 The notion of
value is extremely important in examining differentials between men and women.
Most people would agree that water is more valuable than diamonds, but diamonds
are much more expensive than water. This differential arises because the supply of
water is abundant relative to demand. When administrative assistants, librarians, and
cashiers are in short supply, what employers have to pay them will rise.
The Walsh-Healy Act of 1936 requires firms doing business with the federal
government to pay wages at least equal to the industry minimum. It parallels the Fair
Labor Standards Act on child labor and requires time-and-a-half pay for any work
performed after eight hours a day. 25 It exempts some industries, however—again,
like FLSA. The Davis-Bacon Act of 1931 requires the payment of minimum
prevailing wages of the locality to workers engaged in federally sponsored public
works. The McNamara-O’Hara Service Contract Act requires employers who have
contracts with the federal government of $2,500 per year or more, or who provide
services to federal agencies as contractors or subcontractors, to pay prevailing wages
and fringe benefits to their employees. The Civil Rights Act of 1964 and the Age
Discrimination Act of 1967 are designed to ensure that all people of similar ability,
seniority, and background receive the same pay for the same work. The Equal
Employment Opportunity Commission enforces the Civil Rights Act, while the Wage
and Hour Division enforces the Equal Pay Act and the Age Discrimination Act. The
Federal Wage Garnishment Act (1970) is designed to limit the amount deducted from
a person’s pay to reduce debts. It also prohibits an employer from firing an employee
if the employee goes into debt only once and has pay garnished. The employer may
deduct as much from the paycheck as required by court orders for alimony or child
support, debts due for taxes, or bankruptcy court rulings.
Another important external influence on an employer’s compensation program
is labor unionization. Unionized workers work longer hours and make more than
nonunionized workers. Unions have an effect whether or not the organization’s
employees are unionized. Unions have tended to be pacesetters in demands for pay,
benefits, and improved working conditions. There is reasonable evidence that unions
tend to increase pay levels, although this is more likely where an industry has been
organized by strong unions. If the organization stays in an area where unions are
strong, its compensation policies will be affected. There is a supportive interaction
between unions and government influences on compensation.
Several federal laws apply. For example, the Davis-Bacon Act and similar
laws require employers with government contracts to pay prevailing wages.
Prevailing wages for any locale are determined by the Department of Labor. In most
instances, the prevailing wage is the union wage in that region. So unions help
determine wages even for nonunionized employees. When a union is trying to
organize employees at a particular place of employment, the organizing campaign
places constraints on the compensation manager. The Wagner Act makes it illegal to
change wage rates during the organizing campaign, so wages are effectively frozen
for the duration. Refusal to bargain over wages is prohibited by this act. This means
that the compensation manager is bound by the results of the collective bargaining
process in setting wages.
The union is more likely to increase the compensation of its members when
the organization is financially and competitively strong, the union is financially strong
enough to support a strike, the union has the support of other unions, and general
economic and labor market conditions are such that employment is low and the
economy is strong. Unions also bargain over working conditions and other policies
that affect compensation. Unions tend to prefer fixed pay for each job category or rate
ranges that are administered primarily to reflect seniority rather than merit increases.
This is true in the private sector and other sectors. Unions press for time pay rather
than merit pay when the amount of performance expected is tied to technology (such
as the assembly line). Although union membership in the United States has declined
in the past decade, the influence of unions on wages cannot be counted out.
e. Internal Influences on Compensation
In addition to the external influences on compensation already discussed,
several internal factors affect pay: the size, age, and labor budget of the organization
and who is involved in making pay decisions for the organization. Little is known
about the relationship between organization size and pay. Generally speaking, it
appears that larger organizations tend to have higher pay. Nor is much known about
the relationship between age and pay, although some researchers contend that newer
enterprises tend to pay more than old ones. Thus only the labor budget and who
makes the decisions will be discussed.
The labor budget normally identifies the amount of money available for
annual employee compensation. Every unit of the organization is influenced by the
size of the labor budget. A firm’s budget does not normally state the exact amount of
money allocated to each employee; rather, it states how much is available for the unit
or division. Discretion in allocating pay is then left to the department heads and
supervisors. Theoretically, the close contact between supervisors and employees
should allow for accurate performance appraisals and proper allocation of labor
dollars.
More is known about who makes compensation decisions than about some
other factors, but this is still not a simple matter. Decisions on how much to pay, what
system to use, what benefits to offer, and so forth, are influenced from the top to the
bottom of the organization. In large, publicly held organizations, the stockholders and
the board have a great deal of say about pay, especially at the top of the organization.
Top management makes decisions that determine the total amount of the firm’s budget
to be earmarked for pay, the form of pay to be used (e.g., time-based versus incentive
pay) and other pay policies. As the firm grows in size, compensation specialists,
general managers, and job incumbents may also have input. Whirlpool Corporation
corporate executives make major reward decisions. Pressures from international
competition have changed its approach.
Today, top managers and compensation specialists jointly establish overall
financial and operating goals for the corporation. Then each level of management
establishes its own plan to support corporate compensation objectives. The new
system rests on performance appraisals directly linked to overall strategic goals for
the firm. All employees, even the CEO, participate in the performance appraisal
process, from which all changes in pay flow. Even smaller firms are giving employees
a say in determining pay. For instance, Com-Com Industries, a small metal-stamping
shop in Cleveland, Ohio, allows workers to set compensation rates, through a
volunteer committee of 10 to 15 members. They determine wage rates for jobs
ranging from floor sweeper to president, using market pricing. The committee even
completes its own pay survey of the local competition.
Satisfaction is an evaluative term that describes an attitude of liking or
disliking. Pay satisfaction, therefore, refers to an employee’s liking for or dislike of
the employer’s compensation package, including pay and benefits. 28 Even though at
least 3,500 scholarly articles have been written about pay satisfaction, research on it is
not very definitive. 29 A recent meta-analysis of 92 samples from other research
studies found a weak correlation of .15 between pay level and job satisfaction. 30 This
previous research has failed to find convincing evidence that workers’ satisfaction
leads to increases in productivity. And although it seems logical to assume that
employees derive satisfaction from being paid well or getting desired benefits or
services, this is a very subjective conclusion.
In fact, the sheer complexity of reward systems made up of numerous
components like base pay, bonuses, benefits, and services makes it even more difficult
to research employees’ satisfaction. The clearest indication of satisfaction may be
patterns of absenteeism and turnover. Edward Lawler developed a model based on
equity theory to help explain dissatisfaction and satisfaction with pay. The distinction
between the amount employees receive and the amount they think others are receiving
is the immediate cause. If they believe the two amounts are equal, pay satisfaction
results. The feedback loop between the employee’s perception and fairness and
subsequent work behavior leads to fluctuations in output. 31 Expectancy theory can
also be used to get employees to motivate themselves, on the basis of their views of
what they want and how they can get it. Research conducted by Simons found which
components of the pay system will lead to satisfaction differed by type of workers:
Industrial workers preferred interesting jobs more than high pay; hotel workers
preferred high wages above everything else. 32 Other research studies found that
important predictors of pay satisfaction include pay desired versus pay earned;
feelings of being entitled or deserving, and relative deprivation theory. 33 Relative
deprivation theory suggests that pay dissatisfaction is a function of six important
judgments: (1) a discrepancy between what employees want and what they receive;
(2) a discrepancy between a comparison outcome and what they get; (3) past
expectations of receiving more rewards; (4) low expectations for the future; (5) a
feeling of deserving or being entitled to more than they are getting; and (6) a feeling
that they are not personally responsible for poor results. Herzberg’s hygiene theory
adds another twist. 34 He proposed that the opposite of job satisfaction is not
dissatisfaction but just the absence of satisfaction. Nor is the absence of
dissatisfaction necessarily positive satisfaction. When applying his theory to pay, he
reached the conclusion that pay simply prevents workers from being demotivated.
Increasing payroll costs and competition in the global marketplace have
caused managers throughout the United States to search for ways to increase
productivity by linking compensation to employees’ performance. 35 High
performance requires much more than motivation. Ability, adequate equipment, good
physical working conditions, effective leadership and management, health, safety, and
other conditions all help raise performance levels. But employees’ motivation to work
harder and better is obviously an important factor. A number of studies indicate that if
pay is tied to performance, the employee produces a higher quality and quantity of
work.
The Your Career Matters on the next page discusses how organizations are
using alternative methods (other than pay) to motivate employees during times of a
weak economy and high unemployment. Early evidence linking pay and performance
is found in the Code of Hammurabi, written in the 18 th century b.c., which
documents the use of a minimum wage, a fixed wage, and incentive rewards. 37
Traveling merchants were paid on the basis of a strong performance incentive—unless
investors received double profits, these merchants weren’t paid. However, during the
Middle Ages it was “common knowledge” that workers would be productive only as
long as they needed to be, perhaps working three days a week and spending the other
four celebrating. The dawn of industrialism found capitalists seeking a way to use
rewards to encourage productivity: the incentive wage.
f. Determination of Individual Pay
To the individual employee, the most important aspect of compensation is
often the specific amount he or she will earn. This focus on earnings encompasses not
only the base salary but also the various additional components that contribute to total
compensation. These might include bonuses, benefits, stock options, and other
financial rewards. The determination of individual pay is a complex process that can
be approached in several ways, each with its own set of principles, methodologies,
and implications for both the employee and the employer.
First and foremost, market-based pay is a common approach where the
organization aligns its compensation levels with those prevalent in the external labor
market. This involves conducting salary surveys and benchmarking against similar
positions in comparable organizations. The goal is to ensure that the company's pay
rates are competitive enough to attract and retain talented employees while preventing
turnover due to pay dissatisfaction. Market-based pay helps ensure that employees
feel their compensation is fair relative to what they could earn elsewhere, thereby
enhancing job satisfaction and loyalty.
Another approach is job evaluation-based pay, which focuses on the internal
valuation of different roles within the organization. Job evaluation methods, such as
the point factor method, rank jobs based on various compensable factors like skill,
effort, responsibility, and working conditions. Each job is assigned a value or point
score, which is then translated into a pay grade or salary range. This approach
promotes internal equity by ensuring that pay levels reflect the relative importance
and complexity of different roles within the company.
Skill-based pay is another innovative approach where compensation is tied to
the employee’s skill set and competencies rather than the specific job they perform.
This system encourages continuous learning and development, as employees are
rewarded for acquiring new skills and enhancing their expertise. It can lead to greater
flexibility in job assignments and career development opportunities, as employees
with broader skill sets can fill various roles within the organization. This approach
also aligns with modern organizational needs for adaptability and continuous
improvement.
Performance-based pay links compensation directly to the individual’s
performance and contributions to the organization. This can take the form of merit
pay, where salary increases are based on annual performance reviews, or incentive
pay, such as bonuses and commissions tied to specific performance metrics or goals.
Performance-based pay aims to motivate employees to achieve higher levels of
productivity and quality by providing tangible rewards for their efforts. It also aligns
employees’ objectives with those of the organization, fostering a culture of high
performance and accountability.
Seniority-based pay is a more traditional approach where pay increases are
based on the length of time an employee has been with the organization. This method
rewards loyalty and experience, ensuring that long-term employees receive
compensation that reflects their tenure and accumulated knowledge. However, this
approach may not always incentivize high performance or skill development as
effectively as other methods.
Competency-based pay focuses on rewarding employees for their proficiency
in specific competencies that are critical to the organization’s success. This approach
assesses employees based on their ability to demonstrate and apply key competencies
in their roles. It encourages employees to develop expertise in areas that drive
organizational performance and can be particularly effective in industries where
specialized knowledge and skills are crucial.
Moreover, organizations may employ a broadbanding approach to simplify
and streamline their pay structures. Broadbanding consolidates many traditional salary
grades into a few wide bands, allowing for greater flexibility in managing employee
compensation. This can facilitate career development by providing broader salary
ranges within which employees can move based on performance, skills, and
experience, rather than being restricted to narrow pay grades.
In addition to these structured approaches, negotiated pay is also an important
consideration, particularly for roles at higher organizational levels or in industries
where individual negotiation is common. In these cases, compensation is often
determined through discussions between the employer and the employee, taking into
account the individual’s qualifications, experience, and the value they bring to the
organization.
Finally, total rewards strategies encompass not just financial compensation
but also non-monetary benefits such as health insurance, retirement plans, paid time
off, flexible working arrangements, and opportunities for career development and
advancement. These comprehensive packages aim to meet the diverse needs and
preferences of employees, enhancing overall job satisfaction and engagement.
In conclusion, determining individual pay involves a multifaceted approach
that considers market conditions, job value, skills, performance, seniority,
competencies, and negotiation. By leveraging these various approaches, organizations
can develop compensation systems that not only attract and retain top talent but also
motivate and reward employees in ways that align with the organization's strategic
goals and values. Each method has its strengths and challenges, and the most effective
compensation strategies often combine elements from multiple approaches to create a
balanced and equitable system that meets the needs of both the employer and the
employees.
g. Methods of Payment
In the unionized firm where wages are established by collective bargaining,
single flat rates rather than different rates are often paid. For example, all
“Administrative Assistants” might make $14.00 per hour, regardless of seniority or
performance. Flat rates correspond to some midpoint on a market survey for a given
job. Using a flat rate does not mean that seniority and experience do not differ. It
means that employers and the union choose not to recognize these variations when
setting wage rates. Unions insist on ignoring performance differentials for many
reasons. They contend that performance measures are inequitable. Jobs need
cooperative effort that could be destroyed by wage differentials. Sales organizations,
for example, pay a flat rate for a job and add a bonus or incentive to recognize
individual differences. Choosing to pay a flat rate versus different rates for the same
job depends on the objectives established by the compensation analyst. Recognizing
individual differences assumes that employees are not interchangeable or equally
productive. By using pay differentials to recognize these differences, managers are
trying to encourage an experienced, efficient, and satisfied workforce.
nternational competition and global economic restructuring are requiring
businesses to become measurably more productive. Pay strategies and pay systems
used for years are outdated, and continued reliance on outdated pay systems is one
reason why American business organizations cannot successfully compete
internationally. 4 An article in HRMagazine reported this growing realization that
traditional pay systems do not effectively link pay to performance or productivity. 5
As a result, managers have increasingly turned to variable pay plans.
Hewlett-Packard (HP) Systems has for many years been an example of
innovation and trendsetting human resources policies, including introducing new
types of variable pay. HP acquired Colorado Memory Systems, a small manufacturer
of computer components, and wanted to have a smooth acquisition. At the time of the
acquisition, Colorado Memory was about to go public, and loyal employees were
eager to become owners of the business. HP wanted to keep Colorado’s employees
loyal and enthusiastic, so it designed a variable pay system that would help retain
employees and assimilate them into HP at the same time. Building on an existing
profit-sharing plan, HP created a new system for Colorado. First, base pay for all
employees was raised to 90 percent of comparable pay at HP. The remaining 10
percent was dedicated to a gainsharing scheme called “success sharing.”
At the end of the first quarter, Colorado employees exceeded their goals by 20
percent and took home a matching 20 percent quarterly bonus! 9 With variable pay, a
percentage of an employee’s paycheck is put at risk. The result is that if business
goals aren’t met, the pay rate will not rise above the lower base salary. Annual raises
are not guaranteed. For example, base pay might be set at $30,000 with a variable
award or end-of-year bonus of up to $6,000. The individual could earn all or part of
the bonus by meeting objectives: lowering costs, raising productivity, raising quality,
or increasing customer satisfaction. Base pay the next year would return to $30,000,
and the employee would again be eligible to compete for the additional variable
reward.
The most widely used plan for managing individual performance is merit pay .
Heneman defines merit pay as “individual pay increases based on the rated
performance of individual employees in a previous time period,” or a reward based on
how well an employee has done the job. Traditionally, merit pay results in a higher
base salary after the annual performance evaluation. Merit increases are usually
spread evenly throughout the subsequent year.
It investigated what size merit increase is necessary to get the desired results
inIterms of motivation. The findings showed that anything less than 6 to 7 percent was
not motivating, and that merit increases above that level could actually be
demotivating. Advocates of merit pay call it the most valid type of pay increase. They
argue that it is directly tied to performance because awards are linked to the
performance appraisal system. 14 Rewarding the best performers with the largest pay
is claimed to be a powerful motivator. However, this premise has two flawed
assumptions: (1) that competence and incompetence are distributed in roughly the
same percentages in a work group and (2) that every supervisor is a competent
evaluator. Researchers have questioned whether merit pay as currently implemented
has anything to do with performance or, rather, whether it tolerates, rewards, and even
encourages mediocrity.
Straight piecework is an individual incentive plan where pay determination
fluctuates based on units of production per time period (usually pieces per hour). 20
An example of an organization that uses straight piecework is a sewing mill that has
set an hourly standard for machine operators of sewing 25 shirts per hour. Wages are
calculated by multiplying the number of shirts completed by the piece rate for one
shirt. Employees who exceed the standard of 25 shirts per hour make higher wages
based on the additional piece rate per unit completed. This is probably the most
frequently used piecework incentive plan. Work standards are set through work
measurement studies as modified by collective bargaining. The actual piece rates may
emerge from data collected by pay surveys. This incentive system is easy for
employees to understand, but setting the work standards is extremely difficult.
The standard-hour plan bases wages on completion of a job or task in some
expected period of time. 21 You have probably encountered the standard-hour plan
when you took your car to a garage to be fixed. The labor costs on your bill are based
on an estimate of how long it should take to do any given task like change spark plugs
or replace brakes. For example, the average time to replace brakes may be two hours.
If the mechanic is extremely efficient, the job may be finished in an hour and a half,
but your bill will reflect the charge for two hours of labor, and the mechanic will be
paid accordingly. Standard-hour plans are ideal pay plans for long cycle operations
and highly skilled, nonrepetitive jobs.
Another variation of the straight piecework rate is the differential piece rate or
Taylor plan . Originally developed by Frederick W. Taylor, the originator of scientific
management theory, the differential piece rate uses two separate piecework rates: one
for those who produce below or up to standard and another for those who produce
above standard. 23 Using the example of the sewing factory, the employees who made
up to 25 shirts per hour might receive a piece rate of 50 cents per shirt. Those who
made more than 25Ishirts per hour would be paid at a higher rate, perhaps 60 cents per
shirt. This system was designed to reward the highly efficient worker and penalize the
less efficient.
Commissions paid to sales employees are another type of individual incentive.
A commission is compensation based on a percentage of sales in units or dollars.
Straight commission is the equivalent of straight piecework. The commission paid is
typically a percentage of the price of the item. For example, real estate salespeople are
paid a percentage of the price of any property they sell, typically between 7 and 9
percent. A sales variation of the production bonus system pays the salesperson a small
salary and a commission or bonus when he or she exceeds the budgeted sales goal.
Individual incentives are used more frequently in some industries (clothing, steel,
textiles) than others (lumber, beverage, bakery), and more in some jobs (sales,
production) than others (maintenance, administrative). Individual incentives are
possible only in situations where performance can be specified in terms of output
(sales dollars generated, number of items completed). In addition, employees must
work independently of each other so that individual incentives can be applied
equitably.
h. Background
The programs offered in work organizations today are the product of efforts in
this area for the past 75 years. Before World War II, employers offered a few benefits
and services because they had the employees’ welfare at heart or because they wanted
to keep a union out. But most benefit programs began in earnest during the war, when
wages were strictly regulated. The unions pushed for nonwage compensation
increases, and they got them. Court cases in the late 1940s confirmed the right of
unions to bargain for benefits: Inland Steel v . National Labor Relations Board (1948)
(pensions) and W. W. Cross v . National Labor Relations Board (insurance). The
growth of these programs indicates the extent to which unions have used this right. In
1929, benefits cost the employer 3 percent of total wages and salaries; by 1949, the
cost was up to 16 percent; and in the 1970s, it was nearly 30 percent.
By 2010, the benefits and services slice of labor costs ranged from 20 to 60
percent of payroll. This figure can be broken down as follows: 8.7 percent of payroll
went for legally required social insurance payments, 6.0 percent for private pension
plans, 11.5 percent to insurance plans, and the remaining 14 percent for all other types
of benefits. 3 Some employers provide these programs for labor market reasons; that
is, to keep the organization competitive in recruiting and retaining employees. Others
provide them to keep a union out or because the union has won them during
negotiations. Another reason often given for providing benefits and services is that
they increase employees’ performance. Is this reasoning valid? In a study of benefits,
it was found that none of these reasons explained the degree to which benefits and
services were provided.
HR executives often seek professional advice from specialists such as
members of the Society of Professional Benefit Administrators. These are
independent consultants who areIemployed by benefit carriers like insurance
companies. In very large organizations, theIcompensation department may have a
specialist in benefits, usually called a manager or director of employee benefits.
Many authorities argue that all organizations should have benefits and
services, but there is little concrete evidence that they affect employees’ productivity
or satisfaction. In the 1940s and 1950s, a major thrust of union bargaining was for
increased or innovative benefits. Union pressure for additional holidays was followed
by demands for such benefits as group automobile insurance, dental care, and prepaid
legal fees. Union leaders have varied the strategy and tactics they use to get “more.”
The long-range goal is getting employers to perceive benefits not as compensation but
as part of their own social responsibility. Today unions are trying desperately to hold
all the gains that were made in previous decades and to stop the pervasive erosion of
such benefits as pensions and health care.
For over 60 years, public policy has played a role in determining what benefits
an employee receives. 5 First, the government mandates (legally requires) certain
benefits: old age and survivors’ insurance (Social Security), disability insurance,
Medicare, unemployment insurance, and workers’ compensation. In addition, through
preferential tax treatment, the government encourages businesses to provide other
benefits. Current policy allows firms to deduct benefit expenses, and the value of
benefits is not counted as current income for employees. Passage of the Welfare Fund
Disclosure Act requires descriptions and reports of benefits plans. The National Labor
Relations Board and the courts have stringent rules on eligibility for benefits and
employers’ ability to change an established benefits plan.
Economic and labor market conditions influence decisions about benefits
because in tight labor markets organizations seeking the best employees compete by
offering better benefits and services, which are nontaxable income. In addition, the
composition of the labor market has had an increasing impact on the type of benefits
and services offered. For example, the increased number of women in the workforce
has resulted in increasing pressure for longer maternity leaves, family leave benefits,
child-care services, and elder care services. The aging of the workforce means that
such services and benefits as preretirement planning, health insurance, and pensions
are increasingly demanded.
The amount of money an employer spends on benefits is related directly to the
financial health of the employer and the industry. Healthy, profitable companies tend
to expand benefits during good times. But when the economy weakens or profits fall,
the cost of the benefit programs intensifies financial problems. Benefit costs must be
passed on to someone. For example, health care costs alone add over $1,500 to the
price of every Americanmade car. In December 2009, the Bureau of Labor Statistics
reported that private employers spent an average of $27.42 per hour worked for total
employee compensation, of which benefits accounted for $8 (or 29.2 percent) of this
amount.
i. Mandated Benefits Programs
Three benefits programs offered by private and not-for-profit employers are
mandated by federal and state governments. An employer has no choice about
offering mandated benefits programs and cannot change them in any way without
getting involved in the political process to change the existing laws. The three
mandated programs are unemployment insurance, social security, and workers’
compensation.
Unemployment insurance and allied systems for railroad, federal government,
and military employees cover 95 percent of the labor force. Major groups excluded
from UI are self-employed workers, employees of small firms with less than four
employees, domestics, farm employees, state and local government employees, and
nonprofit employers such as hospitals. To be eligible for compensation, the employee
must have worked a minimum number of weeks, be without a job, and be willing to
accept a suitable position offered through a state Unemployment Compensation
Commission. A Supreme Court decision granted unemployment insurance benefits to
strikers after an eight-week strike period. The Court ruled that neither the Social
Security Act nor the National Labor Relations Act specifically forbids paying benefits
to strikers. Each state decides whether to permit or prohibit such payments.
Federal unemployment tax for employers in all states accounts for 0.8 percent
of payroll. The tax pays for administrative costs associated with unemployment
compensation, provides a percentage of benefits paid under extended benefits
programs during periods of high unemployment, and maintains a loan fund for use
when a state lacks funds to pay benefits due for any month. Unemployment tax rates,
eligibility requirements, weekly benefits, and duration of regular benefits vary from
state to state. 11 Before benefits are paid, the reason for being unemployed must be
assessed. 12 An applicant can be disqualified for voluntarily quitting a job. On the
other hand, a negotiated quit, that is, quitting to avoid discharge, is a legitimate reason
for collecting unemployment benefits. Some states penalize employers who report
such quits as voluntary. Discharge for work-related misconduct usually means the
applicant is disqualified. Proper documentation is an employer’s best protection in
unemployment hearings.
The employee receives compensation for a limited period, typically a
maximum of 26Iweeks. In most states the weekly benefit amount is equal to 1/26 of
the worker’s average earnings, yielding a total benefit of 50 percent of earnings.
Minimum and maximum benefit amounts are set by the federal government.
Minimum benefits usually range from $0 (New Jersey) to $102 (Rhode Island) per
week, maximum benefits from $133 (Puerto Rico) to $646 (Massachusetts); the
average benefit is from $90 to $175. Unemployment compensation in both Canada
and Europe differs from that provided in the United States. 13 For example, in
Europe, employees who are placed on reduced work schedules (fewer hours per
week) receive short-term unemployment compensation. Research has shown that the
American practice of paying unemployment only to those working zero hours can
encourage the overuse of temporary layoffs. Canada, which has a much more liberal
unemployment benefits program that includes both wider eligibility and faster
delivery of benefits, has a much higher unemployment rate than the United States.
