5. Analysis of current assessment processes

The following section describes the research team's analysis of the various wage determination processes identified during the research project.

5.1 Historical models

Many Business Services pay wages based on their capacity to pay, or in some cases, on historical arrangements that have endured for many years. These wage systems operate in a variety of ways, including:

• basic payment structures whereby all employees receive the same weekly wage (or hourly rate);
• basic payment schedules with incremental increases according to duration of employment;
• payment of wages negotiated between the individual worker (and/or carer/advocate) and the Business Service, outside of an award or Enterprise Agreement; or
• payment of a basic wage (the same for all employees) that has been calculated as a proportion of the appropriate award and placed in an Enterprise Agreement. (For example, a basic wage of $40 per week has been paid to all employees, which equates to approximately 10 per cent of a full award wage. The Enterprise Agreement then states that all employees receive 10 per cent of the award wage, which provides a mechanism for ongoing indexation.)

The ad hoc nature of these wage determination processes and the vast differences in rates of payment, make it difficult to determine whether they comply with appropriate legislation, standards and concepts of 'fairness'. Whilst the research team did not conduct detailed analyses of each Business Service applying these methods (and each Enterprise Agreement into which these systems have been incorporated), it appears unlikely that many such systems would be viewed positively if placed under scrutiny.

Advantages

The historical or ad hoc wage assessment processes identified during the research project were highly variable in terms of wage outcome and structure, although in general, the advantages of such systems include:

• ease of implementation.payment of set wages without formal review limits the cost associated with coordinating and conducting assessments;
• little confusion for employees.workers know what they will be paid and are not required to undergo continual assessments;
• wages can be set at a level that ensures the Business Service is able to pay; and
• employees are not concerned about eligibility for social security benefits, as wages are usually below the threshold for benefit reduction.

Disadvantages

There are a number of disadvantages associated with historical wage determination systems. Whilst some Business Services (in particular, section 13 services) are not required to meet all of the supporting standards of Disability Services Standard 9, FaCS encourages compliance with each of the supporting standards from a quality assurance perspective. Ideally, FaCS supports all Business Services progressing along a 'standards continuum' until full compliance (and therefore best practice) is attained. Many historical systems may not comply with Standard 9 (and supporting standards) of the Disability Services Standards. In particular, such systems do not necessarily demonstrate that:

• the agency ensures that each employee with a disability has the same rights, protection and responsibilities as other people in the workforce (this is the minimum requirement for all Business Services);
• the agency ensures that each employee with a disability receives an agreed minimum wage or salary that reflects progress toward an award-related wage;
• where the agency is also the employer, the budgeted costs of the agency reflect progress towards an award-related wage;
• the agency recognises that labour costs of employees with a disability are an integral cost of running a business and accordingly are a part of the budgeted costs;
• the agency provides opportunities for career advancement, including access to training and skills development consistent with the opportunities provided in the general workforce;
• the agency ensures that each employee with a disability works in a job and in a work environment in which he or she receives the same employment conditions, rights, protections and responsibilities as those expected and enjoyed by other people in the general workforce.
• the agency ensures that each employee with a disability receives award wage rates or pro-rata award wage rates determined through an independent industrial relations process; and
• the agency ensures that each employee is employed under an award or industrial agreement.

The research team notes that some of the supporting standards above do not explicitly state performance indicators and may therefore be interpreted in a number of ways in internal or independent audit processes.

In addition, the following disadvantages of historical/ad hoc wage determination systems have been identified:

• wages do not reflect the employee's skills or knowledge, which may be considered discriminatory;
• superannuation payments are variable, with some employees earning below the superannuation threshold, receiving no superannuation contribution;
• the lack of structured assessment may limit the capacity to identify and facilitate access to appropriate training and skills development;
• wages paid in these circumstances tend to be very low; and
• minimising wages devalues workers and creates unrealistic market expectations of labour costs in Business Services, and it also perpetuates a competitive environment in which Business Services 'under-cut' each other to win contracts.

Current wage determination systems that are based on historical pay rates or are based only on the organisation's capacity to pay are not considered appropriate. Business Services employing such systems should be encouraged to explore alternative options and plan for the implementation of a valid assessment tool that complies with relevant standards and the concept of fairness.

5.1.1 Profit sharing

Some Business Services reported a 'profit-share' arrangement that applies to wage payments. These structures tended to be ad hoc in nature, whereby profitable business activity results in distribution of profits according to an assessment of contribution toward producing the final product. Usually, these systems operate in conjunction with a basic (historical or simple productivity-based) wage payment. Alternatively, some Business Services employ a quasi profit-sharing process by issuing profit dividends to workers in the form of a superannuation supplement, which therefore does not influence eligibility for social security benefits.

Advantages

The primary benefit of this system is that workers share in the profitability of the organisation. This fosters a sense of ownership in the organisation/product, and encourages workers to self-monitor their own productivity.

Disadvantages

Difficulties associated with this system include determining what is a 'fair' distribution of profits, and the impact that additional 'bonus' payments have on Centrelink benefits for the worker. Workers may also become confused about how pay rates are determined. In addition, Business Service operators are likely to accept work that varies in profitability, which may lead to circumstances whereby the link between effort and reward is unclear.

These systems of wage determination are not appropriate in the Business Services sector.

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5.2 Awareness and use of the Supported Wage Assessment Tool

The following table presents the feedback from informants in the consultation process relating to the advantages and disadvantages of applying the SWAT in Business Services. Some Business Services involved in the research project are using the SWS in its entirety or the SWAT only (or a variation of it). Other stakeholders providing feedback commented in relation to the hypothetical implementation of the SWAT in the Business Service they represent. Although the responses are quite variable, they are loosely ranked in order of priority/frequency of response.

Advantages of the SWAT

• Assessment is independent and process is transparent;
• System is known and accepted by most services, particularly those involved or familiar with open employment services;
• Minimum wage guaranteed;
• Infrastructure, accredited assessors, systems and monitoring processes are already in place (may enable economies of scale, assessor pooling, group assessment, co-worker benchmarks etc.);
• Multiple assessment observations (at different times or on different days) enhance reliability and allow for variation in a better way than one-off reviews;
• Encourages Business Services to charge for work at market rates, provide quality products and develop sophisticated business systems. This will ultimately improve viability and competitiveness of the Business Service;
• Link to awards enables compliance with quality standards and participation in Case-Based Funding Trial;
• Enables employees with varied skill and productivity levels to be employed in one setting;
• Union involvement is promoted (although the level of this involvement is often minimal);
• Enhances links between employment services, and recognises that Business Services and open employment are part of the same system (legislation, standards etc are common to both);
• Minimises possibility of worker exploitation, meets Disability Discrimination Act 1992 (DDA) and Disability Services Standards (particularly standard 9).

Disadvantages of the SWAT

• Costs likely to increase significantly due to increased wages;
• Cost of administering the SWAT would be prohibitive if not subsidised by FaCS (ie if not a section 10 service);
• Anecdotal reports that assessors may overstate worker productivity;
• SWAT able to be 'manipulated' by workers or assessors ie productivity displayed during assessment is not representative of usual activity;
• Difficult and costly to administer where there are many workers and/or many jobs across varied industries;
• Difficult to gauge activities of co-worker or develop benchmarks due to the 'tailored' nature of some jobs;
• Does not assess people against all components of the job, only the tasks that are being undertaken (this tends to overstate productivity);
• Assumes basic competencies are held by the worker, less suitable for people with high support needs;
• 10% payment increments under the SWS may be too broad, 5% increments suggested;
• Need to re-assess workers when moving between jobs;
• Knowing that a minimum rate of pay is required may influence employee recruitment to those only capable of 'earning' $50 per week. This may reduce accessibility to the service.

As the above table demonstrates, there are many reasons in favour of the application of the SWAT across the Business Services sector. Similarly, however, many limitations or disincentives were also identified during the consultation process.

Conclusion

The Supported Wage Assessment Tool is a valid, reliable and accepted form of wage assessment that has already been implemented by some Business Services. As identified in section 6, the SWAT complies with relevant legislation and standards. It is, however, a costly system with considerable resource requirements to appropriately support its implementation. It is also noted that the SWAT does not formally link to structured training and professional development strategies.

Those currently using the system or in support of its broader adoption tend to be those services with either profitable business operations, high proportions of workers with low support needs and/or access to Commonwealth subsidised assessments (that is, section 10 services).

Many of those expressing dissatisfaction with the SWAT tend to have less profitable business operations, higher proportions of workers with high support needs, or limited capacity to fund extensive assessment processes by independent assessors. However, some of those critical of the SWAT have developed alternative assessment processes due to their perceptions of the SWAT's applicability in the Business Services sector.

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5.3 Other productivity models

The SWAT is considered a productivity-based assessment tool, as it monitors the output of workers against an established benchmark (the co-worker). During the research project, a number of alternative productivity assessment tools were identified, with a similar objective.to determine the output of a worker in the particular job that they occupy.

The productivity-based assessment processes reviewed as part of this project usually resulted in the payment of low wages. Without using comparative assessment strategies, it is impossible to determine whether this was a reflection of the assessment process or the capacity of employees in these settings. Following workplace observation, however, it is the subjective opinion of the research team that wages paid under these systems tended to 'down rate' productivity and subsequently result in lower wages than might reasonably be expected.

There are a number of significant differences between the SWAT and other productivity tools identified, which influence the extent to which alternative productivity assessments comply with legislation, standards and the concept of fairness. These differences include:

• alternative productivity assessments tend to rely on internal assessment, which raises questions of objectivity and manipulation;
• the outcome of the assessment is not always linked to an award, but may be used as a 'ranking' system for employees;
• benchmarks may be arbitrarily set rather than practically determined using a formal process;
• assessments are often conducted by the employee's supervisor/case manager as part of the annual employment planning process, therefore considering issues much broader than productivity only;
• assessment processes may not be formally documented, or may not be clearly understood by employees or their advocates;
• employees may or may not be made aware of the assessment being undertaken. For example, many employees record their productivity in an ongoing manner (such as by the use of tally sheets) and are unaware of which day or week's outputs will be included in their assessment;
• there is rarely union involvement in the negotiation of pay and conditions; and
• frequency and duration of assessments vary (that is, assessments are not necessarily reliant on multiple observations).

Advantages

The primary advantages of alternative productivity assessment processes are:

• they may be adapted to the particular industry/workplace or specific job;
• they can be conducted efficiently, minimising administrative workload and assessment costs;
• they may be linked to awards and included in Enterprise Agreements;
• they do not necessarily rely on a non-disabled co-worker as a benchmark;
• assessing workers without their knowledge minimises bias associated with the employee working at a rate that is inconsistent with his/her usual productivity; and
• the assessment process may not operate from a deficit model. That is, the result of the assessment is not expressed as a proportion of an able-bodied worker's capacity.

Disadvantages

A number of disadvantages were also identified when examining alternative productivity assessment tools, including:

• where the assessment process is not formalised, there is potential for variable assessment practice;
• the use of internal assessors may limit the objectivity of the assessment process;
• the productivity assessment looks only at the job tasks being performed, therefore assessment result is not transferable between jobs;
• variable assessment processes limit consistency across the sector, meaning a worker may be assessed at a different level for the same job in different Business Services;
• some productivity assessment processes are quite simple, although others are complex and may be difficult to understand;
• pay outcomes for people assessed by these processes seemed lower in comparison to the SWAT; and
• assessors are not always qualified in workplace assessment, which may reduce the efficacy of the assessment tool.

In conclusion, the alternative productivity-based assessment tools reviewed generally did not represent best practice in the view of the research team.

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5.4 Competency-based assessment

There is a growing trend throughout Australian industry and more recently in the Business Services sector to implement competency-based assessment procedures to determine wages. A number of such systems have been developed, the most commonly recognised competency system being the Greenacres tool, which has been adopted (or plans to be) by a number of Business Services around the country. (Note: the Greenacres tool is in fact a hybrid assessment system, discussed further in section 5.5 below). In fact, none of the systems reviewed in the research project were competency-based only. Therefore, this section discusses the potential application of assessment processes focusing on competencies only.

In an assessment process that examines competency only, the assessment allocates employees to a wage classification band determined by complexity of job, which considers not only the tasks the person completes, but also the skills, knowledge and attitudes (that is, competencies) the person possesses. The assessment is linked to a training model whereby the domains in which the employee has not demonstrated competency may be addressed, enhancing the employee's career path options.

The review of competency-based assessment tools revealed a number of key considerations. First, it was noted that many systems that claimed to be competency-based were in fact skills-based in the context of the definitions in section 3.4 above. In fact, there was only one competency-based tool reviewed by the team that demonstrated a link to accepted industry standards (Wangarang Industries). Second, the rationale for calibration or alignment of assessed scores to a wage level was not clearly articulated. In fact, the research team considers that whilst some of the assessment processes appeared sound and valid, the link to a 'fair' wage was not in keeping with the assessed level of competency. That is, the research team noted that some extremely capable people who were functioning in quite complex jobs had been assessed as competent, yet their pay did not reflect this. Finally, some assessment processes that were considered solely competency-based actually included elements of productivity assessment within them, and should actually be considered a hybrid system. An analysis of the merits of hybrid systems is presented in section 5.5.

Advantages

In a true competency-based assessment system, employees are assessed in accordance with industrydetermined competencies, which are generally linked to training needs identification. This system enhances the employee's potential to progress through a structured career path, and enables transferability of assessment between workplaces, even if the job changes, as many common or generic competencies apply to a variety of industries.

Other advantages of a purely competency-based assessment tool are:

• assessment is usually conducted separately to the Individual Employment Plan by specialist qualified assessors (organisations using a competency-based system are usually committed to principles of life-long learning);
• competencies are recognised regardless of the employee's level of output, rewarding workers that may not necessarily be the fastest, but taking into account the skills and knowledge applied in completing a particular job;
• competency assessment enables the allocation of jobs (particularly more complex jobs) to those who are qualified and competent to fill the position;
• consistent assessment, training and wage determination/classification processes may be used for disabled and non-disabled workers, minimising discrimination and enhancing opportunities for the establishment of integrated workplaces;
• workers may access education and training externally.this contributes to the attainment of competencies or industry approved qualifications (for example, certificates linked to training packages, traineeships/apprenticeships and so on); and
• there is a clear link to relevant awards, and opportunities for transition to open employment are enhanced as competencies and qualifications are transferable.

Disadvantages

If competency-based assessment does not take worker productivity into account, the wage determination would indicate that anyone with a set of competencies is entitled to 100 per cent of the award wage. This would be considered inappropriate in many Business Services (and in the 'usual' workplace), as the rate of output of these employees significantly influences the profitability (and therefore capacity to pay) of the Business Service. The incentive to employ people with disabilities would therefore be dramatically reduced.

The relative recency of competency-based assessment may also act as a barrier to the implementation of such systems. Productivity-based assessment has become the norm in open employment settings and in a number of Business Services, whereas competency-based assessment has been implemented in relatively few services. Resources directed toward training Business Services and employees in competency-based assessment would be required prior to the implementation of a single assessment tool utilising competency-based principles.

Other disadvantages of a competency-based system include:

• cost.application of a true competency-based assessment system requires the investment of significant resources including assessment costs, training resources and administration/coordination;
• timing.implementing formal competency-based assessment in large organisations will require significant planning; and
• Calibration of wage rates in accordance with assessed competency levels.at this stage considered inappropriate, and more work is required to ensure that both the assessment and the corresponding wage rate are fair and equitable.

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5.5 Hybrid models

Hybrid models identified during the research project are highly variable depending on the balance or priority of competency versus productivity assessment. As discussed above, some assessment processes that were considered competency-based only, in actual fact included productivity elements. In addition, it should be noted that the preferred model of best practice for wage determination was most commonly cited as a combination of productivity and competency-based assessment.

The hybrid assessment tools that were considered most effective by the research team include an initial competency assessment component that broadly 'streams' employees by competency level, with subsequent productivity assessment to determine exact wage rates against appropriate benchmarks. Ideally, the benchmarks will be set by a co-worker in an integrated workplace environment or will be documented in appropriate industry standards. As identified above, however, only one assessment process linked the competency assessment to endorsed industry training package competencies.

Advantages

As may be expected, the hybrid model has the potential to utilise the best components of both productivity and competency-based assessment tools, although the research team is reluctant to recommend any of the current models as an ideal example of best practice.

The potential benefits of the hybrid model include:

• recognising competencies of employees as well as their outputs;
• enabling transferability of assessment (or parts of the assessment) between jobs or workplaces;
• assessment methods are flexible and the worker has a greater involvement in negotiations associated with the assessment;
• enhancing links between training and employment, and between open and sheltered employment;
• rational links to awards can be developed;
• the capacity to place the most appropriate person in each job is enhanced; and
• issues associated with refined or tailored jobs are minimised, as is the reliance on co-worker benchmarks.

Disadvantages

Whilst the hybrid model is the preferred model of the research team, there are potential disadvantages that should be considered prior to adoption of a hybrid assessment model. These issues include:

• a hybrid system may be complicated and difficult to understand for Business Services and employees alike.decisions relating to the negotiation of wages based on these assessments should be made after clear discussion of the assessment process and outcome. A single assessment process across the sector will minimise confusion;
• hybrid models may be manipulated if wage calculation following the assessment is inappropriate. Again, a single validated system will minimise the potential for misuse of a hybrid model;
• Business Services will be required to allocate significant resources toward assessment (if not subsidised) and in-house (on-the-job) training, in addition to facilitating access to external training programs; and
• whilst elements of the assessment will be transferable and linked to open employment, dichotomous assessment processes in Business Services and open employment settings will remain. Ultimately, however, the single assessment tool for Business Service employees may be adapted to open employment settings.

The research team concluded that a hybrid model represents the most appropriate method of wage determination in Business Services. However, the team is reluctant to recommend any of the existing assessment tools as the preferred method of hybrid wage assessment.