Adjusted Minimum Wage Assessments of
People with Disabilities in the United States and Australia
Submitted to the Israel Committee for Inclusion of People with
Disabilities in the Labor Market
Ministry of Industry, Trade and Labor
Document produced by:
The Burton Blatt Institute: Centers of Innovation on Disability at Syracuse
University (BBI)
Adjusted Minimum Wage Assessments of
People with Disabilities in the United States and Australia
Stephan Haimowitz, J.D., Michal Soffer, Ph.D.
This report is a brief review of the adjusted minimum wage assessment process for
people with disabilities in the United States and Australia. It is one of a series of reports
developed by staff of the Burton Blatt Institute at Syracuse University at the request of
Israel’s Ministry of Industry, Trade and Labor to assist the Ministry in analyzing its policies
and practices related to employment of people with disabilities.
Both the US and Australia have chosen to implement mechanisms for adjusting
minimum wage standards to reflect assessed productivity of individuals with moderate to
severe disabilities. These mechanisms, which are elements of programs aimed at creating
employment opportunities for these individuals, are similar in some ways and quite different
in others. Although not by definition limited to sheltered workshops, both countries use
adjusted minimum wages primarily in such workshops rather than in competitive
employment settings. Both countries also have income benefit programs linked to adjusted
minimum wage rates, though few worker/beneficiaries reach an adequate income level. It
should be noted that Burton Blatt Institute staff have produced a number of reports which
analyze the problems of adjusted minimum wages programs, and propose approaches to
creating employment opportunities which afford the individual a meaningful and sustaining
worklife.1
In addition to an adjusted minimum wage program used in sheltered workshops,
Australia has a small but growing adjusted wage program which supports such individuals in
competitive employment settings. The program, which provides supports to employees and
incentives to employers, seeks to increase the individual’s opportunity for career
advancement in a personally chosen career and for economic independence.
1
See, for example, Michael Morris et al. SECTION 14C OF THE FAIR LABOR STANDARDS ACT:
FRAMING POLICY ISSUES (2002) available at
http://bbi.syr.edu/publications/morris/Policy_Report_042002.doc
2
ADJUSTED MINIMUM WAGE ASSESSMENT IN THE UNITED STATES
The 14 C Mechanism (Sheltered Workshops)
This adjusted minimum wage in the US is known as the “sub-minimum wage.” The
Fair Labor Standards Act, the central law governing minimum wages in the US, provides in
Section 14 C that sub-minimum wages may be paid to workers with disabilities who have
reduced work capacities, but the employer must first obtain a Special Certificate from the US
Department of Labor (DOL) in accordance with regulations2 promulgated by the department
and which have the force of law. In practice, the vast majority of individuals earning subminimum wages under a Special Certificate are employed in sheltered workshops,
administered by non-profit organizations, and are segregated from the competitive
employment arena.
As will be discussed, the employer seeking a Special Certificate must determine the
wage rates for individuals based upon their productivity, ranging from 1% to 100% of the
established minimum wage, and demonstrate how the rates were established. Workers can
be paid at either an hourly rate or a piece rate for the number of units they produce.
The process for obtaining a Special Certificate starts with the employer developing a
complete analysis of the work that is to be performed, considering all the tasks, methods,
materials and equipment to be used, as well as any other factors that may affect the work
(location, time of day, weather conditions, etc.)
The employer must then determine a "standard" for that job which reflects the
productivity of the average worker. Given the enormous diversity in jobs and their duties,
DOL does not require the use of any particular work measurement method when evaluating
productivity but does require that the measurement be verifiable through an established
industrial work measurement technique.3
The regulations recognize that even experienced
2
29 Code of Federal Regulation Part 525
These techniques may include stopwatch time studies, the first technique that was developed, though concerns
exist about the subjectivity introduced by the person conducting the study. More structured Methods-Time
Measurement (MTM) technique were developed in the late 1940’s and have been frequently revised. More
3
3
workers work at different paces and recommend that the employer averages the performance
of at least 3 different workers without disabilities. Though such averaging is not required by
the DOL, it is often done in the various components of the US wage assessment system
outlined in this report.
Just as a standard of productivity for the specific job must be determined, the
employer must establish the customary or prevailing wage in the local community for an
experienced worker without a disability who performs essentially the same type, quantity,
and quality of work.
The employer seeking a Special Certificate must then assess the productivity of the
person with a disability using the same methodology used for the non-disabled worker(s).
DOL requires that person with a disability have opportunity to become familiar with the job
tasks, and that assessment not occur under conditions that would interfere with productivity.
Behavioral factors, such as personal appearance, hygiene, promptness, social skills,
willingness to follow orders, etc., may not be considered because it is generally understood
that such factors can often be addressed through accommodation and support.
If the job includes several varied tasks, the employer may perform a work
measurement on each task and arrive at an overall standard by weighting each task by the
proportion of time spent performing it. DOL’s regulations address two additional issues work quality, and personal time/fatigue/delay. With regard to assessing work quality,
employers generally use one of two methodologies, “Rework” or “90/10.”
Rework is perhaps the simplest method to assess work quality when evaluating the
productivity of workers paid by the hour. It requires that the employer accurately define both
the minimal acceptable quantity standard and minimal acceptable quality standard before
workers are evaluated. These standards must be specified in writing and clearly articulated to
the workers prior to the assessment. Examples of quality standards for hourly paid jobs are
recently, Modular Arrangement of Predetermined Time Standards have been utilized in many workplace
settings. Sheltered workshops generally use an MTM technique and establish the standard from either
information provided by a comparable business or from simulating the work to be performed using a nondisabled staff person.
4
“the number of streaks left on a mirror or window to be cleaned by a janitor,” or “the number
of pieces of mail incorrectly sorted by a mail room attendant.”
The employer them performs a stopwatch time study of a worker who is not
disabled performing the specified tasks until the worker indicates that he or she has
satisfactorily completed the work. The amount of time is recorded, and the work product is
examined by the person conducting the study to ensure that the worker has met the preestablished minimum quality and quantity standards. If those standards have been met, the
time recorded is the standard to which the work of the worker with the disability is compared
to establish the commensurate wage rate. If either of the minimum acceptable standards is
not met by the non-disabled worker, he/she is advised of the shortcoming(s) and the study
will resume with the worker performing "rework." The "clock" will be restarted and run until
the worker corrects/completes the work product to the point where it meets the minimum
acceptable standards. The time spent during the initial study, and all time spent performing
rework, are then added together to establish the standard.
The worker with a disability then undertakes the same time study with the same
quality and quantity standards. The total time spent by that person is then compared to the
total time spent by the worker without a disability. The percentage obtained by this
comparison can be utilized in the commensurate wage determination.
Another method is the 90/10 rating system which assigns a 90 percent weight to the
quantity of work performed and a 10 percent weight to the quality of that work. This system
is most commonly used when the job is in the services sector and not for jobs where a piece
rate standard can be applied. In the 90/10 rating system, the employer first compares the
quantity of work performed by the worker with a disability to that of the non-disabled
standard setter and multiplies this figure by 90%, and then compares the quality of the work
performed and multiplies that number by 10%. The two ratings are then added together to
determine the overall productivity rating. As with Rework, the minimum acceptable
standards of both quality and quantity must be well defined and communicated to the
workers.
5
The DOL has determined that when properly executed, the 90/10 form, as a general
rule, results in the payment of an objectively determined commensurate rate. No such
determination has been made for any method that assigns a higher weight to the quality
rating than 10 percent. Employers who wish to do so will be required to submit
documentation of sufficient detail to justify such ratings. They are also be required to
demonstrate that workers who do not have disabilities earning the prevailing wage when
performing essentially the same type of work are also held to such quantity and quality of
work standards in the vicinity.
When piece rates are used to compute adjusted minimum wages, employers are
required to allow for the normal fatigue which prevent any employee, not only one with a
disability, from producing at their most rapid pace throughout the workday. In addition,
breaks, cleanup time, and delay time while materials are being restocked or the finished
products are removed, all reduce the amount a worker can produce. Employers must take
this nonproductive time into consideration when determining piece rates by including what is
known as the “Personal Time, Fatigue and Delay Factor” of at least 15%, or approximately 9
minutes per hour.
Finally, the employers must calculate the special minimum wage rate by applying the
worker’s productivity rate to the prevailing wage for that job in that community, or to the
minimum wage required by federal law (by state law if higher than the federal law.) For
example, if a 14(c) employee has 75% of the work capacity of an experienced employee
without a disability, and the prevailing wage paid to the latter group is $10.00 per hour, then
the minimum wage for the 14(c) employee would be $7.50 per hour. The employer is required
to review the wage rate(s) at least every six months and promptly adjust wages when indicated.
As stated above, the Special Certificates which permit payment of adjusted
minimum wages are utilized almost entirely in sheltered workshops serving individuals with
moderate to severe disabilities.4 Although it has been increasingly recognized that such
individuals have the potential to be successfully employed in the competitive workplace, the
government’s support in this regard is limited. For example, US law requires employers to
There appear to be a number of reasons for this, not the least of which is the employers’ perception that the
Special Certificate process is complex.
4
6
make reasonable accommodations but the individual is largely responsible for the
enforcement of this mandate. In addition, tax incentives5 are available to employers, though
a federal government report issued in 2002 found that such tax incentives were not widely
used.6 In sum, despite the fact that many people are seeking increased competitive
employment opportunities for people with moderate to severe disabilities, most such
individuals who work at this time do so in under Special Certificates in sheltered workshops.
As is clear from the Special Certificate’s assessment and wage setting procedures, the
focus is on productivity. In Australia, productivity is also a focus, but it is not the only one.
Moreover, wage adjustments and assistance are also directed at individuals and employers
with the aim at increasing employment in the mainstream economy.
ADJUSTED MINIMUM WAGE ASSESSMENT IN AUSTRALIA
The Australian government operates two programs involving adjusted minimum
wages. The Australian Business Enterprises, a sheltered workshop system, is administered
by the Department of Families, Housing, Community Services, and Indigenous Affairs, and
the Supported Wage System which is administered in competitive employment settings by
the Department of Education, Employment, and Workplace Relations.
Australian Business Enterprises (Sheltered Workshops)
Most Australians with moderate to severe disabilities who are employed work in the
system known as Australian Business Enterprises (ABE), formerly Australian Business
Services, which is. The ABE is comprised of approximately 360 sheltered workshops
operated by charitable not-for-profit organizations which receive federal funding, are
required to meet standards set by the government and employ approximately 20,000
individuals.7
5
Work Opportunity Credits, Disabled Access Credits are examples of such Barrier Removal Deductions
incentives.
6
Government Accounting Office Report GAO-03-39. (2002). http://www.gao.gov/new.items/d0339.pdf
7
http://www.fahcsia.gov.au/internet/facsinternet.nsf/disabilities/services-bis_services1.htm.
7
In 2001, the government published the Wage Assessment in Business Services: A
Guide to Good Practice Wage Determination,8 a 25 page manual which governs ABE
organizations. Compliance with the requirements that employers make “reasonable
adjustments” in the workplace is incorporated in the Guide. A significant portion of the
Guide presents a candid comparison of the strengths and weaknesses of assessment models
based on productivity, those based on competency and those which incorporate both.
In 2003 the government published the Business Services Wage Assessment Tool9
(BSWAT) a hybrid of productivity and competency assessments, which BSE organizations
were encouraged but not required to use. The BSWAT was developed and tested
independently with assistance from a task force including Business Service, union and
worker representatives. What follows is an overview of the BSWAT’s competency and
productivity assessments, which are performed by a Job Capacity Assessor, usually a
psychologist or social worker, who is an employee of CRS Australia, the national vocational
rehabilitation agency.
Use of the Business Services Wage Assessment Tool (BSWAT) in Sheltered Work Settings
The competency assessment is comprised of 8 units of competency. This includes 4
core units against which all workers are assessed and up to 4 industry-specific units of
competency that relate directly to the tasks performed by the worker. The four core
competencies are:
1. Follow Workplace Health and Safety Practices
2. Communicate in the Workplace
3. Work with Others
4. Applying Quality Standards
Each of the four core competency units has associated questions that are used by the
supervisor and assessor to determine if the worker demonstrates the required
8
9
http://www.facs.gov.au/internet/facsinternet.nsf/via/gpg/$file/gpg.pdf
http://www.crsaustralia.gov.au/about_the_business_services_wage_tool.htm
8
knowledge to be deemed competent in a particular aspect of work performance. For
example in core competency 1 Follow Workplace Health and Safety Practices, the
assessor determines the worker’s ability to follow safety procedures, identify hazards
and respond to workplace emergencies. The worker is asked to demonstrate their
knowledge of the following:

What to do if they or someone else hurts themselves at work.

The importance of using/ wearing protective clothing or equipment.

What is a workplace hazard?

Take appropriate action when they notice something is unsafe at work.

Take appropriate action if the fire alarm goes off.

Why is it important to follow evacuation procedures?

Using appropriate methods to move objects in the workplace.
After analyzing the characteristics of the workplace and the jobs that people do, up to
four industry-specific competencies for each worker are identified and agreed upon with the
Business Service. These are used by the assessor in the evaluation, and by the Business
Service to identify training needs.
Productivity Component
The productivity component of the BSWAT wage assessment compares the worker’s
output with an industry benchmark or comparator (i.e. the expected level of output required
of a worker receiving the prevailing wage.) This may be expressed as a number of units that
the worker can produce in a set time or the time it takes the worker to produce a certain
number of units or to complete a task.
Assessment Process
9
A CRS Australia assessor usually conducts multiple assessments over a number of
sessions in order to minimize the “snapshot” effect. The assessors use a variety of data to
support their assessment decisions, including:

direct observation;

questioning and interviewing; and

third party reports from the supervisor/ manager (the supervisor completes an
assessment workbook for each worker).
Supervisors are required to:

be familiar with the worker;

have provided supervision to the worker on a regular and recent basis;

observe the worker in their usual work roles and see whether they demonstrate a
required level of competency;

consider how productive the worker is against identified performance benchmarks;

record their observations and date them in the Supervisor’s Assessment Workbook
for use during the assessment process.
Assessors meet the worker and observe them in the workplace, list the key
functions/tasks and then select the most relevant units of competency to comprise the
industry specific component of the assessment after reviewing Australia’s National Training
Information Service website10. The website includes a description of the elements of
competency, the evidence required to demonstrate competency and the underpinning
knowledge and skills required in order to be deemed competent. Assessors identify each
competency by name and code. A software application assists the assessors to complete the
assessment components and calculate the wage correctly. A review date of up to three years
from the date of assessment is set and is stated on the report sent to the employer and worker.
This date may be changed at any time by request of the worker or employer.
Scoring and Wage Calculation
10
http://www.ntis.gov.au/
10
The competency component and the productivity component of the BSWAT are
scored separately, with the results combined to determine an overall pro-rata wage rate.
The wage calculation formula is:
Competency % plus Productivity %)
2
X
the prevailing wage rate per hour
For example, if a worker is assessed as competent in 4 of 8 competency units (i.e.
Competency 50%) and produces output at 4 units per hour when the benchmark
productivity rate is 10 units per hour (i.e. Productivity 40%) and the prevailing wage rate
is$10 per hour, this worker’s pro-rata wage will be:[ (50% + 40%) / 2] X $10 = 45% X $10 =
$4.50 per hour
In 2006 the BSWAT and 21 other assessment tools used in Business Services were
analyzed by an outside consultant in a 236 page report.11 In many cases, the Business
Services using one of the 21 other assessment tools identified reasons why they considered
the BSWAT inappropriate for their business and/or their employees. The assessment report
found:
A consistent and reliable measure to compare wage outcomes across agencies was not
found. Average hourly wage rate which would seem to be the obvious measure has
too many confounding variables to provide a reliable comparison. Findings from
quality audit reports, anecdotal information and the limited wage data that is available
suggest that these alternative tools are delivering fair wage outcomes.
It is evident that flexibility is required to accommodate the diverse nature of the types
of products and services produced by Business Services and the range in types of
disabilities and support needs of their workforce populations. In other words, a single
wage assessment tool, from those currently available, is not likely to meet the needs
of all Business Services.
The evidence provided by tool owners indicates that all the tools reviewed in this
report satisfy the Good Practice Guide to Wage Determination criteria provided that
the tools are implemented according to their documented procedures. It is important
that this standard is maintained and specific performance indicators for each of the
Good Practice criteria might assist quality auditors to determine that wage assessment
processes meet the criteria.12
11
Jenny Pearson & Associates, Analysis of Wage Assessment Tools Used by Business Services Final Report
April, 2006 http://www.fahcsia.gov.au/internet/facsinternet.nsf/vIA/wage_assess/$File/FReport_Incorp22wageTools.pdf
12
Id. at ii
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Wage Determination in Competitive Employment (Supported Wage System)
Australia has a separate program to assist people with disabilities and their employers
in the mainstream economy, the Supported Wage System (SWS). The system authorizes
employers to pay employees a pro-rata wage that corresponds to the productivity level of the
individual and applies to both full and part-time employment. The Supported Wage System
Handbook13 outlines in detail the system’s administrative procedures; payments and the wage
assessment process. The SWS is Administered by (a different agency than the one which
administers Business Service Enterprises.)
An individual’s participation in the SWS begins with the government retaining, at no
cost to the employer considering hiring him/her, an independent contractor to conduct
productivity assessment. In order to be a SWS assessor, a person must: 1) have a minimum
of two years experience in a disability employment field; 2) have a formal qualification in a
field relevant to the delivery of services and. participate in an assessor training program. As
of 2007 there were138 certified SWS assessors.
The assessment occurs during a trial period of employment during which the person
earns a minimum weekly wage of $66.00 for twelve to sixteen weeks depending on the
nature of the industry. The minimum hourly rate payable to the employee during the trial
period is the greater of $1.82 per hour or $69 ÷ x where x is the actual number of hours
worked by the employee per week up to a maximum of hours. Generally, the trial will not be
extended longer than twelve weeks, unless it is of benefit to the employee. Employers are
required to provide any necessary training during the trial.
It should be noted that prior to the wage assessment, the assessor does pre-assessment
checks of the worker and of the place of employment. These checks include verifying that
the worker would be unable to work at the full wage level, the availability of and need for
training, and the need for and provision of reasonable adjustment, Reasonable adjustment can
include physical modifications to the workplace or other alterations to employment
depending on the nature of the disability and the industry involved.
13
http://www.jobaccess.gov.au/NR/rdonlyres/48EBE25D-FF3E-4B75-81C6
D8DF1CD4A44B/0/SupportedWageSystemHandbook.doc
12
Moreover, the assessment includes addressing such questions as

Is there an appropriate match between the individual and the job?

Does the placement capitalise on the strengths and abilities of the worker, or does the
placement place undue focus on areas of disability? The worker’s freedom of choice
and preferences should of course always be an integral part of this process.

Are there any desirable changes to task allocation in the work team? Such change
may improve overall productivity and help match the employer’s requirements and
the abilities of the worker.
The next step is the wage assessment. While the parties can choose to begin the
assessment early in the process, the SWS Handbook makes clear that the worker not
persuaded to undertake a wage assessment before he or she is ready, or to delay a wage
assessment, with the worker remaining on a training wage for longer than necessary. The
assessor, an independent contractor, then evaluates the person’s productivity following these
steps:

The assessor lists the major duties of the position and briefly describes the major
tasks of each duty.

The assessor gathers information on the basic standard for each duty at the full rate of
pay for the job. These standards should reflect the basic level of competency
expected from an employee engaging in the same tasks, as using an “ideal” level as a
standard would discriminate against persons with disabilities.

The assessor compares the employee’s achievement on the job with the workplace
performance standards for each duty associated with the position. All parties must
agree on the performance standards as well as the individual employee’s ability to
perform to the basic level of competency.

The assessor calculates the appropriate wage based on productivity (i.e., 70%
productivity = 70% of the prevailing wage.

The Minimum Pay Rate is $69 ÷ x where x is the actual number of hours worked by
the employee per week up to 38 hours per week.
If, at the end of the trial period, the employer and employee agree to continue the
relationship, the two enter into a contract14 based on the results of the productivity
14
The SWS Handbook contains a model employment contract.
13
assessment. The agreed upon wage rate is reviewed by a government assessor on at least an
annual basis thereafter.
The government offers incentives to employers for participating in the SWS. The
initial costs of the assessments and reviews of each potential employee, including associated
travel costs, are paid by the government. Both private and public employers can receive a
payment of $1,000 to cover any costs associated with hiring a person with a disability. This
payment is not made until after the wage assessment is complete and the parties have signed
a written agreement of employment. Participating employers are also eligible to receive up to
$5,000 for workplace modifications or equipment that will aid employees with disabilities.
For employers who hire deaf employees, the government will pay the costs associated with
interpreters and incentives to co-workers to undergo interpreting training. The funds which
serve to assist business hire people with disabilities are direct, up-front payments, as
compared to the after the fact tax credits and deductions which the US government makes
available to employers.
DISCUSSION
It is clear from this brief review of two countries’ adjusted minimum wage
mechanisms that the assessment of people with disabilities is a complex endeavor for which
there is no single tool or methodology. As noted, Australia’s Supported Wage System is an
initiative that utilizes wage adjustments in competitive work settings in an effort to
encourage employers to hire people with disabilities whose productivity is less than that of a
non-disabled employee. Conversely, the US generally relegates adjusted minimum wage
practices to sheltered work and utilizes workplace accommodations and a variety of wage
and tax incentives to encourage employers to hire people with disabilities when their
productivity is less than that of a non-disabled employee.
Other differences in this area between the US and Australia include:
1. The employer and government’s degree of involvement. In the US, the employer
initiates the Special Certificate procedures and files the paperwork with the
government. In Australia, the mechanisms involve interactions between the
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individual, the employer and the government, with the latter more involved in the
process than in the US, where the government is largely a reviewer of documentation
submitted by the employer.
2. The connections between addressing training needs and providing reasonable
adjustments in the workplace are made clearer in the Australian wage adjusted
minimum wage assessment systems.
3. The BSWAT, developed with the input from Business Service, union and worker
representatives, focuses on the person’s competencies, both core competencies and
industry-specific competencies, as well as his/her productivity.
4. The principle of individual choice is more evident in Australia’s wage assessment
mechanisms.
SUMMARY
The state of Israel is at a crossroads. It recognizes that people with disabilities face an
extraordinarily high rate of unemployment and that employers, while wanting to do ‘their
civic duty’ by hiring people with disabilities, are also concerned that what they view as the
potential cost in lower productivity could affect their businesses. The answer is complex, and
adjusted minimum wages have been used for many decades throughout the world.
However, there is increasing recognition that the answer may not only be an issue of
providing adjusted wage payments, especially in competitive work settings, but rather using
accommodations, job negotiation, customization and better work preparedness training as
part of the solution. That of course must be coupled with more concerted work with
employers about reducing stigma and helping them through financial incentives that allow
them to accommodate for the additional training, supervision and other services that their
workers with disabilities often need.
Burton Blatt Institute staff are analyzing the available information on Israel’s current
wage assessment mechanisms and, based on the three countries’ experiences and additional
15
knowledge in this area, will make recommendations to Israel’s Ministry of Industry, Trade
and Labor for improving its system.
16