(Not) Hanging on the Telephone: Payment Systems in the New Sweatshops

“The ultimate objective of empirical work on incentives should be to find out why firms use the compensation systems they do...huge advances in our understanding could be made by a concerted effort to collect data on contracts.” So concludes the 1998 Journal of Economic Literature survey on compensation systems. This paper does just that. It presents very detailed case study evidence on contracts in four organizations, three of which are call centres, the fastest growing sector of employment in the UK. This evidence is used to test predictions from the New Economics of Personnel (NEP) concerning the incidence of payment systems. We also contrast and test predictions from NEP with those of the earlier British Institutional School, which anticipated many of NEP’s ideas on payment systems. Variations in the ratio of performance-related to basic pay among our organizations can, broadly, be explained by the costs and benefits of monitoring inputs and measuring output, which comprises the core of NEP. Indeed, the monitoring of our case study employees is the theme which binds the paper together – for call centres Jeremy Bentham’s 1791 Panopticon was truly the vision of the future. This paper was produced as part of the Centre’s Industrial Relations Programme (Not) Hanging on the Telephone: Payment Systems in the New Sweatshops Sue Fernie and David Metcalf