Category Archives: compensation

Hiking the ‘Living Wage’ in NYC

According to the New York Times, Mayor Bill de Blasio plans to sign an executive order today designed to “significantly expand” New York City’s living wage law, covering thousands of previously exempt workers and raising the hourly wage itself, to $13.13 from $11.90, for workers who do not receive benefits.

The executive order will immediately cover employees of commercial tenants on projects that receive more than $1 million in city subsidies going forward. Workers who receive benefits such as health insurance will earn $11.50 an hour, compared with $10.30 before, the paper notes.

And the current living wage law, passed in 2012, has applied to about 1,200 jobs, officials say, excusing many retailers and companies that lease space as part of city-subsidized projects, the paper reports.

The paper says the living-wage change is also intended to frame a looming debate in Albany, where Mr. de Blasio hopes to win the authority to set the citywide minimum wage at the same amount. If Mr. de Blasio succeeds in matching the minimum wage to the living wage, all hourly workers in the city would earn more than $15 by 2019, according to the city’s projections.

New York Gov. Andrew M. Cuomo, who in February said that allowing local governments to set their own minimum wages would yield “a chaotic situation,” seemed to have reversed himself months later. He said he would support a plan, advocated by the Working Families Party, that allowed municipalities with higher costs of living to set their own minimum wages.

As a result, the governor has endorsed an increase to $10.10 in the statewide minimum wage, with a provision allowing New York City and other areas to raise their minimums as much as 30 percent higher, to $13.13.

It will be interesting to see how — and if — New York City’s example is adopted elsewhere when it comes to setting a higher bar for a living wage for workers.

Regardless, HR leaders should keep an eye on this development to ensure they won’t be caught off guard when a living-wage boost may be introduced in their municipality or state.

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Employees: Pay Matters Most

payWe routinely feature, in our print edition and on our website, stories about the vital role played by leadership training, wellness programs, communication strategies and even office design in creating and sustaining employee engagement. But it shouldn’t obscure the fact that, for most employees, the bottom line is the bottom line — when it comes to engagement, pay is the most important factor.

The new Workforce 2020 survey, which queried more than 5,400 employees and executives in 27 countries and was conducted by Oxford Economics with the support of SAP, is the latest report to confirm this. The survey finds that two-thirds of the respondents cite competitive compensation as the most important attribute of a job. And it’s cross-generational: millennials and non-millennials alike cite comp as the most-important benefit, while 41 percent of millennials and 38 percent of non-millennials say higher compensation would increase their loyalty and engagement with the company.

This isn’t to undermine the importance of things like manager training and corporate culture: Studies have repeatedly shown that while competitive pay and benefits can lure employees to companies, having a positive work environment and a good boss play crucial roles in keeping them there. But if they feel under-compensated for the value they provide, it’s only a matter of time before greener pastures — or at least, the appearance of greener pastures — lure them elsewhere.

Do companies get this? The trucking industry doesn’t appear to. According to HREOnline columnist and Wharton School Professor Peter Cappelli, real wages for truck drivers apparently have fallen by almost 10 percent during the last 10 years — and even a critical shortage of truck drivers so severe that some trucking companies are unable to accommodate their customers’ needs hasn’t led to an increase in wages. Companies cite customers’ unwillingness to pay higher fees as a reason for not raising wages, Cappelli writes — and yet, trucking firms are perfectly willing to pass along higher fuel costs to their customers, he adds.

Cappelli ends his column on this provocative note: The trucking industry will either have to raise wages to attract the drivers it needs, or “we start hearing that we need to import more foreign drivers because ‘no Americans want to drive trucks.’ “

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Increasing Pay, Increasing Challenges

Not sure how you’ll read this, whether you’re the full-glass or half-glass sort, but this latest survey from Mercer shows pay raises are growing steadily … albeit in .1-percent increments.

180274674 -- pay raiseAccording to the New York-based global consulting firm’s 2014/2015 U.S. Compensation Planning Survey, the average raise in base pay is expected to be 3 percent in 2015, up slightly from 2.9 percent in 2014, 2.8 percent in 2013 and 2.7 percent in 2012.

No leaps and bounds, certainly, but indicative — we’d all have to agree — of a steadily improving economy and job market, no?

Granted, .1-percent increments may not give your employees the wow factors they’re looking for as they mull whether to stick around or try out greener-looking pastures. And this can be especially worrisome when you consider what it will take to keep your highest-performing workers on board and happy.

Which leads me to another survey finding: that the range between increases to high-performing employees and those given to lower-performing employees continues to widen. Specifically, the survey shows, the former received average base-pay increases of 4.8 percent in 2014, compared to 2.6 percent for average performers and 0.1 percent for the lower performers.

“Differentiating salary increases based on performance has become the norm,” says Rebecca Adractas, principal in Mercer’s rewards consulting business. “Investing in those employees [who] are driving organizational performance has become a necessity.”

So has making sure the good ones have more than one reason — pay — to stay.

Mary Ann Sardone, partner in the firm’s talent practice and regional leader of its rewards segment, says employers are also “continuing to provide rewards beyond compensation, in the form of training and career development.”

“Employee engagement and retention continue to be a top priority,” she says.

So, on the glass-half-empty end, if you’re not doing everything you can to figure out who your top performers are, what they want and how you can provide it, you will inevitably be caught with your proverbial pants down.

On the glass-half-full side, at least things are looking up … ever-so slowly but surely.

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Sharing the Wealth

sharing moneyWith the debate over minimum wage still swirling, one university president is taking it upon himself to see that his lowest-paid workers’ salaries get a boost.

The Lexington Herald-Leader reports that Raymond Burse, interim president at Kentucky State University, is giving up more than $90,000 of his annual salary in order to increase the salaries of 24 KSU employees—some of whom were earning as little as $7.25 hourly—to $10.25 an hour.

Burse—who served as KSU president from 1982 to 1989 and was an executive at GE for 17 years—told the Herald-Leader that he and the KSU Board of Regents discussed his potential pay cut before the board met to approve his contract in late July.

Burse’s annual salary had been set at $349,869. That number now sits at $259,745, which seems to sit just fine with Burse.

“My whole thing is I don’t need to work,” he told the paper. “This is not a hobby, but in terms of the people who do the hard work and heavy lifting, they are at the lower pay scale.”

He was also quick to point out that the move isn’t simply a publicity stunt.

“You don’t give up $90,000 for publicity. I did this for the people. This is something I’ve been thinking about from the very beginning,” he said, noting the raise in pay for the affected employees will remain in place after a new president is selected.

Burse is also under no illusion that his counterparts in academia will begin sharing their salaries with employees on the lower rungs of the pay scale, and says his largesse “is not a poke” at other university presidents to follow his example.

“I was in a position where I could do that,” he told the Herald-Leader. “That is not always the case.”

Fair enough. And it’s safe to say Burse probably hasn’t started a trend here. But, whatever his reasons, give Burse credit for taking steps to beef up the paychecks of some of his lowest-earning employees, and doing so at his own expense.

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A Study in Greed

CEOWhen top managers and executives pursue “extreme wealth,” it’s the company’s shareholders that often pay the price, according to new research.

In a study that recently appeared in the Journal of Management, a team of researchers conducted a statistical examination of 335 companies, analyzing stock market returns and dividends, and conducting interviews with top executives and an independent panel of experts from a variety of disciplines, including academic scholars and senior business executives.

The study looked at the size of CEOs’ perquisite packages, analyzed the difference between a CEO’s cash compensation and that of his or her No 2. executive, and performed an analysis of CEOs who were overpaid compared to a benchmark of their peers.

In the process, the authors—led by Katalin Takacs Haynes, assistant professor of strategic management at the University of Delaware—found the “pursuit of extreme wealth by top managers can lead to lower performance and loss of shareholder value,” according to a summary of the findings appearing at UDaily, the University of Delaware’s online news service.

“Self-interest is OK, but eventually it reaches a tipping point,” said Haynes. “When it is taken to the extreme—when it becomes greed—it is detrimental to firm value.”

There is somewhat of a silver lining in the findings, however. The researchers also concluded that a powerful board or long CEO tenure can “moderate the relationship between greed and shareholder return.”

Some CEOs “appear to direct more of the firm’s resources toward themselves than others, and this can occur more when managers have a lot of discretion or have a short tenure, or if the board is weak,” according to Haynes. “Interestingly, we found that the negative effects of executive greed on shareholder wealth decreases as CEOs experience more time in their role.”

HR can play a part in mitigating this effect, Haynes told HRE.

“There are some points for HR executives to consider when designing compensation packages, while keeping shareholders’ preferences in mind,” she says.

“”Encourage shareholders to actively participate in the compensation process,” for example. “SEC regulations allow for shareholders to express their opinions about compensation packages via the ‘say on pay’ regulations.”

While say-on-pay is non-binding, “ignoring shareholder no-votes invites public scrutiny and negative attention to the company,” adds Haynes, advising HR executives and compensation committees to pay close attention to shareholders who choose to actively participate in the executive compensation process via say-on-pay.

HR leaders must also look out for “the indicators of greed,” she says, such as excessive perquisite compensation in the “other annual” and “all other” categories; the ratio of the CEO’s total comp package to that of the organization’s second-in-command; and CEO pay at peer companies and industry benchmarks, which help identify possible overpayment of your organization’s chief executive.

“CEOs play a significant role in setting their own pay, and are not passive recipients of pay,” says Haynes, “as the term ‘overpayment’ implies.”

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Seattle OKs $15 Hourly Minimum Wage

Seattle’s city council unanimously approved an increase in the city’s minimum wage to $15 an hour yesterday afternoon, making it the nation’s highest by far, according to CNN Money.

The increase was formally proposed by Seattle Mayor Ed Murray, and his spokesman said he intends to sign the ordinance later today, according to the report, which adds that Washington already has the nation’s highest state-level minimum wage, at $9.32. That rate also applies to the city.

The current federal minimum wage is $7.25.

CNN reports the pay hike in Seattle will take place over several years, based on a scale that considers the size of and benefits offered by an employer, and it will apply first to many large businesses in 2017 and then to all businesses by 2021.

According to a piece in the Seattle Times, the pay hike now moves the region’s employers — and their workers — into terra incognita:

“No city or state has gone this far. We go into uncharted territory,” said Seattle City Council member Sally Clark before the council agreed to give workers a 61 percent wage increase over what is already the country’s highest state minimum wage.

While the move was cheered by various groups representing workers’ interests, USA Today reports the Seattle Chamber of Commerce initially pushed back against the plan, and in February released the results of a survey of 283 area employers that found there may be some negative repercussions stemming from the pay hike, including:

  • Small businesses will be greatly impacted: 37 percent of employers offering less than $15/hour in total compensation have 50 or fewer employees;
  • Most companies will make more than one change in response to the increase: 60 percent of companies will consider multiple changes (reduce/eliminate new positions, increase standards for entry level positions, reduce/eliminate benefits); and
  • Prices will go up: 50 percent of companies will increase prices for goods and services to offset a rise in the minimum wage.

The first increase will reportedly occur on April 1, 2015, and will bring the minimum wage to $10 for some businesses and $11 for others.

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A Few Takeaways from Total Rewards 2014

WorldatWork has expanded its focus in recent years to include “total-reward” issues such as healthcare, financial wellness and work/family as part of its overall mix. But as anyone who’s attended the association’s annual conference lately knows, no one can ever accuse the Scottsdale, Ariz.-based association of abandoning its roots in compensation. (Some of you will no doubt remember the days when WorldatWork was named the American Compensation Association — and pretty much exclusively focused its attention on comp.)

totalrewards2014-500x334Certainly, those roots were evident this week at WorldatWork’s Total Rewards 2014 Conference & Exposition at the Gaylord Resort in Dallas, which attracted around 1,500 attendees.

Comp-specific sessions at this year’s event ranged from the tactical “Compensation as a Career” to the more strategic “Executive Rewards Trends and Predictions,” which I tried to attend but was turned away from at the door because, I was told, every seat had been taken.

I was able find a seat at an earlier session on Monday titled “The Danger of One-Size-Fits-All Executive Compensation,”  which included as presenters Steve Harris, managing director of Frederic W. Cook & Co., and Brynn Evanson, executive vice president of HR at J.C. Penney. (Evanson previously headed comp, benefits and talent operations at JCP and replaced Dan Walker as its top HR leader in April 2013. Some of you may remember Walker earned a whopping $20 million during his first and only year as JCP’s top HR executive and departed soon after Ron Johnson was ousted as CEO in early 2013)

I was especially interested to hear how JCP was tackling executive comp these days, considering all its been through. (In what has to be described as perfect timing, JCP reported its first decent quarter in quite some time last week, suggesting that its turnaround might have entered a new phase.)

Harris suggested that employers would be making a mistake were they to let the forces at work today, such as increased government oversight and the efforts of proxy advisory firms, significantly influence what they do — and, more importantly, don’t do.  Considering no two companies have the same challenges and business objectives, he said, there’s a real danger of “falling into the trap” of “sameness” when it comes to exec comp.

Of course, he said, it’s not all bad to be formulaic, but it’s also not all good.

When you look at the pay-mix charts today, Harris said, you don’t see a whole lot of difference between your company and the median company.

True, he said, being somewhere in the middle goes a long way toward preventing scrutiny, but that doesn’t mean it’s the best approach.

Harris stressed the downside of formulaic incentive plans that emphasize pre-established goals and downplay comp-committee discretion and judgment in determining payouts. Following a herd mentality, he said, can often stifle innovation and undermine an organization’s ability to achieve its business’ objectives.

Instead, Harris said, employers need to be able to balance shareholder support for performance against proxy-adviser angst, use good business judgment and “manage the influence of peer comparisons.”

As Evanson made clear in her remarks, as far as executive comp is concerned, flexibility has been an important factor in JCP’s turnaround efforts.

As most of you are aware, JCP has seriously underperformed against its peers in recent years, with its stock price going from $36 in 2011 to around $8 today. During that period, the Plano, Texas-based retailer went from being a coupon- and discount-based retailer in 2011, with Mike Ullman at the helm; to a lowest-price retailer in 2012, with Ron Johnson in charge; back to being a coupon- and discount-based retailer in 2013 and 2014, again with Mike Ullman leading the firm.

Each phase required a very different strategy, Evanson told attendees.

As part of JCP’s turnaround efforts, Evanson said, JCP has recently been using spot awards for top talent, promotions, and learning and development to hold onto key talent.

(Before moving on, I probably should mention a story in the Dallas Morning News that reported  all of “the hiring and firing in 2011 and 2012 cost Penney $236 million in bonuses, stock awards, transition and termination pay: $171 million for officers and $65 million for other corporate executives.”)

I also had a chance to speak on Monday with Mercer Senior Partner Steven Gross and Partner Mary Ann Sardone prior to their session titled “Learnings from Managing Global Talent, Compensation and Benefits.”

On the global-comp front, Gross said, employers are focused on “segmentation” and “figuring out how money gets allocated, especially for many of the more critical positions.”

Recognizing critical workforce segments is a core component of a successful total-rewards strategy, Gross said.

He also said it’s no coincidence that the expo hall at WorldatWork has so many rewards-and-recognition vendors exhibiting, since compensation budgets aren’t expanding and companies are looking for other cost-effective ways to acknowledge the efforts of employees. (Achievers, BI Worldwide, Globoforce, O.C. Tanner, MTM and Michael C. Fina were among the dozens of exhibitors at the show in this space.)

In an effort to successfully align comp with business and talent strategies, Sardone said, she’s seeing more and more companies attempting to create “an eco system” across their organizations, where comp and talent management are more regularly talking to each other.

Mercer released this week its Total Rewards Survey, which suggested that companies still have a lot more work to do when it comes to aligning comp to business priorities. While more than half (56 percent) of organizations surveyed said they made a significant change to their total-rewards strategy in the past three years, less than one-third (32 percent) said their total rewards and business strategies were fully aligned.

It is critical that the rewards strategies of companies align with their business strategies to achieve overall success, Gross said.

On Tuesday, I also sat in on a session titled “An Insider’s Guide to Compensation Committee Meetings,” during which a panel of experts shared a few common-sense best practices HR and comp leaders might want to keep in mind as they work with their comp committees.

Robin Colman, vice president of compensation, benefits and HR operations at eBay, pointed out that it’s important for the comp person to know the preferences, biases and points of view of the people in the room and adjust his or her approach accordingly. Often, she said, that includes knowing what committee members might be seeing and hearing at other boards they may be sitting on.

John England, managing partner at Pay Governance LLC, a consulting firm that works with comp committees, advised those working with their comp committees not to be “another personality” in the room, since there are enough “personalities” in the room already.

If you have something to share, he advised, make sure no one is ever surprised.

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Yes, Money Still Matters

E000249For a few years now—especially since the 2008 financial meltdown that ushered in the Great Recession—we’ve heard how pay has become a smaller factor in determining employees’ overall happiness with their jobs.

But, in what could be seen as an indicator of order slowly being restored to the universe, it looks like the money matters most to workers once again.

That’s according to a just-released survey from the Alexandria, Va.-based Society for Human Resource Management. In a poll of 600 randomly selected employees at companies of all sizes, SHRM found 60 percent of respondents citing compensation/pay as the biggest contributor to job satisfaction. According to SHRM, compensation/pay last topped this list during the pre-recession period of 2006 and 2007.

In addition, 56 percent of employees reported receiving a raise in the last year, a six-percentage point increase from 2012. A smaller percentage, however (36 percent), indicated receiving a bonus in the last 12 months; a drop of three percentage points in comparison to 2012.

“Incomes have grown slowly since the recession, and that undoubtedly is having an impact on workers’ priorities and [is] one explanation for the leap to the forefront by compensation,” said Evren Esen, director of SHRM’s Survey Research Center, in a statement.

Esen pointed out that four generations of employees listed compensation/pay as either the first- or second-ranked aspect of job satisfaction. With the exception of executives, employees at all job levels ranked it as one of the top three contributors to overall job satisfaction. At 59 percent, the opportunity to use skills and abilities was the second-most cited factor, tied with job security.

Yes, cash may be king once again. But, as always, there are more variables in the job satisfaction equation. Overall, 81 percent of survey participants said they were satisfied with their current jobs, with many expressing optimism about the future. For example, 79 percent of respondents indicated they were determined to accomplish their work goals and were confident they could meet them. Further, 73 percent said they were satisfied with their relationships with their co-workers, and 70 percent were satisfied with their relationship with their immediate supervisor.

“While many employees emphasize compensation/pay when considering how happy they are in their jobs, a significant proportion also place importance on relationships with co-workers and supervisors,” according to Alex Alonso, vice president of research at SHRM.

“Fostering an environment that treats all employees equally and encourages communication among all levels of workers can be an effective way for employers to earn trust from employees and increase their satisfaction with their jobs.”

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Low-Wage Workers: Trapped in a Catch-22?

It’s no secret that employees are hungry for career development. In survey after survey, it almost always ranks near the tops of their lists of sought-after employer offerings. But as just-released research from the Center for Poverty Research at the University of California, Davis suggests, career development can often be elusive, especially if you’re trying to make ends meet in a low-wage job.

88257844Earlier today, the Center posted a policy brief on an ongoing study that finds low-wage workers are very much caught in a Catch-22. Written by UC Davis Professor of Sociology Victoria Smith and Graduate Student Brian Halpin, the brief reports that “low-wage workers know they have to enhance their skills to escape low-wage jobs, but long hours and multiple jobs make skill-building and education nearly impossible.”

Smith elaborates …

The very conditions of low-wage work necessitate that workers hold multiple jobs, and that they have to put in long hours if they can. People find themselves very caught up, just treading water. The fact that they often are supporting other people heightens their need to take extra hours when they can get them.

[The study] found that low-wage work limits opportunities to learn new skills needed for better jobs. To sustain their livelihoods, these workers keep the jobs they have while searching for additional opportunities through relatives, friends and work networks. They patch together multiple full- and part-time jobs to maximize their paid hours.”

Workers told Smith and Halpin that their employers often expect them to be on call and available—even for overtime—without advance notice.

As a result, the researchers found, these workers were left with little time to take advantage of education and training opportunities, which typically require scheduled attendance.

(Smith and Halpin arrived at their findings through in-depth interviews with 25 low-wage workers, all of whom are first-generation immigrants in the Napa/Sonoma area. Interviewees worked in several sectors, including food service, landscaping, domestic work, office cleaning and construction, with some of those interviewed working in multiple sectors.)

No doubt these findings will provide policymakers on the local, state and federal levels more data to chew on as they continue to rigorously debate various minimum-wage initiatives. But there’s little question they also provide employers, especially those employing low-wage workers, reason to pause and reflect on their own workplace policies and practices and whether they’re improving these conditions or standing in the way of progress.

Also worth reflection, of course, is the notion of self-direction and self-responsibility—even in the face of significant hindrances.

As Career Systems International Founder and Chairwoman Beverly Kaye said when I asked her for her thoughts on the study’s findings, many employers would go out of their way to respond were a low-wage worker to express an interest in advancing their careers. “If one of those workers in Napa were to ask if there was a way he or she could go about learning wine making,” she said, “I would think an employer would find a way to help.”

Simply put, Kaye raises a point that probably shouldn’t be overlooked: People need to be “self-empowered” about their own careers.

I guess so long as they have any time at all to do so.

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Looking to Employers for Pay-Gap Solutions

Plenty has been written about the pay gap between men and women in recent months.

188094090Indeed, as most of our readers know, the issue recently made news again when President Obama directed the Department of Labor to issue new rules requiring federal contractors to provide compensation data that includes a breakdown by race and gender.

In light of its ability to get much of anything through Congress these days, the Obama administration has lately been doing whatever it can through executive orders. But as a study released by Glassdoor earlier today suggests, it’s hardly the only interested party with a role to play.

Indeed, when Glassdoor recently surveyed 1,000 employees and job seekers, it found nearly six out of every 10 employees (57 percent) believe employers are in the best position to address pay gaps. This was followed by Congress (30 percent) and President Obama (14 percent).

Asked to specify how employers could make a difference, the respondents said:

  • New company policies around pay and comp (52 percent)
  • Clearer communication from senior leaders/HR about how raises are determined (45 percent)
  • Greater pay transparency (38 percent)
  • Government legislation (21 percent)
  • Employees threatening to leave and/or protests (17 percent)
  • New senior leaders (16 percent)

In many cases, the employees and job seekers indicated they’re looking to HR for clarification, with a fairly healthy portion of the respondents (43 percent) saying they believe the function is responsible for helping them understand how pay raises or cost-of-living increases are determined at their current employer.

Glassdoor’s career and workplace expert, Rusty Rueff, sees the findings as a wake-up call for employers …

Now is the time employers need to take a close look at their salary structure[s] and determine where pay gaps exist, then fix [them] so employees know exactly where they stand in terms of compensation within their organization.  When employees have a clearer understanding of how they’re being compensated without secrecy around salaries, not only can they feel empowered in their current jobs, they’re also often motivated to work toward the next level, which can improve productivity.”

Tied to that notion is the additional stat that more than one in three (36 percent) of the respondents do not believe they understand the process their employer uses to determine pay raises or cost-of-living increases.

As for how men versus women view their pay, more than 42 percent of women do not believe they received fair pay in their current jobs, compared to 34 percent of men. These numbers seem fairly consistent with other studies that have come before.

Glassdoor also asked respondents to check off workplace perks that would keep them satisfied, in those instances when employers might not be in a position to provide pay raises or cost-of-living increases. Here’s what it found they wanted:

  • 61 percent – more paid vacation days
  • 52 percent – more career opportunities
  • 50 percent – flexible work hours
  • 46 percent – option to work from home/remotely
  • 44 percent – company stock/shares
  • 34 percent – healthcare subsidy
  • 23 percent – gym membership
  • 21 percent – opportunities to work on new projects

I’m sure many of you won’t be too surprised to see what some of the top choices were.  I would imagine there are some similarities to what you’re seeing and hearing on your engagement and satisfaction surveys, assuming you’re regularly doing them. But that said, I figure it never hurts to see what the broader universe of employees and job seekers are saying matter most to them these days.

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