Bus 115 Human Resource Management:You will need to determine your benefits budget and then develop a benefits package to offer the Customer Service Agents. As you develop your package, do not forget to include Federally mandated benefits. See the file for a full explanation of the assignment. For each group, submit one file addressing the following (which are also shown in the assignment file.

Documents for question

Developing an Employee Benefits Programfrom this file

USA Credit is a major financial services organization which offers private label credit cards. Since its founding, USA Credit has targeted medium-sized retailers that like the customer closeness associated with having their own credit card but lack the technical expertise to effectively manage an accounts receivable business. USA Credit's business-plan projects that it will double in size in the next two to three years. To support retailers credit card customers, USA Credit installs at each retail site a bank of telephones tied directly to the regional processing center. In addition, there is a payment drop box for customer payments and an attractive kiosk containing applications and assorted credit-related information. Retailers report their major concerns focus on (1) increasing the number of credit card customers for their stores; (2) maintaining accurate billing information that is summarized in attractively designed monthly statements to customers; and (3) maximizing collection efforts.

Since its founding, USA Credit's offices have been staffed with part-time employees working 20-25 hours per week. Most employees are full-time students, mothers of school-age children, and senior citizens. Employees have been paid wages similar to those offered by other entry-level employers in the area, such as fast-food restaurants and retailers. No employee benefits have been offered, except those required by law.

Several months ago, USA Credit's top management team decided its future goals would best be met by establishing a national service center to replace the regional credit offices. They wish to attract a full-time workforce in order to provide stability and a level of professionalism as new accounts are added and as strategic services are expanded. Estimates are that the center would initially employ 75 customer service associates and 4 to 7 other individuals, such as managers and technical specialists. If business grows according to plan, the number of customer service associates is expected to double over the next few years.

A lengthy search has been conducted using a cross-functional managerial team, which included Andy Wolfson, USA Credit's HR manager. After months of research, the team recommended locating the center on a two-acre lot just northeast of Taos, New Mexico. Real estate values are excellent in the region, the profile of the local worker is very appealing, the tax situation is favorable, and state and local political and community organizations welcome the opportunity to sponsor the opening of a solid, reputable, growing business such as USA Credit. Last week, the recommendation was unanimously approved for implementation. Groundbreaking is scheduled for next month.

Andy Wolfson's main challenge is to assemble an HR plan. A key element of this involves designing a compensation and benefits program for the customer service associates. In addition to its state-of-the-art information systems technology, the competence and courtesy of its associates are expected to be major sources of competitive advantage. If USA Credit is going to continue to be successful in this upcoming growth period, it will be because it didn't lose focus on current customers. The customer service associates at the national service center would be critical contributors to this effort.

Andy has requested a variety of information from knowledgeable sources concerning the employee marketplace and the practices of other area businesses. This information compiled in the attached memo from Andrea Birch. Based on this information, he has sent a preliminary proposal to the corporate vice president for administration. Xavier Ortenzio, whose response is also included. Working with a number of consultants and with local insurance companies, Andy has developed a list of possible benefit choices and their costs, which are itemized in the exhibit.

To: Andy Wolfson, HR Manager

From: Xavier Ortenzio, VP Corporate Administration

I applaud your efforts to date in constructing a "preferred employer" HR strategy for our National Service Center. Having reviewed the copy of the Birch memo concerning the worker marketplace in Taos, I heartily support your recommendations.

Our original estimates called for a total compensation package for Customer Service Associates of $14.75 to $16.00 per hour. We arrived at this figure including a 28 percent rate for fringe benefits. "Fringe benefits" was broadly defined to include mandatory coverages, time off, and various other programs.

Your recommendationthat this amount be redistributed by reducing the average hourly pay rate to $11.50 and by increasing the fringe benefit amount to 38 percent of base rate-makes sense.

I also have no strong feelings about whether or not some benefits require employee contributions-provided that this would not interfere with our "preferred employer" strategy. In addition, I read in yesterday's newspaper that cafeteria benefits are becoming increasingly popular. Would such an approach offer us any advantages?

In any event, consider this your go-ahead to draft your benefits program as outlined above. I look forward to receiving your final recommendations and anticipate a speedy Executive Committee approval. The successful staffing and management of the National Service Center is critical to USA Credit's business strategy, future growth, and overall success.

To: Andy WoIfson, HR Manager

From: Andrea Birch, Senior Consultant Human Resources Concepts, Inc.

As requested, I reviewed the information you provided concerning the Customer Service Associate positions planned for your New Mexico Service Center.

First, let me tell you that I think you'll be pleased with your decision to locate here. Ski resorts are our foremost employers, accounting for 55 percent of the total jobs in the area. Second are tourist-related organizations such as small rental car companies, local motels, and restaurants. From the worker's point of view, these businesses are very cyclical and there is little job security. However, good hospitality industry workers are paid very well, both in base salary as well as tips. Needless to say, employee benefit programs are very meager.

It is my belief that, if you position yourself as a solid financial services company with a pleasant, stable work atmosphere, you will have no difficulty finding skilled, reliable workers. In particular, you would represent an excellent opportunity for a "ski employee spouse" whose concern for stable employment and a comprehensive benefits package is an important factor in choosing and staying with a job. In particular, their emphasis would be on spouse and family options. Even if one or more benefits were contributory, access to the coverage would be valuable to these workers.

Thus, in a market that would normally call for hourly wages of $11.00 and up, we believe that your Customer Service Associate positions could be filled with competent employees in the $11.00 to $12.00 per hour range if the benefits plan were attractive.

As requested, I am also pleased to provide you with some local information concerning paid time off in this area. Most organizations in this market provide two weeks of vacation after one year of service and increase this to three weeks after five years. Typically, firms located here offer 7 to 10 days' sick leave per year and 5 to 7 paid holidays. Be aware, however, that there is quite a bit of variance across organizations relating to these practices.

I'll call you next week so that we can identify the next step in this process.

LIST OF POSSIBLE BENEFITS

Benefit Cost (Unless, where specified, all costs are annual rates)

FICA

Social Security 6.2% on first $106,800 earned by individual

Medicare 1.45%

FUTA (Federal Unemployment Tax) .8% on first $7,000 earned by individual

New Mexico State Unemployment Tax 2% on first $20,800.

(tax rate adjusted to .03% to 5.4% after fourth year of operation depending upon experience rating)

Workers' compensation $1.50 for every $100 of total payroll

Employee Only Employee and Family

Health care insurance program

High plan $ 4,500 $ 6,500 Medium plan 4,000 5,000 Low plan 3,200 4,500 HMO 2,800 3,400

Dental plan

Regular plan 700 1,400 HMO dental 525 1,000

Vision care 180 250

Prescription drug 380 650

Life insurance

1 year's salary $450

2 years' salary 700

3 years' salary 1,200

Dependent life ($5,000 for spouse; $1,000 per child) 300

Pension plan

Defined benefit 4.5%

Defined contribution 3.0%

Tuition reimbursement .7%

Employee assistance program .5%

Child care subsidy 3.5%

Paid vacation $65/day

Paid holidays $60/day

Paid sick leave $55/day

Long-term disability

High plan (full salary after five consecutive days absent due to illness) $1,200

Low plan (60 percent of salary after 10 consecutive days absent due to illness) $600

Benefit Development Exercise :

Assume an average wage of $11.50 per hour and a work week of 40 hours.

Your benefits budget is 38% of salary.

Assume 70% of the customer services associates will require family coverage.

Structure a fixed (not cafeteria) benefits program for the customer service associates to be hired. You want to develop a program that will enable you to attract and retain the best employees.

List below the benefits you will offer. (Recall, this is not a cafeteria program)

Benefit Offered Include sub-description if appropriate

Cost Per Employee

Brief Rationale (Why are you offering this benefit?)

2. What is your benefits budget per employee? How did you determine this? (Show your math as well as explain what assumptions are you made).

3. Why do you believe this is the best plan? (Why does your plan make sense to help attract and retain the best employees?)

4. What are some potential weaknesses to the plan you have developed?

5. Where were there areas of confusion or lack of clarity? / What else would you like to know to help make your plan stronger?