1. Cost out these packages given the data in Exhibits 9.9 and 9.10 and the information obtained from various insurance carriers and other information sources (Exhibit 9.12).

2. Which package should be recommended to Jacobs? Why?

3. Which of the strategies will require less input from employees in terms of their reactions?

• Costing model completed in Excel.

• Answers indicated to the three questions in the Excel file.

Lightning Industries manufactures lamps for residential homes. The president of the company, Laura Jacobs, is convinced that she must get concessions from the workers if Lightning is to compete effectively with increasing foreign competition. In particular, Jacobs is displeased with the cost of employee benefits. She doesnt mind conceding a competitive wage increase (maximum 3 percent), but she wants the total compensation package to cost 3 percent less. The current costs are shown in Exhibit 9.9.

EXHIBIT 9.9

Current Compensation Costs

TOTAL COMPENSATION (WAGES PLUS BENEFITS IS: $49,692 NOT $49,769

Your assistant has surveyed other companies that are obtaining concessions from employees. You also have data from a consulting firm that indicates employee preferences for different forms of benefits (Exhibit 9.10). Based on all this information, you have two possible concession packages that you can propose, labelled Option 1 and Option 2 (Exhibit 9.11).

EXHIBIT 9.10

Benefit Preferences

Note: 0 = unimportant; 100 = extremely important.

EXHIBIT 9.11

Two Possible Packages for Cutting Benefit Costs

Average yearly wage $36,769 Average hourly wage $17.68 Dollar value of yearly benefits, per employee $12.923 Total compensation (wages plus benefits) $49,769 Daily average number of hours paid 8 Average Employer Cost/Employ/Yoar Bonoflts 1. Legally required benefits $ 3,549 a. Canada Pension Plan $ 1,647 b. Employment Insurance $ 968 . c. Workers' Compensation $ 934 2. Pension, group insurance, disability $ 3,446 a. Pension plan contributions $ 2.460 b. Group insurance (life, health, dental) $ 523 c. Short-term disability $ 83 d. Long-term disability $ 129 e. Discounts on goods and services purchased from company by $ 127 employees f. Miscellaneous payments (termination pay allowances, moving $ 124 expenses, etc.) 3. Payments for time not worked $ 3.324 $ a. Paid vacations (16 days average) $ 1.558 b. Paid statutory holidays (9 days) $ 973 c. Paid rest periods, lunch periods, wash-up time, clothes-change - $ 727 time, get-ready time, etc. (60 minutes) d. Payments for jury/witness duty, voting time, leave for $ 66 bereavement, or other personal reasons 4. Other items $ 2.681 a. Contributions to employee savings plan $ 1,064 b. Tuition reimbursement plan (50%) $ 804 . EAP $ 687 d. Special wage payments ordered by courts, payments to union $ 126 stewards, etc. Total $13.000 BENEFIT TYPE OR METHOD OF ADMINISTERING IMPORTANCE TO WORKERS Pensions 87 Healthcare plan 86 Holidays 79 Paid vacation 82 Life insurance 82 Long-term disability 72 Short-term disability 69 Paid rest periods, lunch breaks, etc. 55 Dental plan 51 Profit sharing 21 Contributions to savings plan 15 Discount on goods 5 Fair treatment in administration 100 Option 1 Implement deductible ($50 annually) for Healthcare plan Dental plan Reduction of benefit Eliminate 10-minute paid break Coordination with legally required benefit Integrate CPP with Lightning Industries pension plan (subtract CPP payout from pension benefit) Option 2 Improved claims processing for Short-term disability . Long-term disability Require probationary period (one year) before eligible for Discounts on goods . Contributions to employee savings plan Co-insurance (80%): Healthcare plan