Insurance Co. is a fast-growing company that has been experiencing high employee turnover rates and low productivity levels in their sales team. To address these issues, the company is considering implementing new employee benefit programs to improve retention and productivity. The companys sales team is composed of 300 employees, all of which are employed on a full-time basis (7.5 hours per day, 5 days a week). An in-depth analysis of the working habits revealed the effective time worked is only 5 hours per day. When asked, employees referred to family commitments and the need to procure their own food and beverages during the day as the main reasons for the productivity losses. Each hour of effective time worked produced direct revenue benefits of $60 (per employee and effective hour worked). Insurance Co. has annual employee attrition rate of 8%, which is higher than the industry average (6.5%). To offset the employee turnover, Insurance Co. has a policy to recruit new employees in the sales team at a 3% annual rate. Proposed Solutions Insurance Co. is considering three programs that will provide benefits to employees. There is evidence that these programs have direct and indirect impact in reducing employee turnover and in increasing employee productivity. The company engaged you to evaluate the effectiveness of these programs over a 36-month period, starting on the 1st of May 2023. OPTION 1 - CATERED LUNCH This option explores the benefits of providing free lunch to employees. The initiative has several direct and indirect benefits, employees: spend less time away from work buying lunch, o Based on similar initiatives implemented in other companies, Insurance Co. expects effective working hours per day per employee will increase over time, reaching an average of 6 hours after 12 months and remaining at that level for the remainder of the 36-month period. save money and may become more loyal to the firm, o Insurance Co. expects a reduction in attrition rate to 7% per annum. get more opportunities to interact with colleagues during lunch. o there are no studies that quantify these benefits. The cost of the catered lunch initiative is $12 per employee per day of work. OPTION 2 - FREE SNACKS The free snacks option explores the benefits of providing free, healthy snack to employees during the workday. The initiative has several direct and indirect benefits, employees: spend less time away from work buying snacks, o a modest increase in productivity is expected under this initiative. Effective working hours per day per employee will increase over the first 6 months, reaching an average of 5.5 hours and remaining at that level for the remainder of the 36-month period. save money and may become more loyal to the firm, o The evidence on loyalty and retention driven by similar initiatives is not conclusive. For this reason, Insurance Co. expect no change in the attrition rate (8% per annum). The daily cost of the free snacks initiative is $4 per employee. OPTION 3 - ONE CHILD FREE DAY CARE This is the most controversial initiative. It only benefits 12% of the current workforce who have at least one child who is under the age of 6. On the flip side, studies show this type of initiatives have a large impact on employee retention, both those who receive the benefit and those who are planning to start a family. Based on the evidence, Insurance Co. expects: a reduction in the attrition rate to 4% over the first 12 months, remaining at that level for the rest of the 36-month period. productivity is expected show a slight improvement in effective working hours per day per employee over the first 12 months, reaching an average of 5.5 hours and remaining at that level for the remainder of the 36-month period. The daily cost of day care is on average $67 per child. Please use the assumptions provided to evaluate the effectiveness of these programs and identify the most suitable option for Insurance Co. QUESTION 1. BASE CASE [4 marks] Using the information provided in section The Company, please build a BASE CASE scenario in the Scenario Calculations worksheet. Use the timeline provided to show: the evolution of the workforce size, considering new hires and attrition, total revenue, considering effective hour worked, days worked, and direct revenue generated per employee. the gap between the companys revenue as is and the potential revenue if the company was in line with the industry average in attrition. In the written report, use bullet points to: describe how the different variables affect Insurance Cos revenue, and discuss the economic significance of introducing modifications that could reduce attrition to the industry average