Suppose you are the human resource manager for a cellular phone company with 600 employees. Top management has asked you to implement three additional fringe benefits that were negotiated with employee representatives and agreed upon by a majority of the employees. These include group term life insurance, a group legal services plan, and a wellness center.

The life insurance is estimated to cost $780 per employee per quarter. The legal plan will cost $312 semiannually per employee. The company will contribute 40% to the life insurance premium and 75% to the cost of the legal services plan. The employees will pay the balance through payroll deductions from their biweekly paychecks. In addition, they will be charged

1

4

% of their gross earnings per paycheck for maintaining the wellness center. The company will pay the initial cost of $800,000 to build the center. This expense will be spread over 5 years.

(a)

What total amount should be deducted per paycheck for these new fringe benefits for an employee earning $72,800 per year?

$

(b)

What is the total annual cost of the new fringe benefits to the company?

$