you have been in business for 5 years and now due to the poor economy

Anonymous
timer Asked: Mar 30th, 2017

Question description

You have been in business for 5 years and now due to the poor economy, Management (that’s you) is faced with a difficult decision. You must decide how to cut 20% off labor costs—the company’s single greatest expense.

Labor Costs break down as follows:

  • Hourly employees 15 people that include maintenance and administrative staff total budget $375,000
  • Salaried employees 25 people that include first line managers and account representatives total budget $1,875,000
  • Executives 10 people that include vice presidents, presidents and chief officers total budget $1,500,000

the spreadsheet and the memo

The company pays an increasing portion of benefits--health and life insurance benefits, 401K matching, unemployment benefits, etc.--worth $10,000 per employee based on position in the company.

The list below represent the portion of the total benefit package paid for by the company:

  • Hourly employees company pays 50% employee pays 50%
  • Salaried employees company pays 60% employee pays 40%
  • Executives company pays 100% employee pays 0%
  • Additionally, Executives get a company car/car insurance as part of their benefits package contributing another $10,000 per year.

There is an option to outsource the bookkeeping (3 people) and account management (5 people) functions to an overseas firm. The cost to outsource is all $450,000 per year. No benefits or additional charges are accrued for these services. If you decide to outsource one or both of these functions, discuss the potential impact to the company and its customers.

Note: Bookkeeping (hourly), Account Management (salaried)


You must consider how your decisions will affect the culture of the company and the motivation of the employees that remain at the company.

  • What ethical dilemma do you face in making these changes?

The Human Resources and Management chapters from the textbook can provide some considerations about how to deal with cost cutting measures.

You must consider how your decisions will affect the culture of the company and the motivation of the employees that remain at the company.

  • What ethical dilemma do you face in making these changes?

The Human Resources and Management chapters from the textbook can provide some considerations about how to deal with cost cutting measures.

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