Read the case Lightning Industries then answer case questions 1, 2, and 3

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Please read the case, “Lightning Industries” of the text. Please answer case questions 1, 2, and 3. 1. Cost out these packages given the data in Exhibits 9.9 and 9.10 and the informiation obtained from various insurance carriers and other information sources jExhibit 912) 2. Which package should you recommend to Jacobs? Why? 3. Which of the strategies do you think will require less input from employees in terms of thee reactions?

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Case Lightning Industries 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 doesn't 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 Average yearly wage $36,769 $ 17.68 Average hourly wage Dollar value of yearly benefits, per employee $12,923 $49,769 Total compensation (wages plus benefits) Daily average number of hours paid 8 Average Employer Cost/ Employee/Year Benefits 1. Legally required benefits $ 3,549 CHAPTER 9 EMPLOYEE BENEFITS 205 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 $ 127 e. Discounts on goods and services purchased from company by employees $ 124 f. Miscellaneous payments (termination pay allowances, moving 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 time, $ 727 c. Paid rest periods, lunch periods, wash-up clothes-change time, get-ready time, etc. (60 minutes) $ 66 d. Payments for jury/witness duty, voting time, leave for bereavement, or other personal reasons 4. Other items $ 2,681 a. Contributions to employee savings plan $ 1.064 b. Tuition reimbursement plan (50%) $ 804 C. EAP $ 687 $ 126 d. Special wage payments ordered by courts, payments to union stewards, etc. Total $13,000 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 BENEFIT TYPE OR METHOD OF ADMINISTERING IMPORTANCE TO WORKERS Pensions 87 86 Healthcare plan Holidays Paid vacation 79 82 Life insurance 82 Long-term disability 72 Short-term disability 69 Paid rest periods, lunch breaks, etc. 55 Dental plan 51 21 Profit sharing Contributions to savings plan 15 Discount on goods 5 Fair treatment in administration 100 Note: 0 = unimportant; 100 = extremely important. EXHIBIT 9.11 Two Possible Packages for Cutting Benefit Costs 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 # 29.4% HE Questions 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 you recommend to Jacobs? Why? 3. Which of the strategies do you think will require less input from employees in terms of their reactions? EXHIBIT 9.12 Analysis of Cost Implications for Different Cost-Cutting Strategies: Lightning Industries COST-SAVING STRATEGY SAVINGS AS % OF BENEFIT COST Deductible ($50 annually): . Healthcare plan 10 . Dental plan 15 Require probationary period before eligible (one year): Discount on goods and services 10 . Contributions to employee savings plan 10 Improved claims processing: • Short-term disability 20 . Long-term disability 5 Coordination with legally required benefits: . Integrate CPP with Lightning Industries pension plan 15
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Surname 1
Student’s name
Institution
Date
Benefit Determination
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)
Option 1
Saving Plan

Contribution

Saving Percentage

Total S...


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