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Exhibit 4: Analysis of Cost Implications
Cost Saving Strategy:
Copay
· Dollar-for-dollar savings equal to amount of copay
Deductible:
· Health insurance – 15% savings of benefit cost
Required probationary periods:
· Health insurance – 5% savings of benefit cost
· Dental insurance – 10% savings of benefit cost
Improved claims processing:
· Unemployment compensation – 8% of benefit cost
· Workers’ compensation – 3% of benefit cost
· Short-term and long-term disability – 1% of benefit cost
Exhibit 3: Two Possible Packages for Cutting Benefit Costs
Option 1:
Implement copay for benefits:
· Pension plan ($25.00 per month)
· Life insurance premium ($10.00 per month)
· Health insurance premiums ($50.00 per month)
· Dental insurance ($10.00 per month)
· Short-term and long-term disability insurance ($7.50 per
month)
Reduction of Benefits
· Eliminate 10-minute paid break (workers leave work 10
minutes earlier)
· Eliminate one paid holiday per year
· Eliminate two sick days per year
Option 2:
Improved claims processing:
· Unemployment compensation
· Workers’ compensation
· Short- and long-term disability insurance
Increase deductible from $500 to $1,000 on health insurance
Implement probationary periods:
· 6 months’ probationary period on health insurance
· 1 year probationary period on dental insurance
Implement probationary period of 1 year on dental insurance
Implement copay for benefits:
· Health insurance - $50.00 per month
· Dental insurance - $10.00 per month
· Life insurance - $10.00 per month
· Short- and long-term disability insurance - $5.00 per month
Reduction of benefits:
· Eliminate payments to thrift plan
· Eliminate two paid holidays per year
· Eliminate tuition reimbursement
Exhibit 2: Benefit Preferences
Benefit Type/Method of AdministrationImportance to Workers
Pensions
87
Health insurance
86
Life insurance
79
Paid vacation
82
Holidays
82
Long-term disability
72
Paid sick leave
70
Short-term disability
69
Paid rest periods, lunch periods, etc.
55
Dental insurance
51
Christmas bonuses
31
Profit sharing
21
Education expenditures
15
Contributions to thrift plans
15
Discount on goods
5
Fair treatment in administration
100
Note: 0 = unimportant; 100 = extremely important
Exhibit 1: Current Compensation Costs
Average yearly wage
$27,290.00
Average hourly wage
13.12
Dollar value of yearly benefits, per employee
16,904.00
Total compensation (wages plus benefits)
$44,194.00
Benefits (by Category)
Dollar Cost/Employee/Year
1.
Legally required payments (employer’s share):
a.
FICA taxes
$2,088.00
b.
Unemployment compensation
434.00
c.
Workers’ compensation
546.00
2.
Pension, insurance, etc. (employer’s share):
a.
Pension plan premiums/pension payments
1,460.00
b.
Life insurance and health insurance
427.00
c.
Health insurance
4,000.00
c.
Short-term disability
83.00
d.
Salary continuation/long-term disability
57.00
e.
Dental insurance
350.00
f.
Discounts on goods/services purchased from
company by employees
27.00
g.
Miscellaneous payments (separation or termination pay
moving expenses, etc.)
124.00
3.
Paid rest periods, lunch periods, wash-up time, clothes-
change time, get ready time, etc. (60 minutes/day)
3410.00
4.
Payments for time not worked:
a.
Paid vacations/payments in lieu of vacation
(16 days per year average)
1,680.00
b.
Payments for holidays not worked (9 days)
945.00
c.
Paid sick leave (10 days maximum)
1050.00
d.
Payments for state or national guard duty,
jury duty, bereavement pay, voting pay allowance
66.00
5.
Other items:
a.
Profit sharing payments
0.00
b.
Contributions to employee thrift plans
71.00
c.
Christmas or other special bonuses, service awards,
suggestion awards, etc.
0.00
d.
Employee education expenditures (tuition reimbursement, etc.)
40.00
e.
Special wage payments ordered by courts, payments
to union stewards, etc.
46.00
Total
$16,904.00

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Exhibit 4 Analysis of Cost ImplicationsCost Saving Strategy.docx

  • 1. Exhibit 4: Analysis of Cost Implications Cost Saving Strategy: Copay · Dollar-for-dollar savings equal to amount of copay Deductible: · Health insurance – 15% savings of benefit cost Required probationary periods: · Health insurance – 5% savings of benefit cost · Dental insurance – 10% savings of benefit cost Improved claims processing: · Unemployment compensation – 8% of benefit cost · Workers’ compensation – 3% of benefit cost · Short-term and long-term disability – 1% of benefit cost Exhibit 3: Two Possible Packages for Cutting Benefit Costs Option 1: Implement copay for benefits:
  • 2. · Pension plan ($25.00 per month) · Life insurance premium ($10.00 per month) · Health insurance premiums ($50.00 per month) · Dental insurance ($10.00 per month) · Short-term and long-term disability insurance ($7.50 per month) Reduction of Benefits · Eliminate 10-minute paid break (workers leave work 10 minutes earlier) · Eliminate one paid holiday per year · Eliminate two sick days per year Option 2: Improved claims processing: · Unemployment compensation · Workers’ compensation · Short- and long-term disability insurance Increase deductible from $500 to $1,000 on health insurance
  • 3. Implement probationary periods: · 6 months’ probationary period on health insurance · 1 year probationary period on dental insurance Implement probationary period of 1 year on dental insurance Implement copay for benefits: · Health insurance - $50.00 per month · Dental insurance - $10.00 per month · Life insurance - $10.00 per month · Short- and long-term disability insurance - $5.00 per month Reduction of benefits: · Eliminate payments to thrift plan · Eliminate two paid holidays per year · Eliminate tuition reimbursement Exhibit 2: Benefit Preferences Benefit Type/Method of AdministrationImportance to Workers Pensions 87 Health insurance 86
  • 4. Life insurance 79 Paid vacation 82 Holidays 82 Long-term disability 72 Paid sick leave 70 Short-term disability 69 Paid rest periods, lunch periods, etc. 55 Dental insurance 51 Christmas bonuses 31
  • 5. Profit sharing 21 Education expenditures 15 Contributions to thrift plans 15 Discount on goods 5 Fair treatment in administration 100 Note: 0 = unimportant; 100 = extremely important Exhibit 1: Current Compensation Costs Average yearly wage $27,290.00 Average hourly wage 13.12 Dollar value of yearly benefits, per employee 16,904.00 Total compensation (wages plus benefits)
  • 6. $44,194.00 Benefits (by Category) Dollar Cost/Employee/Year 1. Legally required payments (employer’s share): a. FICA taxes $2,088.00 b. Unemployment compensation 434.00 c. Workers’ compensation 546.00 2. Pension, insurance, etc. (employer’s share): a. Pension plan premiums/pension payments 1,460.00 b. Life insurance and health insurance
  • 7. 427.00 c. Health insurance 4,000.00 c. Short-term disability 83.00 d. Salary continuation/long-term disability 57.00 e. Dental insurance 350.00 f. Discounts on goods/services purchased from company by employees 27.00 g.
  • 8. Miscellaneous payments (separation or termination pay moving expenses, etc.) 124.00 3. Paid rest periods, lunch periods, wash-up time, clothes- change time, get ready time, etc. (60 minutes/day) 3410.00 4. Payments for time not worked: a. Paid vacations/payments in lieu of vacation (16 days per year average) 1,680.00 b. Payments for holidays not worked (9 days) 945.00 c.
  • 9. Paid sick leave (10 days maximum) 1050.00 d. Payments for state or national guard duty, jury duty, bereavement pay, voting pay allowance 66.00 5. Other items: a. Profit sharing payments 0.00 b. Contributions to employee thrift plans 71.00 c. Christmas or other special bonuses, service awards, suggestion awards, etc. 0.00
  • 10. d. Employee education expenditures (tuition reimbursement, etc.) 40.00 e. Special wage payments ordered by courts, payments to union stewards, etc. 46.00 Total $16,904.00