Techtron Corporation is a developer and manufacturer of catalytic converter systems for small and medium-size automobiles. It

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Techtron Corporation is a developer and manufacturer of catalytic converter systems for small and medium-size automobiles. It has several international customers, including Kia Motors (Hwasung, South Korea) and the Hyundai Mobis network (Seoul, South Korea). Techtron has recently landed a contract to produce catalytic converter systems for the 2nd generation Kia Sorrento, manufactured in West Point, Georgia, and are bidding on being a preferred supplier for the new Kia final assembly plant in Nuevo Leon, Mexico. They have nearly completed a manufacturing facility within the suburban perimeter of a major city in your state, and the senior leadership and support staff are in place. The company is now ready to begin the recruiting and hiring process for production floor employees.

Here is the projected income statement for Techtron in its first year:

Revenues (from sales and all sources) $100,000,000

Manufacturing expenses:

Cost of materials (33,800,000)

Cost of manufacturing operations (5,000,000)

(includes all plant and equipment maintenance and depreciation) (38,800,000)

Administrative Costs and Overhead Administrative Overhead and Expense (7,000,000)

Research and Development (4,400,000)

Employee compensation and benefits (18,600,000)

(target maximum is 20% of gross sales over time) (30,000,000)

Capital Budget Capital purchases (10,000,000)

Loans payable (16,500,000)

(for the first seven years, then dependent on plant expansion) (26,500,000) ___________

Projected Pretax income for the first year of startup 4,700,000

Depending on tax policy of state and federal governments, net income may be used for additional research and development, capital purchases, reduction of debt, dividends, and/or retained earnings. Obviously the company has the desire to increase profitability over time. The company projects that sales for years 2-6 will increase by 2%, 4%. -3%, 3%, and 4%. The company projects that materials and overhead costs will rise by approximately the current rate of inflation plus 1% (about 3.9%) for years 2-6.

Starting year three, the capital budget will need to increase approximately 4% a year in order to keep up with technological changes and innovations. Techtron will operate a two shift operation which will require 320 hourly production technicians (non-exempt), 12 skilled tradesmen (3 pipefitters, 3 electricians, 4 machine repairmen, 1 millwright, and 1 die setter; some cross training will be involved), 8 production supervisors, 4 manufacturing engineers, 1 process engineer, and 4 computer technicians for their floor operations at startup. It is anticipated that this will be a 60/40 two shift operation.

The company may need to consider additional hiring if necessary. Minimum qualifications and job descriptions for these jobs are as follows: Hourly production technicians: Responsible for production and assembly of electronic window system components and subassemblies. Responsible for quality control of manufactured products. The minimum educational requirement is an associate’s degree in business or manufacturing technology; applicants must have general mathematics skills and be able to interpret control charts and basic computer output.

Prior experience valued but not required. Skilled Trades: The skilled tradesmen will possess their journeyman’s card with current certifications and licenses. The minimum education requirement will be an associate’s degree commensurate with their skilled trades training; applicants must have three years of experience in JIT manufacturing systems; experience with line installation and setup is valued. Production supervisor: Responsible for supervision of manufacturing processes, including troubleshooting problems and interfacing between production technicians and other company functions such as HR, Information Systems, etc. Minimum educational requirement is a BA degree in industrial management or quality management; applicants must have general mathematics skills and be able to interpret control charts and basic computer output. Three years of supervisory experience at the manufacturing floor level with JIT systems is required; experience with line installation and startup is valued.

Manufacturing and Process engineers: Responsible for (but limited to) production scheduling, overview of quality systems, safety systems and ergonomics, and cost management within a JIT production system. The successful applicant should be an innovative thinker who anticipates problems and looks for ways to maximize production efficiency. Minimal educational requirements include BA degrees in manufacturing or process engineering, with a minimum of five years of successful experience in the multiple functions of a robotics-based JIT manufacturing system startup. Computer Technician: Responsible for floor support of robotics, data management, and software maintenance for a JIT components manufacturing system. The successful applicant should be an innovative thinker who anticipates problems and looks for ways to maximize production efficiency.

Minimal educational requirements include an associate’s degree (BA preferred) with majors in software support or database support, with a minimum of three years of successful experience in JIT manufacturing support. Requirements for the Compensation Strategy As the HR compensation strategist for Techtron, your task is to develop a compensation strategy for the production and direct supervisory, technical, and engineering employees at the new facility, which will be located within a major urban core in your state (you may decide where). Some factors you will need to consider when developing this compensation strategy are:

1) The compensation bandwidth for employees performing similar functions at companies of similar size in the employment area in which the plant will be located.

2) The union status of your state. It is the original intent of Techtron for this facility to be non-union, but whether your state is a union shop state (like New York) or a right to work state (like Alabama) will affect your compensation strategy, as non-union may not be realistic. Specifically, if your compensation plan is competing with the compensation of area union employees, the union pension may offer a defined benefit as opposed to a 401K.

3) You are not required by law to provide any pension benefits in any state, although legislation was introduced in 2016 which may require all companies offering 401k plans to make them available to PT workers.

4) You will want to differentiate clearly between exempt and non-exempt employees; on December 1, 2016, exempt minimums were projected to rise to $47,476/year per NLRB/DOL guidances, but this was stayed by court ruling. It should be noted that the California exempt status minimum of about $44,000/year stays in effect, and many businesses were already in compliance with the $47,476 standard when the NLRB/DOL guidance was stayed by the courts. The Trump administration is looking at a revised exempt minimum of around $34,000/year; as noted, many businesses are already in compliance with the $47,476/year standard. You may wish to review Vance v. Ball State (2013) as well as the guidance on exempt status, and you will need to be compliant with respect to FLSA standards regarding time worked, breaks, etc.

5) The legislation in your jurisdiction regarding partner benefits may affect your benefits strategy. Regarding any federal benefits and health care benefits, it should be noted that as of Obergefell v. Hodges (2015), marriage benefits will accrue to all same-sex married partners. Some jurisdictions still require companies to offer health care benefits to unmarried partners.

6) You will need to account for all federal and state mandated benefits as part of your compensation strategy, such as unemployment compensation and workmans’ compensation insurance premiums, Social Security, Medicare, etc. If your jurisdiction mandates paid sick time off, your company will need to be fully compliant.

7) Your benefits policy must comply with the Affordable Care Act. Beginning in 2016, employers with more than 50 FTE employees must either “pay or play” by providing a minimum level of coverage or paying a fine. You will be responsible for reviewing the ACA and health opportunities on your particular state insurance exchanges; currently, 34 states have federally-operated exchanges. Many states have their own exchanges and/or state-operated cooperatives, such as Healthy Michigan.

8) There are no laws in any state regarding a requirement to perform performance evaluations as the basis of compensation adjustment, but you desire to make a performance evaluation the basis of compensation adjustment as well as promotion consideration. What are the relevant policies on performance evaluations among other companies similar to yours in your area?

9) Your compensation and benefits plan and your evaluation plan must be manageable, cost-effective and sustainable.

Required:

Demonstrate how your evaluation plan is tied to your compensation and benefits plan. You will be presenting this compensation strategy in the format of a corporate board presentation. You will need to support this presentation with appropriate documentation of short and long range financial sustainability, evaluation format, etc.