As Generals Construction moves into its 10th year, the company's future is promising. The company has continued to grow and profit, but the CEO has asked company leaders to examine expenses to ensure that the company is financially stable going forward. As the Director of Human Resources, Jane Smith is examining opportunities to cut employee-related expenses while maintaining employee satisfaction and morale. However, Director of Finance Ann Lane is pushing some cost-cutting measures that Jane thinks may have a negative elfect.

Generals Construction employs over 100 full-time construction workers and about 40 other workers that include construction supervisors, office staff, and management. Right now, all employees receive page 57 the same basic employee-benefits package, which includes a health insurance plan fully paid by the company and a generous vacation allowance. After 30 days of employment, all employees can enroll in the health plan and receive coverage for themselves and their families, and the company pays the full premium. New hires receive 5 vacation days, employees with one year of service receive 10 vacation days, and employees with three years of service receive 15 days. Finally, the company also provides a modest retirement plan benefit. The benefit offerings were determined when the company was started, before Jane joined the company. At the time, the CEO needed to hire nearly 50 workers in a short period of time to fulfill a new contract, and the attractiveness of the health insurance and vacation benefits in particular were instrumental in meeting the company's recruitment goals.

Ann suggests that the company make some significant changes to the benefits offerings in order to stabilize company finances for the future. While Jane agrees that the benefits that the company offers are fairly generous compared to those of competitors, she does not think the cuts Ann is suggesting are a good idea for the company. First, Ann wants some dramatic changes to the health insurance plan. Ann thinks the employees should bear more of the cost of the health insurance plan, including asking the employees to pay at least half of the cost of the premiums for individual coverage and the full premiums for family coverage.

This shift would result in an increase of several hundred dollars in deductions from the biweekly pay of many employees.

Ann also suggests a cut in the number of vacation days, but only for the construction workers. She thinks construction workers should receive 5 vacation days after one year and 10 vacation days after three years of service. However, she states that these cuts are not necessary for other workers, including the supervisors, office workers, and management. She argues that the vacation time for the construction workers is costing the company too much money because they must pay overtime and hire temporary workers to cover the absences. She notes that when others are absent, the same coverage is not required, and thus, it won't cost the company anything to keep the same vacation allowance.

While Jane understands that some reduction in employee-benefits expenses is needed, she is concerned that the cuts Ann is recommending are too drastic and may be perceived as unfair. While she knows the employees will understand that they may have to contribute to their health insurance premium eventually, she thinks that the changes Ann is proposing are too much of a change at one time. Further, Jane has serious concerns with offering different vacation allowances for the front-line construction workers and the other employees. As she prepares to meet with the CEO to discuss reducing expenses, she needs to consider her response to Ann's recommendations.

1. Does Jane have a valid concern?
2. What kind of changes could the company make to benefits to address Jane's concerns?

Answer rating: 100% (QA)

Jane has valid concerns about the proposed changes to the benefits package Making drastic changes all at once such as significantly increasing employe... View the full answer