World Measurement is the global leader in product testing forsafety. The recent problem with Chinese-made toy products (forexample, Mattel recalled 19 million toys with evidence of leadpaint) combined with the global recession has caused a 7% declinein sales and 12% in net profits. The president of the company,Lewis Jacobs, is convinced that he must get concessions from theworkers if World Measurement is to compete effectively withincreasing foreign competition. In particular, Jacobs is displeasedwith the cost of employee benefits. He doesn't mind conceding acompetitive wage increase (maximum 3%), but he wants the totalcompensation package to cost 3% less. The current costs are shownin Exhibit 1 (attached). Your assistant has surveyed othercompanies that are obtaining concessions from employees. You alsohave data from a consulting firm that indicates employeepreferences for different forms of benefits (see Exhibit 2attached). Based on all this information, you have two possibleconcession packages that you can propose, labeled "Option 1" and"Option 2" (see Exhibit 3 attached). Please analyze and answer eachof the questions below. It is not necessary for you to type thequestion itself. Your assignment should be 3-4 pages long,double-spaced, using 12-point font, excluding cover page,attachments, etc. 1. Cost out these packages given the data inExhibit 1 and the information obtained from various insurancecarriers and other information sources (see Exhibit 4 attached). 2.Which package should you recommend to Jacobs? Why? 3. Which ofthese strategies do you think will require less input fromemployees in terms of their reactions? Why? Exhibit 1: CurrentCompensation Costs Average yearly wage $27,290.00 Average hourlywage 13.12 Dollar value of yearly benefits, per employee 16,904.00Total compensation (wages plus benefits) $44,194.00 Benefits (byCategory) Dollar Cost/Employee/Year 1. Legally required payments(employer’s share): a. FICA taxes $2,088.00 b. Unemploymentcompensation 434.00 c. Workers’ compensation 546.00 2. Pension,insurance, etc. (employer’s share): a. Pension planpremiums/pension payments 1,460.00 b. Life insurance and healthinsurance 427.00 c. Health insurance 4,000.00 c. Short-termdisability 83.00 d. Salary continuation/long-term disability 57.00e. Dental insurance 350.00 f. Discounts on goods/services purchasedfrom 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- changetime, get ready time, etc. (60 minutes/day) 3410.00 4. Payments fortime not worked: a. Paid vacations/payments in lieu of vacation (16days 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, bereavementpay, voting pay allowance 66.00 5. Other items: a. Profit sharingpayments 0.00 b. Contributions to employee thrift plans 71.00 c.Christmas or other special bonuses, service awards, suggestionawards, etc. 0.00 d. Employee education expenditures (tuitionreimbursement, etc.) 40.00 e. Special wage payments ordered bycourts, payments to union stewards, etc. 46.00 Total $16,904.00Exhibit 2: Benefit Preferences Benefit Type/Method ofAdministration Importance to Workers Pensions 87 Health insurance86 Life insurance 79 Paid vacation 82 Holidays 82 Long-termdisability 72 Paid sick leave 70 Short-term disability 69 Paid restperiods, lunch periods, etc. 55 Dental insurance 51 Christmasbonuses 31 Profit sharing 21 Education expenditures 15Contributions to thrift plans 15 Discount on goods 5 Fair treatmentin administration 100 Note: 0 = unimportant; 100 = extremelyimportant Exhibit 3: Two Possible Packages for Cutting BenefitCosts 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 paidbreak (workers leave work 10 minutes earlier) - Eliminate one paidholiday per year - Eliminate two sick days per year Option 2:Improved claims processing: - Unemployment compensation - Workers’compensation - Short- and long-term disability insurance Increasedeductible from $500 to $1,000 on health insurance Implementprobationary periods: - 6 months’ probationary period on healthinsurance - 1 year probationary period on dental insuranceImplement probationary period of 1 year on dental insuranceImplement copay for benefits: - Health insurance - $50.00 per month- Dental insurance - $10.00 per month - Life insurance - $10.00 permonth - Short- and long-term disability insurance - $5.00 per monthReduction of benefits: - Eliminate payments to thrift plan -Eliminate two paid holidays per year - Eliminate tuitionreimbursement Exhibit 4: Analysis of Cost Implications Cost SavingStrategy: Copay - Dollar-for-dollar savings equal to amount ofcopay Deductible: - Health insurance – 15% savings of benefit costRequired probationary periods: - Health insurance – 5% savings ofbenefit cost - Dental insurance – 10% savings of benefit costImproved claims processing: - Unemployment compensation – 8% ofbenefit cost - Workers’ compensation – 3% of benefit cost -Short-term and long-term disability – 1% of benefit cost