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 ($25.00per month) Life insurance premium ($10.00 per month) Healthinsurance premiums ($50.00 per month) Dental insurance ($10.00 permonth) Short-term and long-term disability insurance ($7.50 permonth) Reduction of Benefits Eliminate 10-minute paid break(workers leave work 10 minutes earlier) Eliminate one paid holidayper year Eliminate two sick days per year Option 2: Improved claimsprocessing: Unemployment compensation Workers’ compensation Short-and long-term disability insurance Increase deductible from $500 to$1,000 on health insurance Implement probationary periods: 6months’ probationary period on health insurance 1 year probationaryperiod on dental insurance Implement probationary period of 1 yearon dental insurance Implement copay for benefits: Health insurance- $50.00 per month Dental insurance - $10.00 per month Lifeinsurance - $10.00 per month Short- and long-term disabilityinsurance - $5.00 per month Reduction of benefits: Eliminatepayments to thrift plan Eliminate two paid holidays per yearEliminate tuition reimbursement Exhibit 4: Analysis of CostImplications Cost Saving Strategy: Copay Dollar-for-dollar savingsequal to amount of copay Deductible: Health insurance – 15% savingsof benefit cost Required probationary periods: Health insurance –5% savings of benefit cost Dental insurance – 10% savings ofbenefit cost Improved claims processing: Unemployment compensation– 8% of benefit cost Workers’ compensation – 3% of benefit costShort-term and long-term disability – 1% of benefit cost