Question

. Managing Employee Benefits: Cutting Benefits at Generals Construction As Generals Construction moves into its tenth 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 employeerelated 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 effect.

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 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 1

Answer1:

Yes, Jane will have a sound concern. Generals Construction features a psychological contract with its staff relating to their advantages. Throughout the hiring method, and over the primary 10 years, the leader offered a generous profit package to draw in and retain staff. In turn, the workers expected those advantages to be an unbroken part of the utilization relationship. A violation of the psychological contract happens once there's a discrepancy between what was secure and therefore the actual fulfillment of these expectations. Whereas the leader doubtless failed to have a written contract promising the continuation of the advantages, the very fact that they were offered for 10 years suggests to the workers that they'll continue. This is often notably true because the company is constant to succeed and grow. Currently that the corporate is stable, the workers can react negatively to such a cut in advantages. They’re doubtless to feel betrayed and distrustful. They could be willing to simply accept the changes if the corporate was during a downswing. Further, cutting the advantages of the development staff and not the others is probably going to possess a fair additional problematic impact on company morale.

Answer2:

The employees during this case could have Associate in Nursing delusive expectation of what the corporate ought to offer them, however, that expectation was established supported the corporate providing them the advantages systematically over Associate in Nursing extended amount of your time. If the corporate desires to shift worker expectations, it has to do this step by step likewise. Shifting a number of the burden of the value of health care insurance to staff wouldn't be entirely unacceptable. However, those changes ought to be additional step by step. It’d know to begin with giving a smaller portion of the premium to the workers. Whereas they could charge a bit additional for workers United Nations agency has coverage for his or her full family, they ought to not cut their support entirely. Further, cutting a vacation profit that the workers have an adult change to having isn't one thing that the workers can settle for pronto. the corporate might modification the new rent vacation allowance, however, the negative impact of cutting solely the development employee vacation would doubtless lead to the loss of staff. Jane ought to take a while to review all advantages offered by the corporate to grasp utilization rates. As an example, if the corporate offers vision insurance and solely many staff use it, they may think about cutting the vision insurance. They may conjointly examine expenses in alternative areas of worker management that they may cut.