(Please answer all sub-questions within 250 words) Your CEO reads in the newspaper that employee benefits cost, on avera

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(Please answer all sub-questions within 250 words) Your CEO reads in the newspaper that employee benefits cost, on average, 30% of payroll. Without much knowledge about human resource management, your CEO suggests that the company do away with all benefits, and give employees a 30% raise in cash compensation. His rationale are two-fold. First, employees will have greater freedom to use the money in areas that they like. Second, the company will save labor costs (a 30% raise in the cash compensation would equal 91% of the original payroll) yet appear more competitive in the labor market by providing highewcompensation in dollars. 1) What arguments could you provide to persuade the CEO that the change that he suggested is not a good idea? Please be comprehensive in your answer. (3 points) After extensive consultations, your CEO realizes that cutting all benefits is not a good idea. However, your CEO still wants to reduce the percentage of benefits costs in the payroll (thus increase the percentage of cash compensation, keeping total payroll constant). An external benefits advisor gives your CEO the following two packages to cut benefits costs (see Exhibit 9.11). Both packages can lower the percentage of benefits in the total compensation to 25%. The CEO asks you to comment on these two packages. You happen to have data about employee preferences about benefits from last year's internal employee survey (see Exhibit 9.10).
2) Please evaluate the pros and cons of these two packages, and make recommendation about which package your CEO should choose. Please explain the rationale of your recommendation. (2 points)
EXHIBIT 9:11 Two Possible Packages for Cutting Benefſt Costs Option 1 Implement deductible ($25 annually) for - Healthcare plan Dental plan Require employee's contribution to: Pension plan (3.5% of base pay Require probationary period (one year) before eligible for Discounts on goods Contributions to employee savings plan Option 2 Improved claims processing for Group Insurance Short-term disability Long-term disability Reduction of benefits: Eliminate two paid sick days per year . Eliminate paid rest periods
EXHIBIT 9.10 Benefit Preferences Benelt Type Importance to Workers Healthcare plan 86 Holidays 79 Paid vacation B Life insurance Long-term disability Short-term disability 69 Paid rest periods, lunch breaks, etc. 55 Dental plan Profit sharing Contributions to savings plan 15 Discount on goods 5 Fair treatment in administration 100 Note C = unimportant: 100 = extremely important.