Background
The decreased market demand created a challenging situation for Bush Corporation. The Management and Union’s task in this situation is to agree on the balance between minimizing costs and preventing the further reduction in the staff, as well as addressing the employees’ security and interests.
Objectives
In these negotiations, the Management’s goal is to ensure that all employees’ rights and interests are addressed and propose the changes in the wage and health care costs structures to respond to the productivity levels and market trends.
Negotiating Strategy
The Management emphasizes the necessity of discussing the issues of wages, bonuses, and health care provision in bundles because it is necessary to set a difference for people working for the company in a different period. The Management is oriented to cooperate with the Union to agree on the issues of the wage structure and health care costs. A compromise can be achieved in terms of providing the higher shift differential for current and new employees. The Management is ready to negotiate on the appropriate transformation of the company’s approach to the Health Insurance provision and guarantees the provision of the minimum wage for all employees, regardless of the years working in the company. The Management is ready to discuss potential changes associated with the plan of implementing more technologies in the working process to address the employees’ interests.
Prioritized Bargaining Issues
The Management is inclined to prioritize issues that are directly related to the employees’ well-being and compensation, including wages and changes in the Health Insurance and health care costs monitoring. The list of prioritized issues is presented in Table 1.
Table 1. List of Prioritized Issues.
Initial Proposals
Wages
Proposal. The average union hourly wage for current employees is set to be $14.48.
The average union hourly wage for new employees starting working in the new contract year is set to be $10.50.
The Management proposes establishing a new wage structure for the next contract year. The proposed average hourly wage for employees already working in Bush Corporation is not changed, and it is $14.48. The proposed average hourly wage for those employees who begin to work in Bush Corporation is $10.50. The proposed wage plan is reasonable because it does not affect the current members of the Union, but it provides the Management with an opportunity to address the issue of minimizing costs to respond to the decreased market demand.
While assuming that the total number of employees (members of the Union) will not change, and new employees will replace the workers who left Bush Corporation, it is possible to predict the changes in the company’s total costs.
If 100 new employees will be hired during the next year, it is possible to expect the following changes in total labor costs while working 40 per week during 52 weeks in a year:
1900*40*52*$14.48 = $57,224,960
100*40*52*$10.50 = $2,184,000
In this case, the average hourly wage for the whole number of employees (members of the Union) will be estimated as $14.281 which is higher than the average hourly rate in the industry ($11.94). The changes will not affect the current employees, the new employees will be hired on new terms, but the costs will be minimized.
Health Insurance
Proposal. Major medical: $200,000 lifetime; the company pays 75% of the medical insurance.
The Management proposes improving the regulation of healthcare costs to guarantee the balanced use of available resources. The Management proposes establishing a joint committee to monitor the costs associated with Health Insurance. The current policy is effective till employees provide reasonable health care reports for receiving medical assistance and insurance. To prevent insurance fraud, the joint committee should be organized to control the health care costs. The provision of the major medical life insurance in $200,000 guarantees for employees to preserve the main services that were proposed earlier.
The initiative is oriented to reducing the number and costs associated with insurance frauds or inadequate insurance claims. The work of the joint committee will cost $25,000 annually, and the insurance fraud can cost the employer up to $400,000 annually (ERIC, 2015, p. 4; Holley, Jennings, & Wolters, 2012).
Shift Differential
Proposal. Current employees – 15 cents/hour for the third shift.
New employees – 10 cents/hour for the second shift; 15 cents/hour for the third shift.
The Management proposes making the wage structure for new employees flexible, with the opportunity to receive the additional bonus while working on the second shift. For a new employee working one second and one-third shift per week, the proposed shift differential will be beneficial:
An employee’s annual average wage will be ~ $21,944 (including the increase in the second and third shifts) in comparison to the previously set ~ $21,902 (including the increase in the third shifts). In comparison to the industry average wage of ~ $24,000, the new employees can be discussed as receiving competitive wages.
Paid Sick Leave
Proposal. 2 years but less than 6 years of service = 1 day
6 years but less than 8 years of service = 2 days
8 years but less than 10 years of service = 3 days
10 years but less than 15 years of service = 4 days
15 years but less than 25 years of service = 5 days
The Management proposes the changes in the plan for providing the paid sick leaves. The reason is that in the predicted high turnover rates in the industry. For the next contract year, the increase in the turnover rate in the industry is expected to be 27% (Overview of paid sick time laws in the United States, 2015, p. 8). Under such conditions, the company chooses not to provide sick leaves for employees working less than 2 years and limit covering the sick leaves for employees working 2-6 years and 10-15 years in Bush Corporation.
Total Costs and Strike Lines.
References
ERIC. (2015). 2014 ERIC pay differential survey. Web.
Holley, W., Jennings, K., & Wolters, R. (2012). The labor relations process. Mason, OH: South-Western Cengage Learning.
Overview of paid sick time laws in the United States. (2015). Web.