Employee Rights & Labor Relations (Part 2) – Review

Part One: Management’s Offer

  1. Length of the Next Contract in Years

The current economic recession caused by the COVID-19 pandemic has proven that a slight change in the external environment can cause a significant impact on organizations. These effects are difficult to anticipate. Due to this uncertainty, the management intends to engage in a 2-year contract instead of 4 years. A short-term contract may give the company the flexibility needed in restructuring our workforce if the situation does not improve.

  • Base Pay

In 2017, the union agreed to a 10% pay cut, which was a good gesture in helping the company recover from the recession back then. However, the current economic situation that has affected every company in the world is far worse. As a result, the decrease in revenue can best get minimized by decreasing operational costs. To guarantee job security for every employee, the company proposes a further pay cut of 15%.

  • Annual Pay Increases for Each Year of your Labor Contract

The company has incurred high costs in preparing for the release of the new products, which has been unsuccessful. The company intends to pause the annual pay increases for two years. Annual pay increases for the two years of the contract could compromise the company’s objective of making the company sustainable to benefit everyone.

  • Shift Pay Differential

The company has recorded a significant decline in productivity during the 3-11 pm and 11 pm-7 am shifts. It is important to reward good performance, yet it is critical to punish poor performance if necessary. The management will develop performance standards for employees working in these shifts and communicate the criteria in time. If any employee fails to meet these expectations, shift pay differential will get reduced further. Only those that meet the standards shall retain it. This measure will help the company focus on enhancing productivity during these shifts to support the recovery strategy.

  • Overtime Pay

The company will change the overtime pay from time and a half to double-time. This change implies that the employees who choose to work overtime will now have higher earnings than before. The financial year 2019-2020 saw the company experienced only a marginal increment in profit relative to previous years. Compared to the 2018-2019 period, the company’s profit rose by only $908,000. In contrast, 2019-2020 saw the company make only $100,000. The current global recession has worsened this situation. Unsurprisingly, the company recorded overtime work during this period. Without raising our productivity through employees’ help, it will be almost inconceivable to gain a competitive edge again.

  • Number of Workers Per Shift

Due to the decline in productivity during the 3-11 pm and 11 pm-7 am shifts, the company shall transfer ten workers from 7 am-3 pm shifts to the 3-11 pm and 11 pm-7 am shifts, each five more workers. The intention is to increase productivity and use this group to motivate the rest.

  • Benefits Percentage of Salaries

The company understands the importance of having a motivated workforce. As a result, it will increase the percentage of the benefits of salaries from 28% to 30%.

  • Annual Paid Sick Days

Cooper Plastics is a company that values employees and considers them part of its growth strategy. It intends to keep a good relationship by offering incentives and showing care whenever necessary. For this reason, the company will restore the previous number of sick days gradually. For the two-year contract, paid sick days will be raised from 6 to 8.

  • Annual Paid Holidays

The company understands that the work done at the plant may cause exhaustion at times. Despite the worsening economic times and the impact of the COVID-19 pandemic on the company’s profits, the company will commit to retaining 6 annual paid holidays.

  1. Total increased costs

Additional Expenses

  • Overtime Pay from Time and a half to Double-time: This may depend on the willingness and other factors such as the number of employees that work overtime.
  • Additional benefits for this class after shift changes:

Increase in benefits = 30% – 28% = 2%. Therefore, the additional cost will be the 2% change from the previous period per job/individual.

40 workers in the 7am – 3pm shift: = 2% * $1,040,000 * 40 = $832,000

35 workers for the 3pm-11pm shift = 2% * $624,000 * 35 = $436,800

20 workers in the 11pm-7am shift = 2% * $312,000 * 20 = $124,800

  • Additional cost of 2 more paid sick days annually.
  • Source of money for increased costs
  • 15% base pay cut coupled with shift changes:

Previous year total salaries: ($1040000 * 50) + ($624000 * 30) + ($312000 * 15) = $75,400,000

Salaries changes after shift change and 15% pay cut:

*New salary percentage will be 85% of the previous period.

(0.85 * $1040000 * 40) + (0.85 * $624000 * 35) + (0.85 * $312000 * 20) = $59,228,000

The pay cut will provide the company with approximately $16,172,000.

  • The company will minimize costs associated with annual pay increases.

Part Two: CFPac Workers Offer

  1. Length of the Next Contract in Years

The workers need to feel secure in their jobs to provide top performance during this recovery time. Offering a short-term contract may worsen the situation and cause more absenteeism. For this reason, the contract shall run for four years.

  • Base Pay

The company should restore pre-2017-2021 contract salaries by eliminating the 10% pay cut. The union has always listened to management grievances regarding wages in the previous period. However, employees have had to endure a period of pay cuts and job insecurity caused by the recent layoff. It is necessary to show the company’s commitment towards its workforce as a vital piece in its strategy.

  • Annual Pay Increases for Each Year of Your Labor Contract

Although the current situation has altered the product release calendar, giving employees increment pay will improve their performance because of better job satisfaction and loyalty to their duties. As a result, the company should retain the annual pay increases for the 4-year contract period.

  • Shift Pay Differential

The employees working in unfavorable conditions require an increase in shift pay differential. The company should increase the pay differential for the 3-11 pm and 11 pm-7 pm shifts.

  • Overtime Pay

Overtime employees should get double-time pay.

  • Number of Workers Per Shift

The company should hire more workers to raise the number of employees working the 3-11 pm and 11 pm-7 am shifts. Doing so will ensure the employees don’t get overloaded with work.

  • Benefits Percentage of Salaries

Benefits percentage of salaries should get raised from 28% to 35%.

  • Annual Paid Sick Days

Annual paid sick days should get raised to 10.

  • Annual Paid Holidays

Annual paid holidays should get raised back to 10.

  1. Total Increased Costs

Additional Expenses

  • 10% pay increase:

Total salaries for the previous period were as follows:

($1040000 * 50) + ($624000 * 30) + ($312000 * 15) = $75,400,000

Total salaries after 10% pay rise:

$75,400,000 * 110% = $82,940,000

Therefore, total cost will be $82,940,000 – $75,400,000 = $7,540,000

  • Additional benefits for this class after shift changes:

Increase in benefits = 35% – 28% = 7%. Therefore, the additional cost will be the 7% change from previous period per job/individual.

Using the same number of employees without a change in their shifts, additional expenses will be as follows;

40 workers in the 7am – 3pm shift: = 7% * $1,040,000 * 40 = $2,912,000

35 workers for the 3pm-11pm shift = 7% * $624,000 * 35 = $1,528,800

20 workers in the 11pm-7am shift = 7% * $312,000 * 20 = $436,800

Total = $4,877,600

  • Additional cost of 4 more paid sick days annually.
  • Additional cost of 4 more paid holidays.
  • Source of Money for Increased Costs

The source of income to cover the costs is the increase in productivity expected from a motivated workforce and an increase in job satisfaction.

Part Three: Your Personal Analysis of this Assignment Experience

The assignment has offered a clear understanding of the dynamics of collective bargaining. It was an opportunity to practice what I have learned so far as negotiations and bargaining in labor-management relations are concerned. Understanding how to negotiate and represent a group in a negotiation is vital because such a scenario is a potential occurrence in my career. As an employer or manager, I have gained theoretical knowledge on how to deliver the company’s offer to the union or employees. With the right approach, one can turn an organization’s workforce into a competitive advantage. Effective bargaining is significant because it can positively influence productivity. Likewise, as an employee or a union representative, it is vital to understand how to voice grievances appropriately during bargaining and arrive at a consensus. Most importantly, I have understood the essence of analyzing the effects of the offer to the organizations, such as expenses incurred and the source of income to cover those costs. In a nutshell, the assignment has provided a better understanding of what a negotiation offer contains.