Ajax Inc. Fringe Benefit Case Assume that you have recently been hired as the HRM Director of a small (100 employee) but growing, privately-held eight year old software design company. Your employees are, on average, relatively young with an average age of 29, and the average length of service with Ajax is 4 years. Your customer base is almost exclusively comprised of large, well-established, publicly-traded companies who offer a comprehensive but “traditional” benefits package. Most of your employees have at least a bachelor degree; several have a master degree, and three key director-level employees have their doctorate. Some employees are interested in or currently working on enhancing their education in the IT or management fields. Learning is prized within Ajax. Pay (direct compensation) is generally slightly above the median of the market, and you rarely hear concerns about base pay issues. Your employees are generally loyal, love their work and like the company and its culture. They are genuinely interested in helping the company succeed. But, a nagging concern is always the potential employee migration to a customer’s company. You have a limited budget to make benefit changes without making other reductions in overhead costs, pay, staffing growth to support strategic initiatives, etc. The company currently offers the following benefits (annually):
• Employee contributions (only) to a 401-k • Two weeks of vacation, starting one year after date of employment. After 5 years, vacation time increases to three weeks.
• Five sick days – to be paid for the time; employees must provide a doctor’s note
• Medical coverage, one HMO plan, paid 50%/50% by the employee and the company
• Ten paid holidays, following the federally-recognized schedule: New Year’s Day, MLK Birthday, President’s Holiday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.
You recently held focus groups with employees to get their perceptions, feedback, and suggestions on the benefits offered. The groups provided their concerns with flexibility, work/life balance, long-term financial security, and affordability of benefits. Consider the company’s employee demographics, culture, and type of business, what benefit plan design changes would you recommend? Provide a brief rationale and the pros/cons for each recommended change.