Vintage Engineering Company Vintage Engineering Company was established in 1993
ID: 429048 • Letter: V
Question
Vintage Engineering Company
Vintage Engineering Company was established in 1993 as a family business. The company’s present CEO is John Smith. The company has approximately 45 employees. John Smith is a very determined business person with a goal to increase the company’s profit by three percent each year. This increase will allow the company to be self-sustainable and able to cope with prices going up. John Smith’s secretary, Elizabeth Jones,recently expressed her concerns to him about the Social Security proposed a wage band increase and contribution rate increase.John Smith was very concern because the company is presently at a break-even point in income and expenses which means the company will not be able to afford an eight to ten percent increase in contribution rate with 45 employees not including the management team which consist of 12 individuals.
Elizabeth Jones’ weekly earnings is $900.00. She is a single mother for two children. She is the eldest sibling of her family she takes care of her little sister who will be attending high school in the summer. Elizabeth lives on a tight budget- like majority of the employees at Vintage Engineering Company. She is worried that the increase in eight to ten percent of her salary will affect her greatly. Instead of paying a higher contribution rate, alternatively she can use that money as pocket money for her little sister. That new expense will force her to re-evaluate her budget because her salary remains the same and her bills are rapidly increasing.
Social Security Board Hybrid Methodology Proposal
The Social Security Board is proposing an increase in 8% of actual salary starting from $340.00 for the 55/45 scenario or a 10% of actual salary starting from $340.00 for the 50/50 scenario. The current weekly insurable earnings are $320.00 with respect to the wage band of $300 and over as the weekly earnings. The proposal indicates that the wage band will increase to five additional salary ranges. The 55/45 scenario of8% percent suggests that the employee will pay 8% of his/herweekly earnings which will fall in the new wage band. This 8% of his/her salary will be paid between the employer (will pay 55%) and the employee (will pay 45%). The same applies to the 10% of actual salary with a 50/50 scenario whereby the employee will pay half of the contributions and the employer will pay the next half.
The Effects on the Company and the Employees
Every single employee at Vintage Engineering Company earns a weekly salary of $500.00. The company is currently paying a total of $3659.40 monthly to Social Security Board for their employees contribution. If Social Security Board contribution increases to the 55/45 scenario then Vintage Engineering Company will then be paying monthly a total of $5016.00. If Social Security Board contribution rate increases to the 50/50 scenario then Vintage Engineering Company will then be paying a monthly total of $5700.00. The company cannot afford to pay an extra $2000 every month to Social Security Board. The management team is suggesting a downsize in the company in order to afford the increased contribution rate. If the company downsizes then it will not perform efficiently since every single employee has an important role. A downsize will result in a loss of income for the company.
Elizabeth and her co-workers are very concern in regard to the wage bands increase and contribution rate increase. They areworried about their budgets since they will be paying on average an increase in $18.72 weekly. Many employees board the train to work daily. The price per week is $15.00 since they receive a special rate. This indicates that the new contribution rate will be affecting them in minor areas that are essential to their daily tasks completion. The employees are extremely nervous. They are all aware that the company will not be able to afford to pay an extra $2000 monthly to Social Security Board. The idea that the company may lay-off some workers has crossed every single person’s mind.
After much thought, Elizabeth mentioned to her co-workers that the increase can also benefit them in the future. She explained that this increase will allow a possible higher retiree contribution. She explained to them that they can consider it as a retirement plan. Elizabeth is seeking further advice for herself and her boss to consider. She has requested such advice from two different experts. One who would argue for an increase and one who would agree for a decrease.
Explanation / Answer
For improving this scenario company has to go through assessment of the available other options for improving the work force. Does each and every person inside the organisation is important, laying off of the workers would be the most critical task that have to be done under supervision of the experts. Increasing the wages would not be affordable for the company as this type of approach would reduce the company's efficiency as company does not have ability to pay the employees with increased pay.
Layoffs are the best option for improving this is specific situation as that would be problem for some time but after sometime these skills which are provided to each and every separate employees can be combined by a proper training and implementation of skill development can be done inside the organisation to reduce the work force as well as to improve the the efficiency.
Increased wages would definitely motivate the employees to learn better inside the organisation even after the layoffs. Layoff process should be done on the basis of performance as well as looking at profile of each and every individual inside the organisation. Importance of the individual and accountability of the specific individual for the work is essential to be measured. By laying of employees, effectiveness of the specific program can be widely increased as well as proper solution to the problem can be provided.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.