Crunch The Numbers-Final

Compensation in Organizations: Crunch the Numbers
Chapter 1
1-7
Total average hourly rate= $19
70% of total average hourly rate allocated for wages= .70 x $19=$13.30
Amount allocated for benefits= total average hourly rate – amount allocated for wages
= $19 - $13.30
= $5.70
1-8
$19 total compensation per hour
2080 hours worked per year
100 office workers
Amount company spends on wages and benefits= hourly wage x hours worked x 100 workers
= $19 x 2080 hours x 100
= $3,952,000 per year
Total yearly spending on wages= hourly rate allocated for wages x hours worked in year x 100
workers
= $13.30 x 2080 hours x 100
= $2,766,400
Total yearly spending on benefits= hourly rate allocated for benefits x hours worked in year x
100 workers
= $5.70 x 2080 hours x 100
=$1,185,600
1-9
Company B is spending $3952600 on average yearly compensation for 100 office workers when
these office workers are spending 2080 hours at work in a year.
Total hourly compensation of one worker = $23

Total yearly compensation of one worker = $23 * 2080 = $47,840
Total yearly compensation for 100 workers = $4,784,000
Additional amount required for yearly compensation of 100 workers:

$4,784,000 - $3,952,600 = $831,400
Chapter 2
2-9
Cost of having current employees working on overtime:
Cost of 1 employee working 4 hours extra per week = $30 * 4 = $120

Cost of 1000 employees working 4 extra hours per week = $120 * 1000 = $120,000
Cost of 1000 employees working 4 hours extra for 52 weeks = $120,000 * 52 = $6,240,000
Cost of hiring new employees:
Cost of hourly pay of 100 employees for 40 hrs/week at $20/hr = 100 * 20 * 40 = $80,000
Cost for 52 weeks = $80,000 *52 = $4,160,000
Additional costs for 100 employees:
Recruitment: $5000 * 100 = $500,000

Training: $3000*100 = $300,000
Termination: $12000 * 100 = $1,200,000
Benefits: $10000*100 = $1,000,000
Total additional costs = $3,000,000
Total cost of hiring 100 new employees = $4,160,000 + $3,000,000 = $7,160,000
It is more cost effective to have current employees work overtime.
2-10
Cost of having current employees working overtime: $6,240,000
Cost of hiring new employees:
Cost of hourly pay of 100 employees for 40 hrs/week at $25/hr: 100*25*40 = $100,000
Cost for 52 weeks: $5,200,000
Additional Costs for 100 employees: $3,000,000
Total cost of hiring 100 new employees: $5,200,000 + 3,000,000 = $8,200,000

More cost effective to have existing employees work overtime.
2-11
Cost of having 500 employees working 4 hrs/week extra: $6,240,000*0.50 = $3,120,000
Cost of hourly pay of 50 employees for 40 hrs/week at $20/hr: $50*$40*$20 = $40,000

Cost for 52 weeks: $40,000*52 = $2,080,000
Additional costs for 50 employees: $3,000,000*0.50 = $1,500,000
Total cost of hiring 50 new employees: $2,080,000 + $1,500,000 = $3,580,000
More effective to have 500 existing employees working overtime

Chapter 3
3-8
Year 2015 2016 2017 2018 2019 2020
Anne Brown $50,000 $53,500 $57,245 $61,252.15 $65,539.80 $70,127.59
John Williams $35,000 $36,050 $37,131.50 $38,245.45 $39,392.81 $40,574.59
Math to Compute Adjusted Salaries for Each Year Under a Merit Pay System
Year Anne Brown John Williams
2016 50,000 x 1.07=53,500 35,000 x 1.03=36,050
2017 53,500 x 1.07=57,245 36,050 x 1.03=37,131.50
2018 57,245 x 1.07=61,252.15 37,131.50 x 1.03=38,245.45
2019 61,252.15 x 1.07=65,539.80 38,245.45 x 1.03=39,392.81
2020 65,539.80 x 1.07=70,127.59 39,392.81 x 1.03=40,574.59
3-9
Annual Longevity Payment
Year 2015 Base 2016 2017 2018 2019 2020 2020 Base
Anne Brown $50,000 $2,500 $2,625 $2,756.25 $2894.06 $3038.77 $63,814.08
John Williams $35,000 $1,750 $1,837.50 $1,929.38 $2,025.84 $2,127.14 $44,669.86
Math to Compute Annual Longevity Payment

Year Anne Brown John Williams
2016 50,000 x .05=2,500 35,000 x .05=1,750
2017 52,500 x .05=2,625 36,750 x .05=1,837.50
2018 55,125 x .05=2,756.25 38,587.50 x .05=$1,929.38
2019 57,881.25 x .05=2,894.06 40,516.88 x .05=2,025.84
2020 60,775.31 x .05=3,038.77 42,542.72 x .05=2,127.14
2020 Base 60,775.31 + 3,038.77=63,814.08 42,542.72 + 2,127.14=44,669.86
3-10
Anne Brown: $50,000 x 1.05= $52,500 at end of 2016
5 percent increase= $2,500
John Williams: $35,000 + $2,500= $37,500 at end of 2016

Percent increase for John Williams= $37,500/$35,000= 1.0714
= 7.14 percent annual increase rate

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How do companies calculate total compensation costs?

How do companies calculate total compensation costs?

What factors are considered when determining if it is more cost effective to have existing employees work overtime or hire new employees?

What factors are considered when determining if it is more cost effective to have existing employees work overtime or hire new employees?

Compensation in Organizations: Crunch the Numbers

Total hourly compensation of one worker = $23

Additional amount required for yearly compensation of 100 workers:

Cost of 1 employee working 4 hours extra per week = $30 * 4 = $120

Cost of hiring new employees:

Additional costs for 100 employees:

Recruitment: $5000 * 100 = $500,000

Total cost of hiring 100 new employees = $4,160,000 + $3,000,000 = $7,160,000

It is more cost effective to have current employees work overtime.

Cost of hiring new employees:

Additional Costs for 100 employees: $3,000,000

Total cost of hiring 100 new employees: $5,200,000 + 3,000,000 = $8,200,000

Cost of hourly pay of 50 employees for 40 hrs/week at $20/hr: $50*$40*$20 = $40,000

Additional costs for 50 employees: $3,000,000*0.50 = $1,500,000

Total cost of hiring 50 new employees: $2,080,000 + $1,500,000 = $3,580,000

More effective to have 500 existing employees working overtime

Math to Compute Annual Longevity Payment

John Williams: $35,000 + $2,500= $37,500 at end of 2016

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Cost of hourly pay of 50 employees for 40 hrs/week at $20/hr: $50$40$20 = $40,000