Image National renews its employees' commitment with this annual review of all the extras they enjoy
Your employees probably don't appreciate you. They see their paychecks, but they disregard all the benefits you fund. Your contributions to their well-being, whether magnanimous or mandated, are likely much more generous than they imagine. Too many small companies demonstrate a coquettish modesty on the subject, as if they were afraid the details would spoil the magic.
Image National (IN) cherishes honesty in its relationship with employees, and honesty has seen that relationship through some trying times. Five years ago IN was a $4.5-million jack-of-all-trades and master of none. The Boise, Idaho, company manufactured custom signs for local accounts and produced display advertising and leased billboards for the regional market.
When Ron Eardley, now president, joined IN, as general manager, in 1988, he focused the company on the more lucrative regional and national sign accounts, like retail chains that open 20 stores a year and provide repeat projects in large numbers. "To succeed with the billboards, we needed to be an ad agency, but we didn't have enough boards. We needed to invest in more equipment and better craftsmen. But that overhead knocked us out of the local market. We couldn't compete with a guy working out of his garage for a $1,500 sign down the street."
Choosing to go national meant walking away from a couple million dollars in small jobs and cutting the work force. Such a dramatic change was bound to shake the remaining employees' faith, and at IN, their faith had already been tested by inconsistent management and performance incentives that inspired only cynicism. "We were asking people to participate and contribute. That would happen only if they trusted the management that was making decisions -- and they didn't."
Eardley's best hope, he believed, was to be forthright. He transformed a halfhearted attempt to share financial data with the employees into an educational responsibility. He has taught employees to understand the numbers on IN's income statement, and he makes sure everyone stays up-to-date by reviewing monthly results in companywide meetings. Benefits costs have a huge impact on the bottom line, so Eardley figures employees should know just how much he spends on them and how to count the ways.
Many companies that do see the value of detailing their contributions to employee-benefits packages leave it to their insurance provider to summarize the information in "personalized" booklets. Eardley considered preparing such summaries, but he decided that it's important for employees to complete the exercise themselves. "It draws their attention, and they have less opportunity to doubt when they've done the math themselves."
Once a year each employee gets a work sheet with the raw data needed to calculate the value of his or her own complete compensation and benefits package.
Lynn Bass, a production worker at IN, fills out the form with his wife. As a dependent on his company health-insurance plan, she has an interest in the process, too. The two were surprised to find that Bass's benefits totaled $12,000 -- he had guessed about half that, maximum. "See," his wife said, "I told you you were worth more!"
Eardley says, "People walk up to me and say, 'I'm just a $10-an-hour guy, but you spent $34,000 on me last year!" The shock wears off, of course, but the recognition endures, and because everyone is familiar with IN's income statement, everybody understands it "when we say, 'We're facing a 40% increase in health coverage, and if it rises like that again next year, you'll have to share the cost.' This form has made a significant difference in employees' understanding and in their trust."
Below is a sample worksheet* * *
ASSOCIATE COMPENSATION AND BENEFITS WORK SHEET
|Hourly Rate||Annual Hours||Base Annual Earnings|
|Base Annual Earnings||$7.25||x2080||=15,080|
|Required by Government and Paid by Image||% of Base|
|Unemployment Insurance (BAE x .01)||$150.80||1.00%|
|FICA (Socal Security) (BAE x .0765)||$1,153.62||7.65%|
|Workers Comp Insurance (BAE x Factor)||$1,330.06||8.82%|
|(use multiple factors shown below)|
|Office: BAE x.0042|
|Production: BAE x.0882|
|Outside sales: BAE x.0085|
|Benefits paid by Image|
|Medical Insurance (enter amount shown below based on coverage you have)||$1992.00||13.21%|
$500 Ded. $200 Ded.
Assoc. only 1,044 1,116
Assoc. + 1 1,992 2,352
Assoc. + Fam. 2,532 2,976
|Paid Holidays (hourly rate x 72)||$522.00*||3.46%|
|Paid Vacation (use multiplier as shown below)||$870.00*||5.77%|
# Weeks 2 3 4
Hr. Rate x 80 120 160
|Paid Breaks (hourly rate x 86.6)||$627.85*|
|Paid Sick Leave (hourly rate x hours taken) up to 120||$297.25*||1.97%|
|Contribution to 401K (BAE x .015)||$226.20||1.50%|
|Employee Assistance Program||$27.00||0.18%|
|CareWise Wellness Program||$45.00||0.30%|
|Training & Education/Internal||$174.00*||1.15%|
|(Less Benefits included in base earnings (*))||$2,491.10||16.52%|
|PPP Profit Sharing||$1,658.80||11.00%|
|Total compensation and benefits paid by image||$22,240.48||147.48%|
Ron Eardley describes an hourly associate's work sheet:
The contributions in the top section are all required by the federal government. We don't pretend we're doing it out of the goodness of our heart. They aren't negotiable. We can't shop to get better rates.
Our workers' comp insurance carrier assigns a factor to each job based on its riskiness. The people who install our signs are on cranes 80 feet in the air, around live wires, so their premiums cost us more than our office workers' do.
In 1988 a manufacturing worker's premium was about 13.9% of that person's salary, or a factor of .139. Now, on account of improvements in our safety record, it's down to .0882. Calculate that against a couple million dollars in payroll, and that's a real savings. This shows everyone the costs of carelessness.
[The medical insurance] numbers are right off the insurance schedule and represent the portion of employee health insurance the company pays. The employee's contribution varies depending on the deductible he or she elects and the number of dependents, but on average, we pay about 75%. Without seeing these figures you can't really understand that health insurance is incredibly expensive.
We mark with an asterisk all the costs for nonproductive time -- holidays, vacation, sick days, in-house training -- that are absorbed into associates' base pay. Because it's not over and above salary, it's netted out at the bottom of the form. We're more generous with these benefits than our competitors are, and this reiterates that.
This number -- 86.6 -- is the total of 10-minute breaks, morning and afternoon, every day, for manufacturing workers. Breaks for administrative staff aren't nearly so formal, but there's still paid, unproductive time.
We match 25¢ on the dollar for the first 6% of salary deferred to the 401(k), an effective rate of .015 of base annual earnings. Almost no one defers less because we really promote this benefit. We knew that as soon as we got people in, they'd see their money grow and they'd keep contributing. On the day people become eligible, we offer them a $100 bonus -- paid to their 401(k) account -- if they join.
The Employee Assistance Program provides for five free visits to a counselor, per problem, for all sorts of problems -- financial, family, drug. It's relatively cheap, and we figure if it helps us keep one good employee on track, we've made back the cost 20 times over. We started thinking that 4 employees a year would be good participation, and after three years the rate is running at about 11. It's not as hyped as other benefits are, but the work sheet reminds people that it's available.
[The CareWise Wellness Program:] For a flat fee per employee, we get access to a hospital's 800 line. Doctors and nurses there answer questions about, say, how to diagnose and treat fevers. Employees also receive a monthly newsletter that encourages preventive care.
A lot of companies don't pay all administrative costs of the 401(k).
We pay for a lot of equipment, safety glasses, overalls for welders, laundry services.
[Educational Assistance/External:] Although our policy says classes must be work related to be reimbursable, we pay for just about anything, short of swimming or basket weaving. We cover tuition and up to $100 for books or lab fees. This $367 could have been a couple of one-day seminars or a three-credit course at the local university, plus a book.
[Training & Education/Internal:] We probably understate the amount we spend on education. This doesn't even account for time we spend developing our internal programs. This $174 paid for a segment of quality training and includes part of the speaker's fee and the money we reimbursed the associate for hours spent in class after work. The number below, $85, is what we pay for our quality workbook.
Once the associate fills in the work sheet, he or she can ask the accounting department to generate a report that looks like this one, showing the relationship of each benefit to that employee's base annual earnings. The key is the bottom line. We pay this person $7.25 an hour, but we pay an additional 19%, nearly $3,000, in benefits.
[PPP Profit Sharing:] We contribute 20% of after-tax net income to a pool, which is then distributed to all employees who have been with us at least one year. This replaced the old, confusing incentive programs.* * *