an introduction to costing a collective bargaining agreement...an introduction to costing a . ......

An Introduction to Costing a Collective Bargaining Agreement

Glossary of terms Direct wages = Straight Time + Overtime Wage-related fringe benefits = Vacation, Holiday

Pay, Sick Leave, etc. Baseline = Costs prior to new contract Hours Worked vs. Hours Paid = On Clock vs. On

Clock + Any Paid Leave

1) Determine the Weighted Average Base Rate for

your bargaining unit. 2) Calculate the proposal’s costs for each contract

year. 3) Add all of the contract years together & check

your work.

Grade Members x Rate = Wage per Hour A – I 25 x $12.00 = $300 A – II 30 x $12.50 = $375 A – III 15 x $13.00 = $195 B – I 50 x $15.00 = $750 120 $1,620 Total Members = 120 Total Wages per Hour = $1,620

Total Wages Per Hour Total Members $1,620 = $13.50 120

Let’s say the employer offers a 9% wage increase spread over three years.

Is one option below better than the others? 1) 5% in Year 1; 2% in Year 2; 2% in Year3 2) 3% in Year 1; 3% in Year 2; 3% in Year 3 3) 2% in Year 1; 2% in Year 2; 5% in Year 3

Front Loaded: 5% in year 1; 2% in year 2; 2% in year 3

New Avg. Weighted Avg. Weighted Annual Year Base Rate + increase = Average x Members x Hours = Wages 1. $13.50 + 5% =$14.18 x 120 x 2,080 = $3,539,328 2. $14.18 + 2% =$14.46 x 120 x 2,080 = $3,609,216 3. $14.46 + 2% =$14.75 x 120 x 2,080 = $3,681,600

Total Cost of Proposal #1 = $10,830,144

Even Distribution: 3% in year 1; 3% in year 2; 3% in year 3

New Avg. Weighted Avg. Weighted Annual Year Base Rate + increase = Average x Members x Hours = Wages 1. $13.50 + 3% =$13.91 x 120 x 2,080 = $3,471,936 2. $13.91 + 3% =$14.32 x 120 x 2,080 = $3,574,272 3. $14.32 + 3% =$14.75 x 120 x 2,080 = $3,681,600

Total Cost of Proposal # 2 = $10,727,808

Back Loaded: 2% in year 1; 2% in year 2; 5% in year 3

New Avg. Weighted Avg. Weighted Annual Year Base Rate + increase = Average x Members x Hours = Wages 1. $13.50 + 2% =$13.77 x 120 x 2,080 = $3,436,992 2. $13.77 + 2% =$14.05 x 120 x 2,080 = $3,506,880 3. $14.05 + 5% =$14.75 x 120 x 2,080 = $3,681,600

Total Cost of Proposal # 3 = $10,625,472

Front Loaded: 5% in year 1; 2% in year 2; 2% in year 3 Cost: $10,830,144 Even Distribution: 3% in year 1; 3% in year 2; 3% in year 3 Cost: $10,727,808 Back Loaded: 2% in year 1; 2% in year 2; 5% in year 3 Cost: $10,625,472

Vacation Leave

Additional Holiday

Change in Healthcare Deductible

Members x Vacation Weeks 30 x 1 week = 30 55 x 2 weeks = 110 25 x 3 weeks = 75 10 x 4 weeks = 40 120 255

Total VAC Weeks Total Members 255 = 2.13 weeks 120

Year 1 Year 2 Year 3 Hourly Wages $14.18 $14.46 $14.75 Hrs in Workweek x 40 x 40 x 40 No.of VAC wks x 2.13 x 2.13 x 2.13 No. of Members x 120 x 120 x 120 Annual Cost: $144,976 $147,839 $150,804

Year 1 Year 2 Year 3 Hourly Cost $14.18 $14.46 $14.75 No. of Members x 120 x 120 x 120 Hrs. in Workday x 8 x 8 x 8 Annual Cost: $13,613 $13,882 $14,160

Employer is asking to increase the employee’s deductible from $1,000 to $1,500 per year.

Employer’s Annual Healthcare costs are: $1,200,000 with Current $1,000 deductible $1,050,000 with Proposed $1,500 deductible $150,000 = Annual cost transferred to the

bargaining unit.

This proposal will save the employer $150,000 at the members’ expense!

Let’s break this down to an hourly figure: $150,000 Annual Cost Transferred to Members 249,600 hours Bargaining Unit’s Total Hours Paid (120 members x 2,080 hours per year) = 60 cents per hour

Year 1 Year 2 Year 3 $ 3,539,328 $ 3,609,216 $ 3,681,600 Wage Increase Proposal $ + 144,976 $ + 147,839 $ + 150,804 + Vacation Leave $ + 13,613 $ + 13,882 $ + 14,160 + Holiday Proposal $ - 150,000 $ - 150,000 $ -150,000 - Health Benefit Proposal $ 3,547,917 $ 3,620,937 $ 3,696,564 Subtotal Total Cost of Contract Items Over Three Years = $10,865,418