Suppose you are the human resource manager for a cellular phone company with 900 employees. Top management has asked you to implement three additional fringe benefits that were negotiated with employee representatives and agreed upon by a majority of the employees. These include group term life insurance, a group legal services plan, and a wellness center. The life insurance is estimated to cost $780 per employee per quarter. The legal plan will cost $364 semiannually per employee. The company will contribute 40% to the life insurance premium and 75% to the cost of the legal services plan. The employees will pay the balance through payroll deductions from their biweekly paychecks. In addition, they will be charged 1 4 % of their gross earnings per paycheck for maintaining the wellness center. The company will pay the initial cost of $600,000 to build the center. This expense will be spread over 5 years. (a) What total amount should be deducted per paycheck for these new fringe benefits for an employee earning $93,600 per year?
First, let's calculate the annual cost for each benefit for the employee:
1. Group term life insurance: $780 per quarter x 4 quarters = $3,120 per year
2. Group legal services plan: $364 semiannually x 2 = $728 per year
3. Wellness center: 1.4% of $93,600 = $1,310.40 per year
Now let's calculate the employee's share of each benefit per year:
1. Life insurance: 60% of $3,120 = $1,872 per year
2. Legal plan: 25% of $728 = $182 per year
3. Wellness center: $1,310.40 per year
So, the total amount deducted from the employee's paycheck per year for these new fringe benefits would be:
$1,872 + $182 + $1,310.40 = $3,364.40 per year
Since the employee is paid biweekly, the total amount deducted per paycheck would be:
$3,364.40 / 26 pay periods = $129.40 per paycheck.