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