Reference no: EM131165853

Benefits for Professionals

LJT, Architects, a small architectural firm organized as a sole proprietorship, serves clients in the New York metropolitan area. Anticipating a good year, Len Elmore, the principal, hopes for a gross of between $300,000 and $400,000. In an architectural practice, revenue is produced by providing a variety of services that range from creating a design and generating the construction documents used by a contractor in executing the project to visiting the site periodically to verify that construction is progressing according to specifications.

Architects are also responsible for coordinating their work with that of the engineers and other consultants associated with projects. Many small architectural firms such as LJT, Architects, have no permanent employees. They hire workers for a particular project with the understanding that they might remain after a particular phase of the project is completed but they might also be laid off. Employees are usually needed for the functions of design, development, and production of construction documents, which include approximately 50 to 70 percent of the services provided under a standard architectural agreement.

Firms acquire the personnel needed for these projects in several ways. They hire personnel on a full-time permanent or temporary basis or on a part-time basis to moonlight (i.e., as a second job). An employee might also be borrowed from another firm whose contracted work has been completed with no new work foreseen immediately. Len believes that hiring fulltime temporary or permanent employees gives him more control over the production aspect of his practice. At this time, Len does not follow any formal personnel policies. He prefers to "work things out" as issues and problems arise. When hiring, he will agree verbally to certain broad terms of employment, compensation, and benefits common to local professional offices, such as two weeks' vacation per year.

He usually insists on a two-week to one-month probationary period during which the salary paid is slightly less than normal. A spot check of some of his colleagues leads him to believe his salary rates are comparable with those of similar employers. Because the nature of the employment tends to be temporary, Len suggests a contract arrangement with his employees, in which no taxes are withheld and no government-required bene- fits are provided. Len's plans for expansion include adding employees until his staff numbers 10. For him, this is the best staff size to provide high-quality professional services.

However, the employment situation is easing for workers in architectural firms; more newspaper ads seek applicants, and fewer callers contact Len for jobs. Those coming for interviews ask more than "When do I start?" Many ask about vacations, sick leave, paid holidays, medical insurance, and profit-sharing plans. Others want to know about the possibilities of advancement with LJT, Architects, and about such long-range benefits as pensions and education leave. In view of the situation, Len has decided to look into providing his employees with a benefit package. At the same time, however, he fears his practice may be too small to begin providing these benefits, which may prove to be extremely expensive. He has set aside money from his own earnings to provide these extras for himself and has difficulty understanding why his employees cannot do the same.

QUESTIONS

1. What recommendations would you make to Len?

2. How much do you think your recommendations would cost?