CASE STUDY Peñamante Co. is considering establishing a corporate fitness programme for its employees. The firm currently employs 500 workers, mainly managerial and administrative, in a number of...

CASE STUDY

Peñamante Co. is considering establishing a corporate fitness programme for its employees. The firm currently employs 500 workers, mainly managerial and administrative, in a number of offices in one local area. The type of programme being considered involves subsidizing employees by paying 50 per cent of any membership fees to a specific fitness centre. This subsidy represents the cost of operating the programme, while the main benefits expected are in terms of increased productivity, reduced sickness and absenteeism, and reduced staff turnover costs. The average salary paid to employees is P240,000 per year, and employees work a forty-hour week for fifty weeks in the year. The firm has researched the extent of these costs and benefits and discovered the following information:

1. 10 per cent of employees can be expected to participate in the programme.

2. The membership fees are 1200 per individual on a group scheme.

3. Workers who do not participate in any fitness programme suffer a drop in productivity of 50 per cent in their last two hours of work each day.

4. The normal sickness/absenteeism rate of eight days lost per year is reduced by 50 percent for those workers on a fitness programme.

5. Staff turnover should be reduced from 20 per cent a year to 10 per cent.

6. Each new employee involves a total of twelve hours of hiring time.
7. Each new employee takes five days to train, and training is carried out in teams of five new employees at a time.

8. Each new employee has a productivity that is 25 per cent lower than average for their first six weeks at work.

QUESTION: (Provide a solution then explain)

1.) Estimate the benefits from reduced sickness and absenteeism.