Projected Wages and Benefits Ruby Alaska Mine Purpose The purpose of this work is to develop a table of annual total costs for an employee serving in particular positions that are anticipated for the Ruby Alaska mine. The table can then be used together with a manning table to develop the total labor costs for cash flow projections and subsequent economic analysis. Total employee cost can also be compared to the Mine Cost Service cost models to make site specific adjustments to mining and processing costs that are used in MSOPIT and other MineSight routines being used for mine design. Approach The desired end result of this work is an Excel spreadsheet that projects the total cost of labor and benefits. The spreadsheet will have adjustable yellow information fields that can be adjusted for minor variations in assumptions and that can then adjust automatically the end cost projection. The initial input is the hourly wage for a position or annual salary for a salaried position. This information was obtained from ------------------------------------------( ). Hourly wages can then be adjusted from a 2011 base to account for inflation to the beginning of 2015 and for any premium chosen to attract the needed workforce. It is assumed that for most workers wage inflation was minimal due to high unemployment over the time period. A rule of thumb that a wage differential of 10% will motivate change was also used. The initial adjustment of 11.43% was used. The exact number corresponds to the increase in Alaska’s minimum wage over the time period ( ). Various benefits and costs are then added in the spreadsheet as a percentage of wages, on a per person basis, or by dividing the total projected cost of a service by the number of employees to be benefited. Itemization of assumptions used follows. Assumptions for Initial Calculations Because there is a significant mining industry in the surrounding area it is assumed that the Ruby Alaska mine will attract its needed labor force using better wages and benefits. This assumption is reflected in an after inflation upward adjustment of wages of around 10%. The spreadsheet allows for this number to be changed. It is assumed that most miners will not live in Ruby Alaska, but will work a 2 weeks on 2 weeks off schedule and be flown in from Fairbanks. The assumed schedule during the 2 weeks “on” is 10 hour shifts, 7 days per week – thus 70 hour work weeks. It is assumed that 40 hours will be base pay and 30 hours will be overtime at 1.5 times standard hourly wage. The weeks worked and hours worked in a week are adjustable. Of a 52 week year it was assumed that the mine would be closed 1 week for Thanks Giving, 2 weeks for Christmas and New Years, 1 week for the 4th of July, 1 week for other work disruption and that a worker would have another week of vacation at a time of there choosing. This yields a 46 week year and a 2 weeks on 2 weeks off suggests a 23 week year. It was assumed that workers would have 4 of the off weeks paid at 40 hours per week (paid vacation). The 4 weeks of paid vacation derives from the assumption that 4 of the six missing weeks occur on planned shut down which is equally likely to affect any worker 50% of the time: thus 2 weeks. It is then assumed that a problem shut down will impact a worker for one week when they should have been on. The workers will get standard pay for these times. The worker then get 1 week paid vacation/sick leave. This totals to 4 weeks of 40 hour per week base pay. These assumptions can also be adjusted. Next benefit costs that are a percentage of salary were considered. Social Security was paid at 6.2% on the first $118,000 of earnings, 1.45% Medicare was paid on all earnings (ADP, 2015). Unemployment insurance 2.68%, and workman’s compensation 4% were paid on all wages and salaries at Alaska rates ( ). It was assumed that employees would get up to 6% of 401K match and that the utilization would be 100%. Any of these assumptions can be adjusted in yellow fields of the spreadsheet. Fixed cost per employee benefits are then computed. It was assumed that the company would purchase insurance with a $10,500 per year family deductable, but would then contribute $6,000 to an Employee Health Savings account. The original plan was to have a free employee health clinic for primary care in Ruby and to have employees and their families live in Ruby. A subsequent decision to have only a mining camp in Ruby with 2 weeks on and 2 weeks off meant that families could not get care from the onsite clinic and thus the contribution to a health savings account. The cost of health insurance and the health savings account for high deductible insurance are all adjustable in yellow fields. The assumed health insurance cost came from ____________________ ( ). Closely associated with the health insurance is the cost of a primary health care clinic and emergency room in Ruby, as well as a standby helicopter for emergencies. These costs are considered fixed on an annual basis and came from another student report in this study (Alcorn, 2015). They are divided over the number of employees the mine is assumed to have. Currently this is 491. The number of employees and the fixed clinic and emergency costs are adjustable in yellow fields. It was also assumed the company would provide dental and vision insurance. The costs for these came from _____________________( ). These costs are also adjustable in yellow fields. Conclusion The product of this work is a spreadsheet that calculates base pay on a total of regular and overtime hours worked in one year and then itemizes the cost of vacation, Social Security, Medicare, Unemployment Insurance, Workman’s Compensation, 401K match, health insurance, dental insurance, vision insurance, Health Savings Account Contributions, and onsite medical care. The spreadsheet then summarizes actual pay from either salary or basic and overtime hours worked in a year. The fringe cost is then divided by base pay to yield the percentage burden on the wage. Finally a total cost for each type of employee is calculated. Knowing the annual cost of an employee allows a manning table to yield a total personnel cost for the year. Several things apparent from the table might be noteworthy. The burden cost for an employee was not the same for every position. Perhaps this would not be unexpected since some fringe costs are a percentage of wages while others are a fixed cost per person. The second note is that the burden cost for the benefits offered is at the high end of the scale – about 72 to 115% of wages for hourly earners and 29% to 78% for salaried people. Most standard benefits tables and models look for mines to have about 40 to 70% burden on the wage. A typical hourly worker at this mine is usually costing over $100,000 and the two weeks on 2 weeks off schedule requires this mine to pay nearly half of hours at overtime which drives many fringe costs up a proportional amount. The mine will have to have two complete separate work crews. While the cost of building up and having a resident workforce in Ruby will require some potentially significant capital costs, the decision to have an off-site workforce is most certainly expensive from an operating cost standpoint and one may want to more closely examine the relative cost of a workforce in Ruby versus and 2 on 2 off non-resident mining camp work schedule. References ADP, 2015, “Changes to Social Security and Medicare Wages and Rates, and Pension Plan Limitations for 2015”, Internet article referenced Feb. 7, 2015, http://www.adp.com/tools-and-resources/adp-research-institute/insights/insightitem-detail.aspx?id=F5E4F8C7-0887-4C94-AFEB-21C7B25DD3BF Alcorn, Nick, 2015, Week 2 report on wages and benefits, Sr. Design Class submission, Department of Mining Engineering, Southern Illinois University at Carbondale, Feb. 3, 2015.