Operational Risk Exercise - Staffing Costs

[uh oh spaghettio]

I'm confused on the retiree part. It states that "under the terms of the current union contract, retirees cannot return to work part time without having their pension payments suspended. Joe thinks, if a pandemic strikes, the large pool of trained retirees could be a good source to draw upon, provided the union contract can be renegotiated. However, he also knows the grocery chain could not afford to pay both wages and pension benefits."

There is no place, that I can find, that it says the current contract doesn't allow retired employees to come back to work. The current contract does say they can't return to work unless payments are suspended, but Joe wants it that way. I don't understand the line about needing to renegotiate the contract, as everything seems to be how Joe needs it; they can work after retirement, and he doesn't have to pay them pension and wages. If a contract is simply continued, unchanged, for an additional 3 years, is that considered a "renegotiation?" Or, did I miss something that would have to change before they could return to work?

[campbell]

The "could not afford to pay both wages and pension benefits" means that's giving you a cap of what he would be able to negotiate for. If he wants to lure retirees back, it's going to have to be for more than their pension payments (since those will be suspended while they work). That's an obvious floor.

Now, an obvious way to lure retirees back is to pay them in an amount that pays them the pension benefits + the full wage (since they were willing to do the job for that much before...theoretically) -- and the current contract would allow that. But that's too much!

So he's got to work with something in between. To get that in-between amount, he needs a new contract.

[uh oh spaghettio]

That makes sense. I was looking at it very "black and white," and for some reason, ignoring any middle ground.

Thanks.