Emerging Pharmaceuticals and Medtronic Comparison

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Introduction

You have recently been hired as a Total Rewards Director for Emerging Pharmaceuticals, a

growing pharmaceuticals manufacturer on the West Coast of the United States with 25

global locations. Emerging Pharmaceuticals was started by a group of private investors in

2011 and has skyrocketed in revenue over the last 3 years. Projected revenue for Emerging

Pharmaceuticals is expected to top $5 Billion by the end of the calendar year.

Your job is new to the organization, created because the organization has increasingly been

losing talent to Medtronic, one of Emerging Pharmaceuticals’ main competitors. Turnover

of new hires with less than 2 years of employment at Emerging Pharmaceuticals is 25%. The

vice president of human resources at Emerging Pharmaceutical feels it’s important to

compare the health, wealth and work/life offerings of Emerging Pharmaceuticals with

Medtronic and is expecting you to develop a Total Rewards strategy for the coming year

that will retain critical employees, respond to the needs of multiple generations in the

workforce, and keep costs under control.

Emerging Pharmaceuticals and Medtronic Comparison

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Emerging Pharmaceuticals Workforce

The workforce at Emerging Pharmaceuticals has tripled since its inception in 2012, growing to a total of 15,000 employees working in jobs such

as scientists, research analysts, IT techs, sales, administrative support, call centers, patient advocates, clinical trial specialists, patent attorneys,

and middle- and senior-level management. The employee demographics with employment types are shown below.

Global Full-Time Employees

Age and Status Demographics

Total in Current Calendar Year

Total of all employees 15,000

30 and under 2,640

31-50 10,018

51 and above 2,012

Total Females 7,042

Locations

U.S. 10,100

Asia- Pacific 865

Canada 895

U.K. 2003

Latin America 807

Global Part-Time Employees

Age and Status Demographics

Total in Current Calendar Year

Total part-time employees 330

30 and under 105

31-50 125

51 and above 100

Total Females 247

Locations

U.S 220

Asia- Pacific 23

Canada 27

U.K. 45

Latin America 15

Employment Type

Employment Type by Position Total in Current Calendar Year

Administrative Support Staff 6,600

Professional 4,375

Clinical/Scientists/Research Analysts 2,450

Middle Managers 1,200

Senior Management 375

Emerging Pharmaceuticals and Medtronic Comparison

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Employee Value Proposition

The employee value proposition (EVP) at Emerging Pharmaceuticals in the early stages was focused on challenging work, competitive pay and

opportunities to advance. In response to the increasing exodus of employees to Medtronic, the vice president of human resources hired an

external consultant to conduct employee focus groups. She is concerned with the results, especially in employees aged 31-50 with at least 2

children, which make up 37% of the workforce. The vice president learned of employee concerns about selections and costs in the health plans;

disenchantment with the 401(k) plan, which has no employee match; and questions about career paths, advancement opportunities, and work

hours. The high level of organizational growth has put pressure on all positions in the organization.

Here are the aggregated results of the focus groups’ responses:

TOPIC CATEGORIES FROM EMPLOYEE RESPONSES % RESPONDED AS IMPORTANT

Work remotely 10%

Tuition reimbursement 8%

Healthy lifestyle reward/Voluntary benefit options 6%

Financial Wealth Options/Pension Match 5%

Paid Time Off/ Family Time Options 8%

Market “right” pay for position 10%

Opportunities to use skills/abilities 3%

Job-specific and company-sponsored general training 8%

Professional development opportunities 9%

Workplace safety 2%

Community engagement/Corporate social responsibility 5%

Recognition of job performance/variable pay options 8%

Employee respect and diversity in the work environment 6%

Trust between employees and Sr. Management 5%

Teamwork within department 7%

The vice president read comments such as:

Emerging Pharmaceuticals and Medtronic Comparison

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 I never get home before dinner and we have a new baby at home. I leave for work at 6 a.m., fight highway traffic to be in by 8, and

extra work always ends up on my desk towards the end of the day. I can’t seem to get out of the office until 7 p.m. and home by 8:30.

By the time I get home my son is already asleep. I wish the company had a way for me to work from home.

 I don’t see how I can move up in the organization when management positions require a degree, and the tuition reimbursement for

school is so low. Thirty-five hundred a year doesn’t go very far. Just the textbooks can cost $1,000.

 There are some real safety hazards in my lab; OSHA would have a field day.

 While I understand that the organization had to implement a “working spouse” surcharge for my health insurance, my husband and I

are really into a healthy lifestyle. We don’t smoke, we exercise and eat right and there’s no incentive for us – my husband’s health

plan is not as good and we are concerned about coverage because we’re trying to save for our first home. But now I have to pay

another $50.00 per month to cover him in our plans. How come there are no rewards for people like us who really work to take care of

ourselves?

 The company claims they care about providing good rewards for us, but there are no voluntary benefit options, the pension plan has

no match, and I don’t know how I can save enough to retire. Are the profits just going to the “people at the top” and leaving the rest

of us behind?

 The paid time off schedule only goes up to 18 days after 10 years of employment, with no sick time. I guess we’re supposed to leave

after 10 years. Is this a way to get rid of older employees?

 I always go the “extra mile” at work and my manager doesn’t seem to notice.

 I like my job, but a couple of people I worked with left recently for better pay at another company.

After reading all of the employee feedback, you and the vice president decide to compare Emerging Pharmaceuticals Health, Wealth and Work/

Life Total Rewards structure with information from Medtronic and make some revisions to the total rewards strategy for Emerging

Pharmaceuticals.

Health Options for Emerging Pharmaceuticals

Emerging Pharmaceuticals offers two health plan options to employees: the Value Preferred Provider Plan (Value PPO) and the Choice Plus

Preferred Provider Plan (Choice+ PPO). The Value PPO has lower bi-weekly costs but higher out-of-pocket costs at the time of service. The Value

PPO uses a narrow network of providers with higher penalties for out of network providers. The Choice+ PPO has higher bi-weekly costs, but

lower out-of-pocket costs. The Choice+ PPO offers a broader network of providers for participant choice.

Emerging Pharmaceuticals and Medtronic Comparison

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Emerging Pharmaceuticals promotes the use of generic drugs and has established a $5.00 co-pay for generic prescriptions, and the organization

is considering a partnership with Care Compare, a benefits selection tool that helps employees search for and compare the cost of procedures at

various providers or facilities. If an employee uses Care Compare, Emerging Pharmaceuticals offers a financial incentive for selecting the lowest-

cost provider.

Medical (bi-weekly costs)

Value Preferred Provider Plan (lower premiums but high out-of-pocket costs)

Choice+ Preferred Provider Plan (higher bi-weekly premiums but lower out-of-pocket costs)

Employee Only – $57.50 Employee Only – $86

Employee Plus One- $157.50 Employee Plus One-$141.50

Employee plus two or more- $257.50 Employee plus two or more – $500

Health Plan Designs – Value Preferred and Choice+ Plans

Plan Design Elements Value PPO – 80 % Co-insurance- In-Network

Value PPO – 80 % Co-insurance- Out of Network

Choice+ PPO- 100% Co-Insurance- In Network

Choice+ PPO- 100% Co-Insurance- Out of Network

Office Visit Copay $25 $75 $10 $20

Urgent Care $35 $85 $20 $45

Emergency Room $250 $250 $100 $100

Inpatient $500 $1,250 $250 $250 Out-of-Pocket Maximum

Employee $1,000 $3,000 $750 $1,250

Employee plus one $2,000 $5,000 $1,500 $2,500

Employee plus two $3,000 $7,000 $2,250 $3,750 Note: All plans are subject to a working spouse surcharge for spouses of employees who have the option of coverage with their own employer.

The surcharge is an additional $25.00 per paycheck.

Note: There are no wellness incentives for Emerging Pharmaceutical’s medical plans.

Emerging Pharmaceuticals and Medtronic Comparison

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Dental (bi-weekly costs)

Comprehensive Plan- Preferred Provider Basic Plan- Network Only

Employee Only – $12.50 Employee Only – $7.50

Employee Plus One- $18.00 Employee Plus One-$14.50

Employee plus two or more- $40.00 Employee plus two or more – $25.00

Dental Plan Designs – Basic and Premium Plan

Plan Design Elements Basic Plan Premium Plan

Diagnostic/Preventive Care $100 deductible per person, all other work covered by the plan

$150 deductible per person, all other work covered by the plan.

Basic Restorative Procedures 75% coinsurance 50% coinsurance

Major Restorative Procedures No coverage 50% coinsurance

Orthodontia No Coverage 50% coinsurance, lifetime max to $1,500

Calendar Year Maximum $800 per person $2,000 per person

Vision (bi-weekly costs)

One Plan Design for All Employees

Employee only – $6.67

Employee Plus One – $11.00

Employee Plus Two – $13.65

Plan Design Elements Plan Co-Pays

Vision Exam $20 copay

Prescription Glasses (instead of contact lenses)

$30 copay. Prescription glasses (frames and lenses) covered 1x each calendar year to max of $140

Contact Lenses (instead of prescription glasses)

$165 allowance for contact lenses 1x each calendar year

Emerging Pharmaceuticals Insurance Enrollment Summary – U.S. Location

Medical Plan and Level of Coverage

Full Time Part Time

Total Employees

Value Preferred Provider Plan

Employee only 285 7 292

Employee plus one 400 10 410

Emerging Pharmaceuticals and Medtronic Comparison

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Employee plus two or more 2,500 34 2534

Choice Plus

Employee only 315 6 321

Employee plus one 500 10 510

Employee plus two or more 2,000 65 2065

MEDTRONIC 2018 Health Plans Side by Side Comparison CHP with HSA PPO Plan

Company-Provided Account Contribution HSA Contribution N/A

$500/ Employee only

$750/ Employee + spouse OR

Employee + children

$1250/family

Deductible $1,400/ Employee only $500 Employee only

$2,800/ Employee + spouse OR $1,000/family

Employee + children

$3,600/family

Out-of-Pocket Maximum (includes deductible) $3,500/ Employee only $3,500/ Employee only

$7,000/Employee + spouse OR $7,000/family

Employee + children

$9,000/family

Primary Care Provider Visit 20% co-insurance, after deductible $20 copay

Emerging Pharmaceuticals and Medtronic Comparison

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Specialist Visit 20% co-insurance, after deductible $40 copay

Co-insurance 20% 20%

Preventive Care 0% 0%

100% covered by plan 100% covered by plan

Emergency Room 20% co-insurance, after deductible $150 copay

Online Care/Virtual Visit 100% covered by Plan, after deductible 100% covered by Plan, you pay nothing

Medtronic Mounds View Clinic 100% covered by Plan, after deductible 100% covered by Plan, you pay nothing

Salary Comparison

Job Title Emerging Pharmaceuticals Pay Range Medtronic Pay Range

Average at domestic locations Average at domestic locations

Scientists Average $93,500 Range $82,000 to $100,000 Average $103,900 Range $92,000 to $112,000

Research Analysts Average $76,000 Range $63,000 to $95,000 Average $86,547 Range $71,000 to $125,000

Clinical Specialist Average $69,000 Range $63,000 to $90,000 Average $78,000 Range $70,000 to $128,000

IT Developers Average $90,000 Range $85,000 to $120,000 Average $95,370 Range $89,000 to $132,000

Non- Clinical Manager Average $54,000 Range $48,000 to $68,000 Average $61,750 Range $55,000 to $74,000

Clinical Manager Average $100,000 Range $75,000 to $110,000 Average $105,000 Range $75,000 to $120,000

Emerging Pharmaceuticals and Medtronic Comparison

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Wealth Benefits at Emerging Pharmaceuticals

The 401(k) plan has only been in effect for 3 years. The first 2 years of operations, Emerging Pharmaceuticals had no 401(k) in place, and when

the organization was ready to start a plan, contributions were not retro to the earlier years of operations, even though the organization had

some positive revenue results. The vice president of human resources read some comments from employees about the absence of retro

funding, but has not thought about the impact of the employee feedback to this point.

The WEALTH PLAN at Emerging Pharmaceuticals has two primary elements: a core contribution, and employee savings. Emerging

Pharmaceuticals makes a core contribution to the 401(k) at the end of each calendar year. The core contribution is 3% of eligible pay for each

eligible employee. The definition of eligible pay includes annual salary and anything considered to be regular wages. Pay not eligible for a core

contribution is pay earned because of a performance bonus, lump sum for unused PTO, or workers’ compensation payments. Emerging

Pharmaceuticals makes the core contribution whether you are saving as an employee or not. Employees are not eligible for the pension plan

until after completing 1,000 hours of service at Emerging Pharmaceuticals.

Employees can save up to the IRS limits each year and should consider options to save as much as possible. Contributions are made on a pre-tax

basis and there is a catch-up contribution of an additional $6,000 for employees age 50 and older.

Work-Life Benefits at Emerging Pharmaceuticals

The work-life benefits at Emerging Pharmaceuticals include paid time off, paid holidays, tuition assistance, and limited remote opportunities.

The major holidays are in addition to paid time off and include New Year’s Day, Memorial Day, July 4th, Labor Day, Thanksgiving, the day after

Thanksgiving, and Christmas Day. Paid time off is front-loaded according to years of service and is a use-it-or-lose-it benefit. Paid time off is also

used for illness. There is no separate illness bank of time. The paid time off schedule is developed off of years of service and, because Emerging

Pharmaceuticals is a young company, the table of time only shows 10 years. There are no provisions for time-off banks beyond 10 years. If an

employee has paid time remaining in their bank of time after December 15th of any year, the time will be lost. Paid time off banks are reset on or

around January 1st of each year. There is no carryover provision and no provision to “buy out” any paid time off.

The schedule for Paid Time Off is as follows:

Continuous Years of Service PTO in Days PTO in Hours Monthly Accrual in Hours

3 years or less 10 80 6.15

After 3 years 12 96 7.38

After 6 years 15 120 9.23

Emerging Pharmaceuticals and Medtronic Comparison

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At 10 years and every year thereafter

18 144 11.07

NOTE: As the Total Rewards Manager, you should think about how a short term list of time off affects retention of employees.

Remote Work Options

Remote work options at Emerging Pharmaceuticals are only available to scientists or analysts who develop data analytics for drug/patient

outcomes. The remote work option requires daily huddles by Skype for Business and attendance at unit meetings at least once a week. Emerging

Pharmaceuticals will provide the appropriate computer equipment and connections. Employees are required to be online by 8:00 a.m. each day

and may be required to work on the weekends as requested. There is no reimbursement for home-based Wi-Fi, which is vital to work remotely

from home.

Tuition Reimbursement

The tuition reimbursement program is available to eligible employees. Employees must have completed at least 1 year of service and will be

reimbursed for education that is considered either an “upskill” related to the employee’s current position, or coursework as part of an

undergrad or graduate degree (doctoral-level education is not included) at an accredited U.S. college or university. The yearly benefit is 100% up

to $2,000 for an undergraduate degree and up to $3,500 for a graduate degree.