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As global thinking spreads, the 'burden rate' debate hovers uncomfortably close Add to ...

There are times, when you come across a new buzzword or phrase, that you're not quite sure you heard right the first time.

Friendly fire?

Near miss?

Surgical strike?

Right sizing?

Going forward?

Pink Viagra?

Usually you can figure out these irritating verbal affectations pretty quickly and move back to real language, but every once in a while one comes along that simply flabbergasts you.

Burden rate.

A friend in one of the thousands of levels of government in this country was sitting through a budget-planning session recently, and the various managers and accountants and the guy who no one knows what he does were all going on about the rising costs of "burden rates" and what could be done to bring this annoying expenditure under control.

You've heard people talk of "the cost of doing business."

This is "the cost of having workers."

It's inside talk, and the reason those of us who do real work (newspaper columnists excluded) rarely hear it, this friend on the inside says, is because companies like to say "our employees are our most valuable asset."

But they're also the greatest burden.

"Burden rate" is hot talk these days, particularly since North American auto makers began looking at the benefit costs that were being built into new cars before they even rolled off the assembly line.

General Motors, trying to come to grips with the reality that Japanese and Korean auto manufacturers were putting out better quality products at a much better price, calculated that its company health-benefit costs were running about $1,500 (U.S.) a vehicle in 2004. Add in the cost of maintaining company pensions, roughly $700 or so per vehicle, and it is a fair guess that GM was forking out about $2,000 a vehicle more than the comparative costs a competitor like, say, Toyota had to take into consideration. What this "burden" factor means is GM was losing the competitive pricing battle before the posters even went up in the local showroom.

Get those costs down, Detroit auto makers reasoned, and we'll sell more cars, make more profits and, happily, run into less benefit and pension costs down the line.

Such "global" thinking is now being applied everywhere, from the corner store to the federal government, wherever employee benefits and pension plans come into play.

It used to be that budget planning naturally took such benefits as health and (for the lucky) dental plans, maternity leave and pensions into consideration, typically tacking, my friend says, another 18-to-22 per cent onto a permanent employee's agreed-upon salary to cover those current and coming costs.

"Burden rate," however, takes that thinking to the next level. It includes such additional costs as, say, the laptop computer the lazy columnist insists on taking to the lake, the cost of a desk telephone, Internet service, business cards, cellphone, travel, travel insurance, office space, vacation pay and, in certain cases, vacation replacement.

Certain levels of government place the "burden rate" cost at around 28 per cent over salary. Some high-end companies -- say in the high-tech world where business-class travel and hospitality costs and the de rigueur BlackBerry also come into play -- place the "burden rate" significantly higher, perhaps as much as 40 per cent.

The keyword can be applied to far more than individual employees. There are "organization burden" costs that include conferences and workshops, the cost of schedule and supervision and "administration burden" costs. In Japan, they are having a debate about the "national burden rate," trying to reach some magic formula by which social benefits could be cut back while the economy moves ahead.

When it comes to the smaller focus, however, it falls on the individual employee. Want to cut down on the "burden rate"? Simple, cut back on benefits and, where you can, put an end to them completely. Want to lighten the pension load? Easy, don't hire anyone full time.

There are young people out there trying to get a start in life, but only rarely get a chance at full-time work with benefits. Far more likely, any job offer will be contract work, part-time work, temporary work or intern work, without the benefits the previous generation came to take largely for granted.

Worst of all is the "work-for-free" deal, so widely available in the various arts communities, where a possible job down the line is used as a carrot that is rarely, if ever, delivered. More likely the kid suckered in is merely let go from the job that never paid in the first place and a new dreamer is offered the chance to work for nothing.

It's unethical; it should be illegal.

This trend in employment appears as if it will stretch on as far, and perhaps even beyond, the GM assembly line.

And what it will bring is anyone's guess.

But one fair guess is that while the burden might today be falling on business, a day will come when it falls on us all.

rmacgregor@globeandmail.com

Follow on Twitter: @RoyMacG

 

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