An old friend contacted me recently. He is about to retire from a manufacturing
ID: 450143 • Letter: A
Question
An old friend contacted me recently. He is about to retire from a manufacturing company where he has worked for over 30 years.
He indicated that he is leaving with a "sour taste in his mouth". He told me that about four years ago, his position was reclassified from a management position to a non-management graded position.
At the time, he was told that he would be "grandfathered" as a manager so that he would not suffer any negative effects.
However, he indicated that it instead of receiving his normal raise each year, he received an annual lump sum payment (of the same amount). He feels that this did impact him financially and therefore is leaving his company feeling very negative.
PART 1
Assuming that he was making $100,000 per year and would have received a 2.5% raise each year (which he instead received as a lump sum each year), calculate his total loss (wages only-do not consider pension or benefit impacts or any intangibles). Show your work.
PART 2
What advice would you have given him if you were me? Should he complain? If so, to who? Should he contact an attorney? Does he have a legitimate legal claim? Why or why not.
Explanation / Answer
Base salary $100,000 Increment (Annually) 2.50% Salary under normal process Salary in 1st year $100,000 Salary in 2nd year $102,500 Salary in 3rd year $105,063 Salary in 4th year $107,689 Total cash in 4 years $415,252 Lumpsum payment Total base pay in 4 years $400,000 2.5 % lumpsum payment $10,000 Total cash in 4 years $410,000 Loss $5,252