In the late 1990s, once employees who worked for what is now Harry & David Holdings Inc. qualified for benefits, they were easy to keep.

"We said just answer the call when we're ready and that worked pretty well," says Harry & David President and Chief Executive Bill Williams.

But in the intervening years the cost of benefits has risen dramatically, as it has in every industry.

"Right now, the per employee cost for medical and pension/401(k), exceeds on average $10,000 per employee," Williams says. "And that doesn't include holiday pay."

In some cases, the company was paying out more for benefits than in wages because some employees were working so few hours, Williams said.

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"It becomes more expensive when you have people who don't work more than a few hundred hours per year."

When Williams — and it was his decision, he says — instituted the 1,600 hour qualification standard for benefits (an average of about 31 hours minimum per week), it was based on the company's production hours.

"I thought it was reasonable that employees hit 1,600 hours," Williams says. "But as we went through the fall, we were more efficient than I thought and the Internet became a bigger component of our business and we didn't require as many hours for order entry."

In fiscal 1998, employees who worked a minimum 1,400 hours a year qualified for benefits, and there was no floor on sustaining the benefits. The following year the qualification hours dipped to 1,000 with 750 hours needed to maintain benefits.

"The group that had previously qualified at 1,400 hours, we honored (grandfathered) if they simply came back when we recalled them," Williams says.

In fiscal 2005, the numbers qualifying and benefit retention hours were raised to 1,250 and 1,000, respectively. Williams says the current 1,600 hours will be reduced when the new fiscal year begins July 1.

"That has proven too much," Williams says. "Not only for people who rotated out, but people who are working all the hours they can get."

He says the qualifying mark will be between 1,000 and 1,250 hours.

The company has three types of employees: Salaried, regularly scheduled employees — who work 20 to 40 hours per week year round — and seasonal.

Addressing the pension plan, which was frozen at the beginning of the current fiscal year that began July 1, Williams says few companies offer both 401(k) and pension plans. He says about 70 percent of the companies that offered pension plans have converted to 401(k) programs.

"It's difficult to compete economically when your cost structure is different from competitors," Williams says. "The auto industry has seen that. We had to look at cost structure to see if we were competitive, otherwise our products would be priced out of the market."