First, the spreadsheet for calculating the new short-term cost savings (benefit) of a layoff:
Line |
Amount |
| Long Term Savings | |
| 1. Annual total compensation cost per employee | (Annual total compensation cost/employee) |
| 2. Total number of employees to be laid off | (Number of employees to be laid off) |
| 3. Total long-term cost savings | (Annual total compensation cost/employee times number to be laid off) |
Short-Term Cost to Implement | |
| 4. Outplacement services (generally a minimum $500 per employee) | ($ in outplacement services per employee) |
| 5. Severance package per employee | ($ in salary and benefit continuation per employee) |
| 6. Accumulated paid vacation | ($ in accumulated vacation per employee) |
| 7. Total cost per employee | (Add lines 4-6) |
| 8. Total cost to implement layoff | (Multiply line 2 times line 7) |
| 9. Net short-term cost savings (Benefit) | (Line 3 minus line 8) |
Line |
Amount |
| The long-term cost of a layoff: | |
| 1. Recruitment, selection, and orientation cost expended per employee laid off (can amount to $12,500 to screen and $7,500 to orient) | ($ per employee laid off) |
| 2. Training investment per employee hired as a replacement (can amount to $3000 per person per year) | ($ per employee laid off) |
| 3. Recruitment, selection, and orientation cost expended per employee hired as a replacement (can amount to $12,500 to screen and $7,500 to orient) | ($ per employee laid off) |
| 4. Market premium paid to attract | ($ difference between salary of the replacement into the company laid-off person and salary offered to the replacement) |
| 5. Cost of additional supervision (estimate the percentage of a supervisor's time required during the first year times the supervisor's salary) | (percent of additional supervisorfs time required times supervisorfs salary) |
| 6. Economic opportunity cost of lower | (percent at which the new person works productivity during first year of the times estimate of the value of his work replacementfs employment output during the first year) |
| 7. Total long-term cost per replacement | (Add lines 1-6) |
| 8. Number laid off | (Number laid off) |
| 9. Total long-term cost for replacing those laid off | Line 7 times line 8 |
Reprinted with permission from THE HEADCOUNT SOLUTION: How to Cut Compensation Costs and Keep Your Best People by N. Fredric Crandall & Marc J. Wallace Jr. Copyright 2003 by The Center for Workforce Effectiveness. Reprinted by permission of The McGraw-Hill Companies, Inc. All rights reserved.
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