This is a formula worked out by the CIPD to show companies that making “knee jerk” redundancies is not necessarily the easy and cheap way out of a financial bind.
(n ×R) + (x ×H) + (x ×T) + ny(H + T) + Wz(P – n)
Where:
- n = number of people made redundant
- R = redundancy payments
- x = number of people subsequently hired
- H = hiring costs
- T = induction/training cost
- y = percentage quitting post redundancy
- W= average monthly staff salary
- z = percentage reduction in output per worker caused by lower morale
- P = number of people employed prior to redundancies
