Cutting 3500 jobs saves 2.3 billion dollars! That’s nearly $660,000 per employee! Damn those Swiss pay well!
Reminds me of a company I used to work long ago where they said that it cost them $200,000 a year to employ me. Since I was making $40,000 I was surprised. I then came up with a deal. They would pay me $100,000 a year and I would pay for everything I needed to do my job. Computer, payroll taxes etc. Since this would save them $100,000 a year, they should jump at the deal…unless, of course, they were full of shit.
See, a new company bought ours out. So they took the cost they had to buy our company and made accounting so that the company I worked for had to pay it off.
This is not wrong. I do not fault them for that.
What I do fault them for is saying it costed $200,000 to employ me. That is just plain wrong. By their accounting system…yes…but by reality, no. I proved that to them by offering the $100,000 deal. At least they shut up about that.
Part of it may just be that the Swiss Franc has been doing some very silly things in the last few years. It wasn’t that long ago that you got nearly 2 francs to the dollar (I think I remember getting something like CHF 1.75 to the dollar around 2000) and now you don’t even get one, even after their recent devaluing efforts. So pretty much anything in Switzerland seems ridiculously inflated when you convert it to dollars. Unfortunately so, for those of us who get paid in dollars and like Alpine scenery.
Why should I argue with someone who so clearly understands everything there is to know about corporate finance? My accounting degree’s clearly got nothing on you.
While I do think a lot of overvaluing of jobs goes on (especially when employers try to guilt-trip their workers with the “it costs a lot for us to support you” line), to be fair, the article said the following:
I doubt UBS is only cutting jobs to save this money - they are likely also consolidating offices, scaling down datacenters, and executing other cost-cutting measures. (Although somehow, I doubt executive compensation is on the chopping block.)
What is the typical overhead rate? How about the typical fringe cost? What about G&A percentage?
How did you want to get paid your $100,000 salary? Did you want a someone to type a command into a computer somewhere showing your hours worked? How was that person going to get paid?
Did you want to have your vacation and sick leave tracked? Who was going to do that, and how would that person be paid under your scheme?
Since you were going to eschew benefits, you do understand that you’d have to work as an independent contractor, right? And you are completely familar with the rules the IRS has for independent contractors? Can you summarize them for us here? And then can you explain who, on the company’s side, was going to ensure the contractual relationship between you and the company stayed within those IRS-mandated lines, and how that person was going to be paid?
I work in a consulting firm, and our back-of-the-envelope rule is that until your revenue (work that you bring in) is three times your salary, you’re a net loss to the firm. If you were getting paid $100k and were bringing in less than $300k you would eventually be let go.
Which industry? Because this doesn’t make any damned sense.
I’m in an industry with high technology and overhead costs. Don’t forget about insurance, benefits, and other perks. Salary represents well less than half the cost of an employee around here.
Unless you’re making 6 figures, health insurance coverage alone is a significant chunk of the cost of an employee.
Well of course not…they, unlike you, understood what cost loading is and how it works. Even leaving aside your benefits, do you think it’s free for your company to employ you?? That it costs them nothing to pay you, to administer to you, to manage you, and to do all of the various paperwork needed by the state and federal government for you, not to mention the taxes they have to pay to state and fed having you as an employee?? You know they have to pay OTHER people to do all that stuff, right? I’ve seen loaded costs for employees at 2 or even 3 times their salary all the time…and if your company was particularly inefficient in their processes or generous with their benefits I could see a $40 base salary translating into $200k in cost loading to the company…easily.
I was talking to a friend of mine over the weekend and she was telling me that her company pays over a million dollars a year on health care benefits alone. Mind, this is for a company that nets only ten million a year…10% of their NET goes to insurance. They are talking about changing the ratio that the employees pay from 20/80 to 25/75 or even 30/70…and this is just to keep their costs where they are today, not to increase their profits (which are actually less than a million a year right now) but just to stay where they are today.
ETA: I imagine that the cost loading on a Dutch company is even more expensive, since I would assume their taxes per employee would be similar or even more than they are in the US.
That’s not to say that $300k reflects the expense of employing you, however. That $300k likely is an informal “break-even” profitability calculation, and factors in everything else the company does to bring its product or service to market - manufacturing, operations, legal, customer support, etc.
YMMV depending on the company’s business model, but I think it’s disengenuous for an employer to say that an employee’s break-even productivity point (what I’d see as the “cost of sale”) represents the actual cost of employing them. The cost of employment is somewhere south of the total cost of sale per-employee. ETA - on review, I see Evil Economist isn’t claiming that his firm represents that as pure cost of employment, but as an academic point, I’ll let my post stand.
In other words, if an employee making $100k gets let go, the company doesn’t shed $300k in expenses. Because all things being equal, if the company does nothing else, the portion of that $300k that represents pure cost of sale (excluding direct employee costs) then just gets distributed to the other workers.
IANA accountant, but I’ve been in sales/sales ops with a big corporation for a while now, and these kinds of figures get thrown around a lot. If I’m way off base, I’m sure someone will correct me.
Everything. I get no vacation, no computer support…nothing. For the $100K I have to do everything.
What you don’t get to do is tell me that buildings in San Fran are expensive (I work in MN) and that is part of the cost to employ me…nor that your business just bought the company I work for and somehow that means I am higher cost to employ. While I understand the accounting of it that way (I really do) it does NOT mean it costs that to employ me. If it really costs that to employ me then you should leap at my offer of meeting you half way between my salary and what you say it costs to employ me.
How much the CEO gets paid has no impact on how much it costs to employ me. That cost goes into how much it costs to employ HIM.
The costs to employ me are my salary, any benefits, whatever tax the government throws on you directly about me and an appropriate share of whatever rent/utilities/equipment it costs to have an office - and that does not mean dividing by the number of employees in the office when some get small cubes and others get big offices. If you say that cost is greater than my salary…well then I have a deal for you