Keeping an unproductive person employed, and here I mean unproductive in a technical sense, without attaching any particular stigma to the individual, keeps them out of other more productive work and makes it harder for a business to adapt to changing markets. If I pay excess payroll costs that money can't flow to other areas of my business and that labor is cut off from other markets that might be able to use it more productively. Unless I am hedging my bets against an imminent influx of work, it is better for all concerned if supply and demand are balanced.
Real world example: Every summer I front load my labor costs in the Spring. I am way over hired in May and June and run a nightmare producing labor cost. This is because I know that the money I spend in May, I'll save in August. Once September comes it becomes my job to prune hours as much as possible, since the salad days are 9 months in the future. I don't have to fire people, technically, since my staff is smart enough to be on their way south to Florida or West to Colorado, but the result is the same... labor costs stay in line with sales.
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Date: 31/7/10 21:31 (UTC)Real world example: Every summer I front load my labor costs in the Spring. I am way over hired in May and June and run a nightmare producing labor cost. This is because I know that the money I spend in May, I'll save in August. Once September comes it becomes my job to prune hours as much as possible, since the salad days are 9 months in the future. I don't have to fire people, technically, since my staff is smart enough to be on their way south to Florida or West to Colorado, but the result is the same... labor costs stay in line with sales.