Which of the following is an appropriate method for calculating the financial impact on the firm that results from the loss of a key employee?
A) Research comparable salaries on employment data websites
B) Never let these employees be in the same building at the same time
C) A multiple of the key person's salary
D) Calculate the net present value of the future salary owed to the employee under his/her existing employment contract

Question

Quizplus · Accepted Answer

A multiple of the key person's salary is a commonly used method for calculating the financial impact on the firm from the loss of a key employee. This method takes into account the direct and indirect costs associated with replacing the employee, such as recruitment, training, lost productivity, and the impact on revenue and profits. The multiple used can vary depending on the industry and the importance of the employee to the organization. A multiple of two or three times the employee's salary is often used. The other options do not provide a comprehensive or accurate estimate of the financial impact of losing a key employee.

Which of the Following Is an Appropriate Method for Calculating