Originally Posted by
joejones
There are a few things missing from the formula:
(1) Variable "A" should be the value of the person's work from the employer's perspective, which should be significantly greater than their compensation (unless you're talking about a self-employed person). Otherwise why did the employer hire them in the first place? For example, in the law practice world, associates are expected to account for revenue of roughly 3x their compensation in order to cover overhead and profits to the partners, so an associate making $100/hour would be making, on average, $300/hour for the firm, so a day of lost work is $1,000 from the associate's perspective but $3,000 from the firm's perspective. I'm sure the discrepancy is even greater for, e.g., people in corporate sales jobs.
(2) Taxes. The fare difference is a business expense so the business should be able to write off some percentage of it.
(3) Retention. If a person is flying frequently and has to sit in the back all the time, they are likely to get sick of it much more quickly than if they were sitting up front (especially if competitors let their employees fly in business).
Yep, that's the wonder of an equation, you can add whatever values you want in. If you (for example) have a billable hours target of 80% and your billing rate is $300 an hour, each day is worth $1920 in foregone productivity (8*0.8*300).
I'm also assuming that business class does allow immediate work on arrival. Not sure that would be true for a 30hour trip.
Retention - another good point. But some staff would rather have 2 days either side of the 'business' part of the trip for sightseeing etc than fly business. Surely?
So, regardless of the specifics, I think businesses should develop their own version of this calculator and input whatever values they deem most appropriate.