Bearing in mind that I'm nothing resembling an accountant, I believe it has to do with getting them off the books by the end of the quarter before the statement goes out. That shows as less liability for the quarterly statement. The cost of severance and hiring is for the next quarter, so it doesn't affect the current quarter's numbers.
So:
- Company has 10 employees at an annual cost of 100k each. That's 250k (1mm / 4) of employee expenses for the quarter.
- Company lays off 5 employees right before the end of the quarter. That's only 5 employees on the payroll in the current quarter, because you account for the number of employees when the statement is issued. Re-hiring and severance payouts are going to be done sometime in the future.
Congratulations, your employee expense was only 125k for the quarter!
So:
- Company has 10 employees at an annual cost of 100k each. That's 250k (1mm / 4) of employee expenses for the quarter.
- Company lays off 5 employees right before the end of the quarter. That's only 5 employees on the payroll in the current quarter, because you account for the number of employees when the statement is issued. Re-hiring and severance payouts are going to be done sometime in the future.
Congratulations, your employee expense was only 125k for the quarter!