Cost retention

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Under residual costs ( english cost stickiness ) is understood in business administration the behavior of costs in a declining employment rate not to fall to the same extent to which they were previously increased with increasing employment. Remanent costs are those costs that are not proportional to employment.


The problem of cost retention belongs in cost theory and has been discussed in German-language business literature since at least 1925. In this book, Wilhelm Hasenack dealt with the inertia of fixed costs in banking. The actual concept of cost remanence was introduced by Hans Brasch in 1927 when he was investigating the behavior of “ overheads ” (today overheads ). In 1958 Walther Busse von Colbe saw the fact that "short-term movable costs do not adjust in their amount to changes in the level of employment in the company immediately, but only with a time delay".

Cost function

In the course of the years two reasons for its origin have been worked out. On the one hand, fixed costs contribute to the remanence, on the other hand, these costs only decrease with a time lag . The remanence effect is to be seen as a connection between operational costs and employment and thus a cost function . The change in costs depends on the direction of the change in employment.

American studies come to the realization that sales , general costs and administrative expenses ( "sales, general and administrative costs") at a sales growth to increase from 1% to 0.55%, while, at a 1% sales decline by only 0 35% decline. Similar conclusions came a study from 2006, after which the operating costs ( "operating costs") increased at turn 1% revenue growth by 0.97%, while it decreased by only 0.91% in the corresponding drop in sales. Both studies observed that when employment falls, costs do not fall proportionally, but rather disproportionately.

This has to do with the fact that fixed costs are incurred regardless of employment and are therefore not subject to fluctuations in employment. Cost retentions can only arise from indirect output-dependent costs such as operating materials or completely output-independent costs. Therefore, with regard to the remanence, the block of fixed costs must be examined to determine whether and to what extent it can be reduced through business decisions in the event of declining employment. In times of slump in sales and lulls in sales, it is difficult for an entrepreneur to decide whether it makes sense to reduce excess capacities because it is a permanent slump in sales, or whether it is better to bear the higher standby costs in order to keep production ready and to secure capacity for any later boom phases . Remanences often appear in connection with a recession and are then one of the main causes of a decline in profits or even losses .


The causes of cost retirement can be of various kinds. In general, a distinction is made between corporate, personnel and legal reasons.

Corporate political causes

This includes maintaining a higher capacity (operational readiness) in the expectation of a short-term improvement in the employment situation, an anti-cyclical company policy and aspects of prestige. In addition, capacity reductions, for example by selling buildings, cannot be carried out immediately.

Human resource causes

In particular, here come the avoidance of layoffs of workers for social reasons and out of fear of being unable to find skilled workers later once again questioned. In addition, the personnel organization can only be adapted to fluctuations in employment to a limited extent.

Legal reasons

Employees are protected against immediate dismissal by dismissal protection provisions and notice periods and must continue to be employed for a certain period of time, although the level of employment is already falling; In addition, regulations under the works constitution must be observed. Procurement and purchase contracts with suppliers, for example, are often of a long-term nature and cannot be terminated immediately.


  • When a company is liquidated, remanence costs are also used to describe the costs remaining that are not immediately eliminated. If the employees transfer to a state-sponsored employment and qualification company, this includes, for example, the costs for employer and employee contributions to social insurance and the costs for wages on vacation and public holidays. In the event of bankruptcy, the remanence costs are to be paid from the bankruptcy estate.
  • The term remanence costs is also used in connection with short-time work . In the case of short-time work, the labor costs for employees on short-time work do not fall in proportion to the number of hours lost. The resulting remanent costs are influenced by three cost factors:
    • The employer pays the collectively agreed increase in short-time allowance;
    • the employer pays 50% of the social security contributions for the first six months;
    • other remuneration components such as Christmas and vacation pay are retained in full.
If an employee goes on short-time work, the employer has 35% remanence costs of the wage costs per hour of working time, which decrease to 24% after 6 months of short-time work, although the working hour has ceased.
  • In the public sector , cost retentions can arise from the fact that public infrastructures and public administration are not or can not be adapted sufficiently quickly and adequately to smaller populations ( communal conversion ). Then cost restraints "lead to increasing public expenditure without improving the provision of public services to the population." In this, Helmut Seitz warns of the effect that costs cannot be reduced immediately in the event of a population decline for economic, social, work organization, labor law or operational policy reasons .

Individual evidence

  1. ^ Wilhelm Hasenack: Company calculations in the banking industry. 1925, pp. 90-95.
  2. Hans Brasch: On the practice of cost fluctuations and their recording. In: Business Review. 1927, p. 67.
  3. ^ Walther Busse von Colbe: Concise dictionary of business administration. 1958, col. 3460-3465.
  4. Mark C. Anderson, Rajiv D. Banker, Surja N. Janakiraman: Are Selling, General And Administrative Costs “Sticky”? In: Journal of Accounting Research. vol. 41, March 2003, p. 54 f.
  5. Michael Steriaros, Dylan C. Thomas, Kenneth Calleja: A Note on Cost Stickiness. In: Management Accounting Research. vol. 17, 2006, pp. 127-140.
  6. ^ Philipp Belz: Analysis of the cost behavior with declining employment in companies. 2013, p. 54.
  7. Erich Kosiol et al.: Manual dictionary of accounting. 1981, p. 956 ff.
  8. ^ Mark Lembke: Restructuring in bankruptcy with the involvement of an employment and qualification company. In: Betriebsberater. 2004, p. 773.
  9. Fritz-Ludwig Danko, Jens Cramer: Labor law aspects of a company sale in insolvency. In: Betriebsberater. Supplement No. 14, 2004, p. 9.
  10. Helmut Seitz: Implications of demographic changes for public budgets and administrations. 2004, p. 7.