The health care system is a highly labor intensive industry making up to 60% of the total cost of all expenses in the organization. One of the most significant drivers of labor costs is the number of staff employed in relation to an organization’s performance and output.
The cost of labor is a product of the pay rate times the number of people employed, and certain factors have a significant impact on the total salaries and benefit costs. The number of employees in the healthcare organization vis-à-vis their productive power, mode of employment, and compensation is worth determining, since the pay rate is always a function of labor market conditions. Management has a greater control over the number and mix of staff in every department of the organization, which drives the overall salary expense. Since labor costs are so substantial, it is important that the organization attempt to size its workforce properly to maximize results. In the health care, the challenge is to create the best possible patient experience with excellent clinical outcomes without overspending for those services. Although determining the right staff size is not easy, the health care system like other industries ought to adopt techniques to control the labor costs.
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