Salaries of employees are included in direct costs. Direct costs can be either fixed or variable, and salaries too can be either fixed or variable.

Employees who are salaried and exempt from FLSA regulations, represent fixed costs because salaried employees make the same amount of money per pay period even when they work longer than 40 hours per week. The variable cost is found in hourly employees’ rates which, in health care, comprises most nurses, therapists, administrative and support staff, dietary, maintenance, housekeeping, etc. Now, consider a residential/inpatient setting and think about the fact that revenue comes almost exclusively from patient census. So as census fluctuates so does the amount of dollars that can be paid out in salaries. When census gets low, then staffing gets cut so that the expense dollars from salaries are in line with revenue that is allowed for the expense.

It’s good to do everything you can to keep census up so that hourly employee who are full time will have steady hours that they can depend upon.

Class: What other variable costs do you think are associated with health care? Please share your ideas. 150-200 words