One of the most important aspects of successfully moving a start-up healthcare staffing firm from incubation to ongoing success is the ability to effectively manage margins. Tracking the true cost of labor is a cornerstone of all successful staffing companies. Every staffing firm should have their own benchmarks for margin objectives. Letting margins slide only a little can have disastrous effects on cash flow and future viability.
Three other significant areas of healthcare staffing agency cost are state unemployment insurance, (SUI), worker’s compensation insurance, and professional liability. A Federal-State unemployment insurance program mandates a percentage of payroll be paid for both Federal (FUTA) and State (SUI) insurance premiums.
Recently, high rates of unemployment coupled with legislation to extend the normal period of benefits payable have depleted many state unemployment funds. As recourse for states to continue making payments, the Federal government has provided loans to states with depleted accounts. As an individual company, little can be done to make a significant impact on the rising premiums that are a direct result of higher than normal unemployment payouts. This does not, however, prevent an individual company from effectively managing it’s own premium rates within the states it provides employees. As is the case with most insurance policies, unemployment insurance rates are carefully calculated based on an employer’s most recent history of claimants for benefits.
Since the unemployment premium rate is a direct cost of labor, careful attention to the claims process is critical in assuring an accurate rate. Although no one wants to deny a qualified individual benefits due, it falls to the employer to make sure claims are warranted and valid. Disregarding a formal process for administering unemployment claims is an invitation for higher premiums. Unfortunately, due to the sustained period of high unemployment, and extended periods for benefits, these premium rates are likely to see significant increases in coming years. Despite an expected baseline increase across the country, effectively managing claims can at least provide some level of protection against the highest rate increases within the states.
In a later article we will discuss some of the other factors in margin calculation. What are your margin expectations?