HERC: Cost of VA Staff & Labor
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Cost of VA Staff & Labor

Cost of Employing Specific VA Staff

This FAQ briefly describes the four sources of employment costs: Federal salary schedules, the VA general ledger (FMS), the Managerial Cost Accounting (MCA), and the VA payroll system (PAID). It also explains the creation and use of applied hourly compensation rates.

Employment Cost Sources

Federal Schedule

If an employee's grade and step is known, the gross annual salary may be obtained from Federal salary schedules. These schedules are available on the Office of Personnel Management (OPM) web site. Note, in addition to a general wage table, the OPM web site also has tables for the geographic adjustment of wages.Employers also pay taxes, contribute to insurance premiums, and make other benefit payments. Researchers at the Palo Alto VA medical center estimate that these additional costs equal 30% of salary. Thus a reasonable estimate of annual employment costs is 130% of the gross annual salary.


A more precise estimate may be obtained from the Financial Management System (FMS), also known as the VA general ledger. FMS reports all labor costs including benefits and employer contributions to taxes. Because FMS tallies the number of hours worked, the average cost per hour of work can also be determined.

Employment hours and costs may be determined separately by facility and occupation type (also known as the Budget Object Code, or BOC). Data are reported separately for each VA facility, allowing researchers to determine local costs in addition to national averages. The data are also divided into scores of BOCs, of which 72 values refer to different occupation types. For example, BOC 1081 represents full-time physicians and BOC 1061 represents registered nurses. By limiting the range of BOCs, researchers may determine costs for particular occupation types. FMS lacks specificity in some staffing codes, particularly for administrative personnel. A diverse group of administrative employees with a wide range of salaries is represented by a single code.

FMS data are stored by the Austin Information Technology Center (AITC) and may be accessed through special computer accounts. Accounts are approved locally through the Information Security Officer (ISO) at each medical center. VIREC has prepared a tutorial on using AITC files. See the HERC guidebook on FMS which lists relevant files with variable names and formats.

Managerial Cost Accounting Extracts

The Managerial Cost Accounting (MCA; formerly Decision Support System (DSS)) is a utilization and cost database system implemented at every VA facility. Extracts from the local MCA systems are combined to create a set of National Data Extracts (NDEs). The NDE for inpatient and outpatient care contains both labor workload (hours) and expenditures. These figures may be used to calculate average wages. As with FMS, the MCA NDE data are available by facility and by BOC.

HERC staff have prepared a technical report on determining wages for VA employees. It describes how to access FMS and MCA data through the VISN Support Services Center (VSSC) web site, also called the "KLF Menu". A table in a supplemental document shows average annual and hourly wages by BOC for fiscal years 2000-2008. This work was continued in the HERC guidebook "Researcher's Guide to Estimating VHA Labor Costs", including a supplemental Excel file comparing hourly wages by BOC for fiscal years 2000-2016.

HERC staff have also prepared a guidebook that provides information on how the MCA Account Level Budgeter (ALB) National Data Extract (NDE) is created, how to access the ALB, and describes variables in the ALB.


The VA payroll system, PAID (Personnel and Accounting Integrated Data), has specific information on payroll and human resources characteristics of every VA employee. Among many data elements unique to PAID are highest educational degree, immigrant status, and T&L (time and leave) code that identifies the specific department or section in which the employee works. PAID data are highly confidential. Access to them is strictly controlled and not guaranteed. Investigators with a demonstrable need for PAID data and very strong data-security procedures may request access; contact HERC for further information. See the guidebook on PAID data.

Applied Time versus Total Time

We can divide an employee's total hours at work into applied time spent on direct patient care and related activities, and overhead time for administrative tasks unrelated to care (e.g., serving on institutional committees), sick leave, annual leave, holidays, training, and any continuing medical education (CME) that occurs during scheduled work hours. We may refer to the ratio of applied time to total time as the applied rate. There are 261 weekdays in a year, and thus someone who has 26 days of overhead time has an applied rate of about 90%. If there are 8 hours per workday, a 90% applied rate corresponds to 1879.2 hours of applied time out of 2088 total hours.

The applied rate plays a role in figuring staffing costs. The cost of staff time is meant to measure an employer's cost of performing the intervention. Interventions always constitute applied time. If nurses have an average applied rate of 90%, then in theory no more than 90% of a nurse's time could be spent on an intervention. When figuring the cost of an intervention, therefore, one must calculate the hourly applied cost, equal to the total annual cost divided by the total number of applied hours:

Hourly applied cost = total annual cost / total applied hours

The applied cost simply recognizes that employees spend time on overhead activities like sick leave and administrative work. As a result, less than 100% of a person's time can be spent doing clinical work. Suppose that a VA registered nurse has a 90% applied rate and a total annual cost of $71,500. If she works 2088 hours per year, her hourly total and applied costs will be as follows:

Hourly total cost = total annual cost / total hours
= 71500 / 2088 = $34.24
Hourly applied cost = total annual cost / total applied hours
= 71500 / (2088*0.90) = $38.05

The actual applied rate varies by person due to differences in annual leave and sick leave, supervisory duties, and other factors. Full-time regular VA employees are generally eligible for at least 13 days of annual leave and 10 Federal holidays, yielding a maximum applied rate of approximately 91% if all leave is taken. Registered nurses earn more annual leave, however, and many states require physicians and nurses to undertake as many as 50 hours of CME per year. Thus an applied rate of 85-90% for non-medical staff and 80-85% for licensed medical staff is more realistic. A survey of staff members concerning their applied rate when at work would provide more accurate estimates but might not generalize to other VA facilities or sites outside the VA.

Published analyses must state clearly what applied rate was assumed for each type of employee in the analysis. A brief explanation of the distinction between hourly total cost and hourly applied cost will benefit readers unfamiliar with the concept of applied rates.

Related Guidebooks

HERC's Medicare Wage Index for VA Facilities: HERC has combined data from the Centers for Medicare and Medicaid Services (CMS) and the VHA Support Services Center (VSSC) to create a Medicare wage index for VA facilities.

Researchers’ Guide to the Account Level Budget (ALB): This guide provides information on how the Decision Support System (DSS) Account Level Budgeter (ALB) National Data Extract (NDE) is created, how to access the ALB, and describes variables in the ALB. Examples of how the ALB may be used in research are also discussed.

Research Guide to the Managerial Cost Accounting National Cost Extracts: This document reports on the four NDEs that the MCA Office refers to as the core NDEs: the inpatient discharge (DISCH), inpatient treating specialty (TRT), observation treating specialty (OBT), and outpatient (OPAT) files. The goal of this handbook is to describe the contents of the MCA core NDEs and to provide instructions on how they may be used.

Researcher’s Guide to Estimating VHA Labor Costs: HERC has created a dataset that provides hourly labor cost estimates by job category from both FMS and MCA/DSS ALB sources for every year since the 2000 Federal fiscal year. This guide provides information on both FMS and ALB data sources, methods used to create the dataset, and recommendations about using each dataset.

Research guide to the VA Financial Management System (FMS): This HERC guidebook lists the contents of FMS datasets and contrasts FMS with other VA costs datasets, explains the meanings of variables in FMS files, describes how to access the data, offers tips on using the data to estimate wages, and provides a bibliography of published studies that used FMS data.

Guidebook for Research Use of PAID Data: This HERC guidebook offers all of the information that the researchers learned about the History and Master Files while conducting multiple analyses of the data.