Using simple multiple regression to establish labor rates

Multiple-regression methodology allows healthcare financial managers to set standard rates of pay, thereby enabling them to better control costs. The process for implementing multiple regression is simple. The first step is to calculate the betas, or weights the marketplace gives each job characteristic to determine pay. Data on betas can be purchased, or a regression can be run on market data to calculate the betas. Next, the job descriptions should be reviewed and job incumbents interviewed, and then job characteristics for each job should be ranked on a scale of 1 to 5 to obtain the independent variables, or X values. Then, betas and X values should be entered into the salary formula to obtain standard hourly rates. The proposed standard rates should be verified through market salary surveys.