I have owned a bunch of animal hospitals and have done legal and consulting work for many more. I have learned a lot from these experiences, but after all this time I still am puzzled by one thing:

Why do some clinic staffers (lay and professional alike) believe that their practice is some kind of giant money factory with an endless ability to generate paychecks and overtime hours, all without the need for employees to participate in the affirmative effort to increase revenue? (Then again, it is even more mysterious that these same folks are surprised when a weak economy results in a reduction in hours or in their own layoff.)

This legal article is directed toward the veterinary practice staff and provides some information on the law of economics as well as the law of business taxation. The two are related to each other and to the ability of veterinarians to maintain full employment during this recession.

1. HUMANS ARE EXPENSIVE.

Veterinary practices are, in economic terms, no different from any other business. They have certain fixed costs such as electricity, heat and rent, and not much can be done about them.

Veterinary hospitals also have a revenue stream, which is whatever work the public brings in (from which money can be derived). This number is not fixed. It is subject to a steep drop when consumers are tight on disposable dollars.

Some costs drop in direct relation to a drop in revenue. Your practice spends less on Clavamox and paper towels if business drops off. That is just intuitive.

However, the most costly item for the clinic is neither fixed nor does its costliness drop when revenue (client traffic) falls. That cost item is staff. The expenses associated with practicing doctors, technicians, receptionists and others account for the biggest part of the hospital's budget. Furthermore, as long as every employee who is full-time wants to keep his or her hours, that cost will not go down with a drop in practice income.

2. PAYROLL IS ONLY PART OF WHAT HUMANS COST.

Many employees have no idea how much it costs, over and above the amount they receive in their paychecks, to keep them on as workers. Tax and labor laws require unfailing compliance with insurance and matching (employer-paid) tax obligations, which the boss must pay or go out of business.

These additional costs of manpower include the payment of federal payroll tax, state payroll tax, city employment tax (where applicable) and federal unemployment tax. Most jurisdictions require employer-paid disability contributions as well.

In addition to those, employers must kick in to protect their workers against injury by paying a hefty insurance premium for workers' compensation. Then there is the mandatory participation in the state unemployment insurance fund, costs for which are assessed against the entire payroll, even if no one ever actually gets fired or laid off.

Employers also contribute to Medicare on the employees' behalf. Plus, it costs the practice a significant amount to provide staffing and/or overtime during paid and unpaid vacation time, sick time and paid holidays.

When you think about all that, it is easy to see why there is always a computer answering the phone when you call any customer service department these days. The credit-card companies, computer companies and every other business recognize that the cost of people is crushing. On the other hand, machines don't get a paid vacation; and if they are injured on the job, you throw them away instead of covering them for workers' comp.