The travel nurse housing stipend is one of the largest components of the travel nursing pay package. But understanding exactly how the housing stipend works can be difficult. This is because different agencies handle housing stipends in different ways which leads to different explanations when talking to recruiters. You’ll also find different explanations from travelers who participate in social media groups and message boards dedicated to travel healthcare. In this blog post, we’ll provide detailed information about housing stipends to help you attain a full understanding of this pay package variable.
What is a housing stipend?
Simply put, a housing stipend is a sum of money that is intended to cover the cost of housing while you’re working a travel assignment. However, the reality is that housing stipends are much more complex than this simple definition. And to fully understand the stipend we have to understand “GSA Per Diem Rates”.
The “General Services Administration” (GSA) “oversees the business of the US Federal Government.” Of course, this means the GSA has many responsibilities. One of those responsibilities is to establish the per diem rates for federal employees. “Per diem rates” are “the maximum allowances that federal employees are reimbursed for expenses incurred while on official travel.” These reimbursements are paid free of taxes.
There are three expense categories: housing, meals, and incidentals. We’ve discussed the Meals and Incidentals stipend in a previous blog post. The GSA publishes these rates for all counties throughout the United States. Counties with a higher cost of living typically have higher per diem rates because it costs more to cover these expenses.
You’re probably wondering why we should care about GSA Per Diem Rates if they only apply to federal employees. Well, the GSA per diem rates are applied by the IRS to private sector employees. That’s how they worked their way into the travel healthcare world.
Travel Nurse Housing Stipend vs. Per Diem
With this basic understanding of GSA Per Diem rates in mind, we can discuss how this all applies to travel nursing. First, you might be wondering why the GSA calls it “Per Diem” and others refer to it as a “stipend.” “Per Diem” is a Latin term that means per day. And the GSA lodging rates are quoted as daily figures. For example, the current Per Diem lodging rate for Sacramento, CA is $102 per day.
“Stipend” is defined as a “fixed regular sum paid as a salary or allowance.” This definition is a better fit for the travel healthcare industry. Using the term stipend helps avoid confusion with the healthcare industry’s use of per diem as meaning daily or on-call staffing. More importantly, most agencies pay their housing reimbursements in lump sums. They typically pay them on a weekly or biweekly basis. Moreover, agencies typically quote their housing reimbursements as a monthly figure.
Should I expect to get the maximum allowed by the GSA?
Different agencies will offer different amounts for their stipends. This leads many travelers to wonder if they’re getting a fair deal. When researching the issue in online groups and message boards, you’ll find some travelers who refer to the GSA lodging rates as what you should expect to receive or as a barometer for expectations. This would mean that if you took a travel assignment in Sacramento, CA, then you should expect to get a stipend of $3,060 per month, or close to it ($102 per day for 30 days).
This is not the case. First, the GSA rates are the maximum amounts that can be given without the exchange of receipts. So it’s not a requirement that these figures be paid out.
Second, the GSA rates are based on short term stints that typically require the use of a hotel. In other words, employees who typically utilize the reimbursements are most commonly doing so for less than 1 month. By contrast, travel contracts typically last for 13 weeks and are rarely less than 8 weeks.
As you know, hotels are much more expensive than apartments. And travel healthcare professionals can typically secure short term apartment leases or qualify for large discounts at Extended Stay and other hotels. This is important because according to IRS rules, agencies must have a “reasonable belief” that the traveler would deduct the amounts the agency provides for their lodging stipend. In other words, the agency must believe that you will pay as much for housing as their stipend allows.
Many, if not most, of the GSA housing rates are much higher than the reasonable expectation for the cost of a 3 month stay. For example, the GSA lodging rate in San Diego, CA is $139 per day. That’s $4,170 per month. Agencies should expect that their employees would be able to secure adequate accommodations in San Diego for much less than that.
Despite this, you will find large variations in the stipends offered by travel healthcare companies. For example, you may find one agency offering $2000 per month for Sacramento and another offering $3000 per month. When this occurs, it’s important to remember that travel nursing pay packages are like a pie so a larger piece in one area most often means a smaller piece in another.
There are several reasons for these variations between agencies. First, different agencies interpret the rules in different ways. Second, some agencies disregard the rules and offer really high tax-free stipends and low taxable wages which makes their “net pay” more attractive.
Sometimes, agencies are able to offer both higher taxable pay and higher stipends because the bill rate for the particular job is high enough to allow them to do so. Remember, the bill rate is the hourly rate that the agency can charge for the nurse’s time at the facility and it is the sole source of revenue for the agency. So the higher the bill rate, the more money the agency has to offer overall.
The flip side is also true. If the bill rate is low for an assignment, then the agency has less money to offer overall. So the size of the stipend can be constrained when the bill rate is low. Again though, it’s important to consider the value of the entire pay package when evaluating an offer.
The financial advantages of the housing stipend
Many travelers and recruiters tout the financial advantages of taking the stipend instead of company housing. And they’re right; in many cases, taking the stipend can be financially advantageous.
For example, if you are working with a company that offers a straight choice between a stipend and company provided housing, then you could pocket some extra cash if you’re able to find housing that costs less than the stipend. It’s common for companies, especially larger companies, to offer a straight choice between company housing or a $2000 monthly stipend. It’s a plain and simple choice; there are no caveats. Therefore, if you can find your own housing for less than $2000 a month, then you pocket the difference.
This next scenario is more convoluted. if you’re working with an agency that gives you a choice between pay packages offering either a high stipend and lower taxable wage OR company housing and a higher taxable wage, then you could pocket some extra cash in two ways. First, by avoiding the extra taxes you’d pay on the higher taxable wage. Second, if you can find housing for less than the cost of the agency provided housing. Like I said, this is confusing, so let’s take a detailed look at this scenario.
Option 1: You take the housing stipend
The agency offers you a pay package that includes a taxable base rate of $20 per hour plus a monthly lodging stipend of $3000, among other compensation variables.
Option 2: Company provides the housing
The same agency tells you that if you don’t want Option 1, then they can provide housing that will cost $2200 per month. Remember, the stipend in Option 1 is $3000 per month. That’s a difference of $800 and they will add this amount to your taxable hourly rate. They’ll do this by breaking it down to an hourly figure. For example, if this was for a 13 week contract for 36 hours per week, then there would be 468 total hours in the contract. There would be 3 total months or $2400 extra. So, $2400/468 is $5.12 per hour to be added to your taxable rate.
As you can see, you’d be paying taxes on an additional $800 per month that would otherwise be tax free if you took the stipend. Moreover, if you were able to find housing for less than $2200, then you could pocket even more additional cash.
We must point out that this particular scenario could potentially run afoul of the IRS’s wage recharacterization rules. However, this is something that agencies could potentially get in trouble for, not travelers. And because many agencies conduct business this way, it’s an important scenario for you to be aware of.
Contract cancellation risk
As you know, financial advantages and gains typically come with financial risks. And there are a couple of financial risks to taking the lodging stipend. If you sign a 3 month lease and your contract gets cancelled, then you could potentially lose a significant amount of money. Your name will be on the lease and you will be the responsible party.
If the agency provides the housing, then they’re the ones who are on the hook if the contract gets cancelled. They know this all too well. This is the main reason that many agencies sell you so hard on the financial advantages of taking the stipend. They’d much rather that you shoulder the risk.
Some may argue that the employment contract typically assigns responsibility for costs to the traveler in cases where contracts are cancelled. However, this is only true in cases where the contract is cancelled with cause, meaning the contract is cancelled for some disciplinary or performance issue. But contracts can get cancelled for many other reasons, such as low census. Moreover, even when a contract is cancelled with cause, it’s often more trouble to collect from the nurse than it’s worth, so agencies often shoulder the costs associated with housing when they’re providing it.
That said, there are ways that you can avoid this risk. First, you can use Extended Stay and other hotels. This way, you don’t sign a lease and you stop paying when you check out. However, you may be on the hook for additional charges if you negotiated a long-term rate with the hotel and your contract is cancelled early. Typically, hotels like Extended Stay offer deep discounts if you’re staying for more than 30 days. If your contract is cancelled within 30 days, then the hotel may charge you the difference between the discounted price and the standard price for the number of nights you stayed.
Second, you can look for month-to-month apartment leases. These are relatively rare, but they do exist. With a month-to-month lease, the most you’ll be on the hook for is the remainder of the month. Similarly, you can ask property managers if they can include an early cancellation clause in their lease.
Third, you can utilize unconventional housing options like vacation rental services, share rentals, and sublets. These options typically have more flexible terms and more reasonable prices. However, you may have to sacrifice some of your desired housing amenities with these options.
Missed hours and cancelled shift risk
If you take the stipend, then you could potentially face a greater risk of financial losses due to missed hours or cancelled shifts. Whether or not you face a greater risk depends on the company you work with because different companies handle this in different ways.
The issue here is that most companies include a clause in the contract pertaining to penalties for missed hours or cancelled shifts. And remember, while it’s true that most travel nursing contracts include a “guaranteed hours” clause, these clauses typically allow a certain number of cancelled shifts per 13 week contract and they never cover missed hours (ie calling in sick or scheduled time off).
The missed hours/cancelled shift penalties are typically equal to the value of all the stipends and are quoted as hourly figures. For example, if the lodging stipend, M&IE stipend and travel stipend had a combined value of $22 per hour, then the penalty for missed hours would be $22 per hour. These clauses exist to ensure that the agency doesn’t have to pay if the hours aren’t worked because the agency can’t bill the hospital if the hours aren’t worked.
How does this pertain to the stipend? If you take the stipend, then it’s much easier for the agency to simply withhold the prorated value of any missed hours from your paycheck. They can just treat everything as an hourly payment. So, if you don’t work the hours, then you don’t get the payment.
It’s important to note that there are questions over the legality of this practice. The issue is that treating tax-free reimbursements this way may qualify as “wage recharacterization.” However, this doesn’t change the fact that many agencies engage in this practice. Therefore, it’s something travel nurses must consider when making their decision.
By contrast, if the agency is paying for your housing, then they must actually garnish your wages to recoup the costs of housing. There are laws and legal issues that they may run afoul of when doing this. As a result, many agencies withhold stipend payments when you miss hours but don’t penalize you if you’re taking the company provided housing. Therefore, you wouldn’t lose money if you took the company housing and missed hours, but you would lose money if you took the stipend and missed hours.
Is it worth the hassle?
Despite the financial risks, you will usually realize a financial advantage if you take the stipend. However, you also need to consider whether or not it’s worth the hassle. You’ll be the one in charge of finding the housing, completing all the paperwork, and taking care of all the furnishings and incidentals. Many agencies will provide assistance, but it will always be more work to secure your own housing. This is another reason that many agencies sell the stipend so hard; they don’t want to hassle with the housing.
If you have very particular tastes when it comes to housing, then it may be more of a hassle to find housing. For example, if you’re only willing to stay in a nice apartment complex, then it could be difficult to find one that is willing to accommodate a short term lease. If you are more flexible, then you’ll have an easier time finding a place.
Also, it’s easier to find accommodations in certain areas than it is in others. For example, resort cities in Florida will be easier than downtown Los Angeles. There are more vacation rentals in Florida resort cities and landlords are more used to short term tenants in general.
Remember, you need to qualify
Finally, as with all tax-free reimbursements, travel healthcare professionals must qualify to receive the housing stipend. In order to qualify, you must be traveling for work away from your tax home. And you must maintain your status as a “temporary worker” in order to maintain your tax home.