How Travel Nursing Companies Calculate Pay Rates

How Travel Nursing Companies Calculate Pay Rates and What It Means for Travelers

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It’s fair to say there is a certain degree of mystery involved with travel nursing pay packages. They’re more complicated than permanent pay packages. There are huge differences between the lowest paying and highest paying packages. And companies quote and explain them in different ways. Of course, the mystery leaves many wondering how travel nursing companies determine their pay packages. In this article, we’ll take a detailed look at the two most common methods used to calculate travel nursing pay packages and discuss some of the implications for travelers.

The Basics of Travel Nursing Pay Packages

First, let’s take a quick look at the basic structure of travel pay packages. All pay packages begin with the bill rate which is the hourly rate the agency can charge the hospital for the traveler’s time. Different contracts have different bill rates. You can review our article on the different types of bill rates for more detail on this topic.

Next, each contract has a set of time variables. For example, the standard travel contract is 3 12 hour shifts per week for 13 weeks which totals an anticipated 468 hours for the entire contract. Essentially, the bill rate multiplied by the number of contracted hours represents the amount of money the agency has to work with for any given contract. You can review our article on how time impacts pay packages for more detail on this topic.

The next component of the pay package is the company’s “gross profit margin”. This is the percentage of the bill rate that the agency keeps for itself in order to cover costs that are not directly related to the traveler. These costs include basic business expenses and salaries for the company’s internal employees. Most agencies operate with gross profit margins between 20% and 30%. You can review our article on company profit margins for more detail on this topic.

After the gross profit margin is taken out, the rest of the bill rate goes to covering the costs directly associated with the traveler and their pay package. One of the confusing things for travelers is that many of the costs are hidden to them so they don’t actually see these costs reflected in their pay. As a result, the traveler might get the impression that the agency’s gross profit margin is much higher than it actually is if the traveler ever sees the bill rate and compares it to their pay package. At the same time, it’s also possible that the agency is in fact taking a gross profit that is higher than the customary 20%-30%.

With that in mind, here is a sample list of some of the pay package variables and costs that might be associated with any given contract:

  1. Taxable hourly pay rate.
  2. Taxable overtime rate (common in states like California with overtime after 8 hours in a day).
  3. Company housing or housing stipend.
  4. Meals and Incidental Expenditure stipend.
  5. Travel stipend.
  6. Medical benefits.
  7. Non-billable orientation hours.
  8. Credentialing costs (medical exams, clinical exams, certifications, etc).
  9. Employer portion of the Federal Insurance Contributions Act tax (FICA).
  10. State Disability, Workers Comp and Unemployment insurance.
  11. Liability insurance for the traveler (required by hospitals).
  12. Vendor management fee.
  13. Cost of capital for loans to cover payroll.

You can review our article on what goes into a travel nursing pay package for more detail on this topic. And check out the video below for a helpful overview of pay packages:

How to evaluate pay packages

 

As you can see, there are tons of variables that make up a travel pay package. To make matters more complex, many of the variables are on different schedules. For example, housing is a monthly cost, travel is a one time cost, FICA is charged only on the taxable hourly rate and so on. Obviously, recruiters aren’t sitting around all day churning out pay quotes with pencils and calculators. So, how are they doing it?

The Two Common Methods for Calculating Travel Nursing Pay Packages

The Rate-sheet Method

There are two widely used methods for calculating pay packages. The first is what we’ll refer to as the “rate-sheet-method”. Think of a rate sheet like a complex Excel Spreadsheet. In fact, in its simplest form that’s exactly what it is; a spreadsheet with cells for every possible variable that goes into calculating the pay package.

The bill rate and time variables are entered. Each of the pay variables is entered along with all the costs. The rate sheet has built-in equations that break each variable down as needed. Perhaps the most important equation is the one that calculates the gross profit margin. As the pay and cost variables are adjusted, the gross profit margin is adjusted accordingly. This allows the user to tweak the pay package while keeping an eye on the bottom line.

While there may be a few smaller companies using Excel Spreadsheets to calculate their pay rates, the vast majority of companies that use the rate-sheet method have applicant tracking software in which rate-sheets are one of many interrelated components that help the company manage their business. As a result, there is a certain degree of automation that can be achieved. Let’s take a look at how this works.

How Travel Nursing Rate Sheets Work

As mentioned above, several components of the company’s applicant tracking software are utilized by the rate-sheet component. First, the company can enter information about the clients they work with including the bill rates, the locations and other pertinent information. Next, the company can enter the taxes and other government related costs for each state they do business in. The company can also enter the costs and locations of various housing options. Finally, they can enter any standard costs incurred on every contract including things like liability insurance.

Now, when a company receives a new job order they will enter it into their applicant tracking system. When the recruiter views the job order, they will have the option to create a rate-sheet for the order. At that point, the rate sheet will automatically pull in all of the data it has available for this particular client and location. In other words, much of the rate sheet is already completed for the recruiter, but they still have a little work to do.

The recruiter will review everything to make sure it looks correct. Next, they’ll enter the various items that weren’t already added automatically. For example, the hourly rate, travel stipend, and meals & incidental expenditure stipend will all be added at this point. The recruiter can also review the housing options available in the area and select one of them, or add a lodging stipend if the traveler prefers.

As the recruiter adjusts the numbers, they’ll keep an eye on the profit margin to make sure it stays within the agency’s requirements. They’ll discuss the numbers with the traveler and the two will ultimately decide whether or not the compensation package is able to meet the traveler’s needs.

The Automated-rate Method

The second method used by agencies to calculate pay rates is what we’ll refer to as the automated-rate method. Simply put, everything is automated. Essentially, the software takes it a step further by automating the hourly rate, the M&IE stipend, the travel stipend and any other variable that goes into the pay package.

The company simply enters a few numbers, like the gross profit margin they want, and the software takes care of the rest for every job order. When a job order is entered into the company’s system, the software automatically generates the entire pay package.

So, why is any of this important for travelers to know? Well, the impact of these approaches answers a lot of burning questions related to travel nursing pay packages and it also affects service in many ways. Here are some considerations:

Do travel nursing recruiters always know the bill rate?

No, recruiters do not always know the bill rate for any given assignment. If a company uses the automated-rate method, then it’s highly likely their recruiters never see the bill rates. There is certainly no need for them to see the rates. Everything is already calculated. All the recruiter ever sees is the end result.

Can travel nurses negotiate for a better pay package?

We always recommend travel nurses engage in negotiation. In fact, we’ve written a 75 page eBook on how to negotiate travel nursing pay packages that can be downloaded for free simply by joining BluePipes.  That said, it’s fair to say that you’ll have better luck negotiating with companies that use the rate-sheet method.

The rate-sheet method typically offers the recruiter easy access to altering the pay package. After all, they most likely developed the pay package themselves in the first place. Moreover, companies that employ this method usually give their recruiters a certain amount of leeway in calculating the rates.

By contrast, recruiters with companies that use the automated method most likely lack the access required to alter the pay package. They may need to request assistance from a manager or someone else with permission to make adjustments. Or, the company might have a policy that simply prohibits altering pay packages.

Why does it take so long for travel nursing recruiters to provide a pay package?

Many travel nurses have encountered the following scenario: The travel nurse calls their recruiter to discuss potential jobs. The recruiter provides the basic details such as the location, shift, specialty and start date. When the travel nurse asks for the pay packages, the recruiter places the traveler on a long hold or says they will call the traveler back as soon as they have the rates figured out.

From the outside, it might seem as though something shady is going on. Why can’t they just tell you what the jobs pay? In most cases, the recruiter is working with the rate-sheet method which can take some to complete. For example, if the agency has not entered some possible housing options for the area in question, then the recruiter may need to do some research. Or, if the agency hasn’t entered the payroll related costs for the state in question, then the recruiter may have to look those up and enter them manually.

By contrast, recruiters working with companies that employ the automated-rate method will typically be able to rattle off pay rates with ease. There may be the occasional job order that does not include all the required information, but those situations are a rarity.

Why don’t travel nursing companies post pay rates for their jobs?

It’s pretty rare to see pay rates quoted online for travel nursing jobs. There are some companies, such as Fastaff, that post pay rates for each job online. However, the vast majority of companies do not. Here again, travel nurses are left wondering if companies are hiding something. After all, travelers aren’t typically going to apply for a job unless they know the pay rate first.

One of the main reasons that companies don’t post their pay rates online is that they’re using the rate-sheet method. This method would require them to manually calculate the pay rate for every job they post online and enter it into a job advertisement. There simply isn’t enough time for them to do this. That said, you will routinely see pay rates quoted for jobs that are posted in Facebook groups. This is because recruiters are posting those jobs manually as part of their personal recruitment efforts.

What Travel Nurses Can Expect

It’s fair to say that the rate-sheet-method is used by the vast majority of agencies in the industry. All of the most widely used applicant tracking systems, such as API and BlueSky, have it set up this way. Moreover, the automated-rate method requires a highly complex software package to execute. Despite this, a large percentage of travelers may encounter the automated-rate method because it is most likely used by the largest companies in the industry.

There is certainly a trade-off from a service perspective. You can expect the automated-rate method to result in faster rate quotes, faster job submissions and a higher likelihood the company will provide pay quotes in their online job postings. You can expect the rate-sheet method to result in a more flexible approach to compensation packages and a higher likelihood you’ll be able to negotiate a better rate.

We hope this information is useful! As always, we’d love to here about your experience with this issue or any questions you might have. Post them on BluePipes Forums to discuss with us and our community!

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