Many respondents to our travel nursing survey indicated that the lack of a pay raise or bonus offer was one of the main reasons they declined travel nursing contract extension offers. Our review of social media discussions regarding this topic indicates that there is sometimes a disconnect between agencies and travelers on this issue. In this blog post, we’ll discuss both sides of the issue to highlight the factors at play.
Travel Nursing Extension Raises and Bonuses: The Agency’s Perspective
This outtake from a public social media group is indicative of the agency perspective on extension raises and bonuses. It’s a fair point. The bill rate for the extension contract is the same as the bill rate for the original contract. I have never seen an agency-hospital contract include a special increased bill rate for extension contracts and I doubt such a clause exists.
Moreover, it’s extremely rare for an agency to be able to negotiate small increases or bonuses with their client hospitals for contract extensions. First, these options don’t exist in the agency-hospital contract and would therefore require some additional agreement to be drawn up. Second, the hospital would most likely opt to find a new traveler in lieu of taking the steps necessary to arrange for the additional payments.
Therefore, recruiters assert, if the traveler was given the best rate possible on the original contract, then there is no room for them to provide a raise or bonus for the extension contract. In fact, we’ve seen some recruiters pose the question, “Given the circumstances, would you rather I give you the best rate I can on the original contract or give you a lower rate so I can give you a bonus or raise on the extension?”
The Travel Nurse’s Perspective
Of course, when the issue is framed this way, almost every traveler will say they would rather have the maximum amount of money from the outset. This is understandable given that extension offers aren’t guaranteed. More importantly, if you choose to take less money now, then you’re simply going to make less money.
Some travelers state that they don’t expect raises or bonuses for extension contracts. When they receive them, they are pleasantly surprised. These travelers most likely accept the above explanation offered by recruiters and that’s okay.
Other travelers are keen to the cost differences between the original contract and the extension contract. They assert that because the costs are lower for the agency on an extension than they are for the original contract, some additional money should somehow make its way into the traveler’s extension contract.
There are basically three cost categories that vary between the original contract and the extension contract. Let’s take a look at each of them in detail and discuss the factors at play.
Travel Stipends and Extension Contracts
Travel stipends are almost always provided for the original contract. For example, the contract may stipulate that the traveler is to receive $700 as a travel stipend with $350 to be paid on the first paycheck and $350 to be paid on the final paycheck of the contract.
When it comes to extension contracts, the travel stipend is up in the air. For all intents and purposes, the traveler is already at the work location. Therefore, a travel stipend may not be warranted.
Why is this important? After all, if the traveler isn’t going to spend the money on travel expenses, then why do they need it? As regular readers of this blog know, the travel nursing pay package is like a pie. In general, the bill rate for the travel assignment constitutes the pie of available money. The pie is split up between the traveler’s compensation, various costs associated with the contract, and the agency’s gross profit margin. So, if a travel stipend was paid on the original contract and isn’t paid on the extension contact, then that slice of the pie is going to the agency instead of the traveler.
There are a number of ways that this can be addressed in the extension contract. The traveler can simply ask for the same exact travel stipend to be included in the extension contract. However, if the traveler isn’t going to be doing any traveling, then the agency is warranted if they decline this request because it would violate IRS regulations.
If adding the same travel stipend to the extension isn’t an option, then the traveler can request to have their hourly rate bumped up by an equitable amount. Or, the traveler can request to have an equitable amount added to the contract as a bonus. However, there is a small difference to consider with these options.
Adding the money to the hourly rate or as a bonus changes the money’s status from nontaxable to taxable. Both the agency and the traveler will end up paying taxes on it. This means that the agency will incur an additional cost that they weren’t previously incurring. So travelers should understand that the equitable bonus or additional pay will be a little less than the original travel stipend. For example, a $700 tax free travel stipend may wind up as a $600 bonus.
On a side note, it’s very important for travelers to insist upon receiving the entire travel stipend from their original contract when they are negotiating an extension. There are recruiters out there who will try to claim that the second half of a travel stipend is not payable unless you are actually traveling. So, if you’re extending, they’ll try to avoid paying the second half of the original travel stipend and add it to the end of the extension instead. This should not be tolerated.
Credentialing Costs and Extension Contracts
There is often a difference in credentialing costs between the original contract and the extension contract. Credentialing costs include the costs of drug screens, medical exams, licensure, certifications and other costs incurred in getting the traveler compliant for the contracted facility. However, this issue is trickier than the travel stipend.
Different agencies handle this cost variable in different ways. Some agencies attribute the entire cost to individual contracts while other agencies spread the costs evenly over all of their contracts by adding a “general burden” to every rate sheet.
Before we continue, it’s important to note the nuances at play with credentialing costs. When an agency brings on a brand new traveler, they’re going to incur higher credentialing costs because they have nothing on file for the traveler. Many of the credentials that the agency pays for will be valid for at least a 1 year period. Why is this important?
Well, once the agency has the traveler compliant for one assignment, they’re pretty much going to have the traveler compliant for all assignments. There maybe an extra document here or there for a new facility (drug screens for example), but for all intents and purposes, the agency has a compliant file. So even if the agency places the traveler at a new assignment, as opposed to an extension, they’re still not going to incur much in the way of compliance costs.
With that in mind, let’s look at how agencies handle this cost variable. For example, let’s say that an agency incurs $250 in costs to get a new nurse compliant. One agency might factor this cost into every new traveler’s rate sheet when calculating the rate for the original contract. Of course, they’re going to incur more credentialing costs over time if they continue to work with the traveler as various items expire. Each time they incur a new cost, they’ll factor it in to the traveler’s contracted rate. This can be very cumbersome and opens the agency up to the risk of missing costs.
As a result, many agency’s opt for the simpler solution of adding a burden to every contracted rate that covers the cost of credentialing. For example, the agency may assign a $100 burden to every rate sheet or a .5% burden to every rate sheet in order to cover the costs associated with credentialing.
Unfortunately, travel nurses really have no way of knowing which method an agency uses. If the first method is being used, then it’s justified to expect additional compensation for this variable on extension contracts. However, if the agency uses the second method, then there really shouldn’t be a difference between the original contract and the extension contract.
Time and Resource Expenditures on Extension Contracts
Another cost variable that differs between the original contract and the extension contract is the agency’s time and resource expenditure. On the original contract, the agency may have incurred any or all of the following time expenditures:
- Time to recruit the new candidate.
- Time to get the candidate’s profile ready for submission
- Time to locate potential assignments and discuss rates
- Time to get all the paperwork ready for the assignment
- Time to locate and secure housing
- Time to arrange for travel
- Time to communicate all details with traveler and facility
The extension contract will undoubtedly take far less of the agency’s time and resources to secure. Typically, it’s simply a matter of negotiating the extension contract and sending the facility a confirmation.
Now, it’s possible that agencies rely on the time and resource savings realized on extensions to make their businesses viable. However, one thing is for certain. The higher an agency’s retention rates, the lower their costs per traveler are. It’s flat-out less expensive to keep a current employee than it is to hire a new one.
What does all this mean for travelers and agencies?
Travel nurses should definitely be mindful of the differences between the original contract and extension contracts. Pay very close attention to the travel stipend. Make sure that you request an equivalent amount for your extension contract. It represents money that the agency is certainly capable of paying as indicated by the fact that they’ve already paid it.
Meanwhile, taking a more flexible approach to the credentialing and resource cost differences is warranted for travelers. Use them as bargaining chips to try and get a little extra if you can. But be mindful that the agency you’re working with may not necessarily be taking advantage of you if they don’t provide additional compensation for these variables.
Finally, agencies should understand that this issue is important for many travelers. Many agencies do indeed offer extension bonuses and loyalty perks because they understand the value of higher retention rates. So if your competitors are doing it, maybe you should to. Ultimately, it makes more financial sense to provide the traveler with an equitable extension package than it does to find a new traveler.
As always, please share your questions and comments in the comment section below.