Travel nursing pay packages are quite complex. They incorporate many variables that are not common in traditional compensation packages. We’ve provided a general overview of how agencies view their pay packages. We’ve also provided details on how best to compare travel nursing pay packages. Here we’ll provide a detailed sample breakdown of a pay package. Travel nurses can use this information to help them negotiate better pay packages.
The travel nursing contract bill rate and time variables
All travel nursing pay packages begin with the bill rate. The bill rate is the hourly rate that an agency can charge the hospital for the travel nurse’s work. Bill rates vary from hospital to hospital and from contract to contract. In this example, we’ll use a bill rate of $60 per hour which is a very common bill rate in many parts of the country under normal economic circumstances.
On a side note, it’s important to note that bill rates fluctuate depending on market circumstances. For example, bill rates are much higher when the market is hot and demand for travelers is high. You can view this article for information on how to approach hot travel nursing job markets.
In any case, when evaluating travel pay packages we must consider the time variables involved with the contract in question. Time is how revenue is generated. Remember, agencies bill hospitals by the hour. So more time means more revenue and less time means less revenue. This means that fixed costs, like a travel stipend, are more expensive per hour for a shorter contract than for a longer contract. In this example, we’ll use 13 weeks and 36 hours per week as the time variables which are typical of most contracts.
At this point, we have the following details:
Bill rate: $60/hour
Contract length: 13 weeks
Hours per week: 36
Total contract hours: 468
Total anticipated revenue: $28,080 (468*$60)
“Burden” is a term used to describe some of the various costs incurred by the agency which are associated with the contract and/or pay package. Different agencies classify costs in different ways and account for them in different ways. So our example of burdens here may not be used by all agencies. However, we will be accounting for all costs so our calculations will ultimately end up in the same place. The following items are examples of burdens.
Non-billable orientation hours:
Many agency/hospital contracts include non-billable orientation hours. Essentially, the agency agrees not to bill the hospital for a specified number hours during the travel nurse’s orientation. The standard range is anywhere from 4 hours to 12 hours but it can be more.
Vendor Management Fees:
Many hospitals utilize Vendor Management Services. These services act as middle-men between the hospital and agencies. There are several types of Vendor Management Service, but they all charge a fee to agencies. The fees typically range from 2%-4% of the bill rate.
Sometimes hospitals charge agencies a billing fee. This is basically a fee intended to cover the cost incurred by the hospital in settling the bills between the agency and hospital. The fee is typically 2%-3% of the bill rate, sometimes less.
Licensing/Credential/Medical Record Costs:
Many agencies establish a set dollar amount to take out of each contract in order to cover the licensing, credentialing, and medical record costs they incur as a result of getting their files in compliance with a hospital’s standards. This could be $150-$250 per contract. Agencies know that sometimes it will cost much more and sometimes much less so they often try to determine an average cost.
In this example, we’ll use 8 hours of non-billable orientation, a 2% vendor management fee, and $200 for compliance costs.
So at this point, we have:
Non-billable orientation: $640 (8 hours*$60) = $1.36 per hour (640/468)
Compliance: $200 = $.42 per hour ($200/468)
Vendor Management fee: $1.20 per hour (.02*60)
Taxable Base Rates and Payroll Costs
The taxable base rate is the taxable hourly rate the agency pays to the travel nurse. As we’ve discussed previously, the pay package is like a pie. Some agencies are going to offer a low taxable base rate and higher stipends. While other agencies will offer higher base rates and lower stipends. The important thing to understand here is that paying higher taxable base rates increases the payroll costs that the agency incurs.
Both employees and employers pay FICA taxes. The FICA tax for employers is currently 7.65% of gross compensation. So if an agency pays a taxable base rate of $10 per hour, then they incur 76.5 cents in FICA costs per hour. By contrast, if an agency pays a taxable base rate of $20 per hour, then they incur $1.53 in FICA costs per hour.
Similarly, agencies must also pay certain taxes to the state based on the taxable base rate. These can include disability insurance, workers compensation, and unemployment insurance costs. These costs vary from state to state.
In this example, we’ll use a taxable base rate of $22 per hour and a state tax cost of 4.5%.
So at this point, we have:
Taxable base rate: $22 per hour
FICA: $1.68 per hour ($22*.0765)
State DI/UI/WC: $.99 per hour ($22*.045)
Travel Nursing Tax-Free Stipends and Benefits
Now we’re left with the tax-free stipends and benefits that the agency can potentially provide. The most common tax-free stipends and benefits are travel stipends, M&IE stipends, lodging stipends or company provided housing, and medical benefits. However, agencies may also offer rental cars, 401ks, tickets to the Giants game, and many other offerings.
In this example, we’ll use a travel stipend of $700, an M&IE stipend of $250 per week, and a lodging stipend of $2000 per month.
So at this point, we have:
Travel Stipend: $1.50 per hour (700/468)
M&IE Stipend: $6.94 per hour (250/36)
Lodging Stipend: $12.82 per hour (2000*3/468)
Sample Breakdown of a Travel Nursing Pay Package
Now we’re ready to put everything together to see how this sample pay package breaks down. Let’s start by subtracting the burdens and payroll costs from the bill rate. While this is an unconventional approach, it will provide a clear illustration.
We started with a bill rate of $60 per hour. From that, we are going to subtract our burdens and payroll costs. They are as follows:
$1.36 per hour: Non-billable orientation
$.42 per hour: Licensing and credential
$1.20 per hour: Vendor Management fee
$1.68 per hour: FICA
$.99 per hour: State DI/UI/WC
These costs total $5.65 per hour. So we’re left with $54.35 per hour.
Now let’s subtract each of compensation variables from the remaining $54.35 to see what the agency is left with. The compensation variables are as follows:
$22 per hour: Taxable base rate
$1.50 per hour: Travel Stipend
$6.94 per hour: M&IE Stipend
$12.82 per hour: Lodging Stipend
The compensation variables total $43.26 per hour. So this leaves the agency with $11.09 per hour as the agency’s gross profit margin. This is a gross profit margin of 18.5% – 19% (11.09/60) depending on how the agency calculates its gross revenue. Agencies typically strive to obtain gross profit margins between 20% and 25%. Therefore, this example would be a pretty good rate for the travel nurse. Remember, agencies must still pay their internal workers and cover all costs of business with the gross profit.
Understanding the pay package in this light is highly beneficial for travel nurses. Travel nurses can use this information to inform their negotiations. They’ll be better able to spot good deals versus bad and ultimately end up making more money!!