We recently communicated with a travel nurse whose agency offered her a choice between guaranteed hours or a higher pay rate. This choice had her, and many other travel nurses, perplexed. In fact, it even had many experienced recruiters perplexed. After all, guaranteed hours is a straightforward concept, isn’t it? Actually, in recent years the issue has become a bit more complex. In this blog post, we’ll provide some background on the topic and examine this choice between guaranteed hours or a higher rate.
Background on travel nursing guaranteed hours
Guaranteed hours clauses have traditionally been a part of travel nursing contracts. While there have always been variations in what the clauses covered, the spirit of the clauses is universal. Essentially, a minimum number of working hours is guaranteed. If the traveler is cancelled more than the minimum allowed for, then they are paid anyway.
Ultimately, the agency is the party guaranteeing the hours. After all, they’re the party responsible for paying the traveler. However, in the vast majority of cases, the hospital provides a guarantee to the agency that the agency’s employees will have a minimum level of guaranteed hours. So the hospital’s guarantee to the agency makes the agency’s guarantee to the traveler financially viable.
You see, guaranteed hours clauses exist to protect both the nurse and the agency from lost revenue. Travel nurses accept contracts based on the expectation that they’re going to work. Like everyone else, they have financial obligations to meet and they probably incurred some start up costs for the assignment. Meanwhile, the agency must meet its own financial obligations and it has certainly shelled out a significant amount of money to ensure the hospital has a highly qualified professional.
Travel nursing guaranteed hours under pressure
Unfortunately, guaranteed hours clauses have come under pressure in recent years. The recession caused a shift in the nursing labor market that gave hospitals an edge over agencies. Hospitals used this edge to negotiate more favorable bill rates. They also used it to negotiate more favorable guaranteed hours policies.
It’s true that in many cases there has been no change in guaranteed hours policies and contract clauses. However, in some cases, hospitals decreased the number of hours they were willing to guarantee. In other cases, hospitals simply refused to guarantee any hours at all. And sometimes, hospitals just disregard the contractual obligation when it exists. This last possibility can leave the agency in a quandary. Should they take legal action against their client or preserve the relationship for future business purposes?
While it is rare for hospitals to blatantly disregard their guaranteed hours obligations, it is much more common these days for them to cancel shifts in accordance with the guaranteed hours policy. This means, for example, that a hospital whose contract allows them to cancel up to 3 shifts in a 13 week period has been more likely to cancel those 3 shifts during the past few years than they have under normal economic circumstances. Moreover, hospitals may even cancel a contract outright due to low census.
Travel nursing agencies adapt to the changes
The increased uncertainty pertaining to guaranteed hours has forced agencies to reconsider how they handle them. In prior years, many agencies simply guaranteed hours in their all their contracts regardless of hospital policy. Shift cancellations were so rare that the costs associated with them were insignificant compared to benefit of offering a flat-out guarantee.
As shift cancellations increased, so to did the costs associated with them. Many agencies now sync the guaranteed hours clauses in their hospital contracts with the guaranteed hours clauses in their contracts if they weren’t doing so already. For example, if the agency’s hospital contract allows the hospital to cancel the traveler 1 shift every 2 weeks, then the same stipulation is put into the contract.
Of course, this can make selling a contract much more difficult. So some agencies came up with more innovative approaches. For example, when possible, some agencies offer fully guaranteed hours if the nurse agrees to pick up shifts at other hospitals in the area should shifts be cancelled at their contracted hospital. The obvious downside is that nurses could end up being on call if shifts are cancelled at their contracted hospitals.
At least one company has chosen to deal with this issue by offering their travelers a choice between guaranteed hours or a higher pay rate. This is an interesting approach. As mentioned previously, cancelled shifts cost the agency dearly if they are not able to collect from the hospital but are still obligated to pay. This agency has most likely worked out some formula to calculate the average cost per contract they’re incurring due to cancelled shifts. They then work that cost into the contracts of those that would prefer to have guaranteed hours.
For the nurse, it’s almost like an insurance policy. It’s spreading the risk and the cost among the group in order to ensure that individuals who face cancellations don’t get slammed with huge expenses. Meanwhile, those that want to shoulder the risk don’t have to purchase the policy. Unfortunately, the nurse did not reveal the cost of obtaining the guaranteed hours, so we can’t speculate on the fairness of the deal.
Choosing between guaranteed hours and a higher rate
Most travelers responding to the inquiry, which was made on a popular Facebook travel nursing group, said they’d take the guaranteed hours. However, others said they’d require both the higher rate and the guaranteed hours. That’s fair enough, but that’s not the offer on the table. Of course, a you can always decline an offer. However, travel nurses should always consider the cost of being without work while they line up their next contract before declining a job offer. For example, if it takes another 2 weeks to land an assignment, then it might not be worth it to pass on this assignment just because it pays a dollar or two less per hour.
At any rate, the recruiter offering this choice told the nurse that, “… you will get more money taking a higher pay and skipping the guaranteed hours being as it all comes from the same pie so to speak.” This assertion led a couple of recruiters to comment that guaranteed hours have nothing to do with the bill rate or the pay package. This is true only in a narrow interpretation of the pay package. At a broad level, the agency has one source of revenue, the bill rate. So in the end, EVERYTHING comes out of the bill rate, including the cost of cancelled shifts.
How to make a calculated decision
Ultimately, this is a dollars and cents decision. First, determine how much lower your rate will be if you take the guaranteed hours. Let’s say the agency pays $2 per hour less in order to have guaranteed hours. Next, calculate how much it’s going to cost you over the course of the contract. Let’s say the contract is for 36 hours per week for 13 weeks for a total of 468 hours. The cost would be $936 over the course of the contract.
Next, determine how much it would cost you per missed shift if you took the higher rate and passed on the guaranteed hours. How you arrive at this figure is going to depend on how your contract is structured. In fact, it’s probably best to ask your recruiter exactly how much it would cost. Then determine how many shifts you’d have to miss in order for the insurance policy to be worth it. For example, if it were going to cost $500 per missed shift, then missing 2 shifts would make it cost effective to take the lower rate. Finally, decide whether or not you like your chances of be cancelled enough to make up for the cost of having guaranteed hours.
If you’re considering declining the contract offer because you can’t have both the higher rate and the guarantee, then it’s important to the weigh the costs of being without work. For example, the cost of the guaranteed hours is $936. That’s less than one week’s pay on most contracts. You might be better off booking that week of work to ensure that you are able to work more weeks in the year in order to maximize your annual income.
As always, we’d love to hear about any experiences you’ve had with this topic as well as any questions you may have. Please post in the comments section below!