We have a confession to make. We’re not really going to discuss how to negotiate a travel nursing overtime rate. Instead, we’re going to discuss how to negotiate an extra hours rate. First, we’re going to discuss the difference between travel nursing overtime hours and extra hours. Then, we’ll offer some tips on negotiating extra hours rates.
What’s the difference between travel nursing overtime rates and extra hours rates?
There’s a huge difference between overtime hours and extra hours. The term “extra hours” should be used to refer to time that is worked in addition to the contracted hours. For example, if your contract is for 36 hours per week, then anything over 36 hours would be extra hours. If your contract is for 48 hours per week, then anything over 48 hours would be extra hours. If your contract is for 40 hours per week….well, you get the idea.
The term “overtime hours” should be used to refer to any contracted hours that the respective state law mandates for overtime pay. For example, the state of California mandates that overtime rates be paid after 8 hours are worked in a day and 40 regular hours are worked in a week. Therefore, a contract in California for 3 12 hour shifts per week has 24 regular hours and 12 overtime hours.
Different states have different laws. Many states have no overtime laws of their own and instead adhere to Federal law which simply requires that overtime be paid after 40 hours have been worked in a week.
Why Does The Difference Matter?
Many recruiters and nurses refer to these different types of hours in the same way. They’re simply referred to as overtime hours. However, the difference is stark and can have a major impact on how the pay-package-pie is split up between the agency and the nurse.
If you prefer a visual presentation of this topic, then view the video below!!
You see, agencies base their compensation calculations on the anticipated number of hours to be worked during the course of a contract. For example, a 13 week contract for 36 hours per week totals 468 hours. Therefore, the agency anticipates billing for 468 hours to determine how much money they have to provide housing, travel expenses, the M&IE stipend, medical insurance, taxable base rates, and any other variable that get’s tossed into the pay package.
Here’s the kicker: Sometimes, overtime is required to be paid as part of the contracted hours. For example, if you’re working a contract for 12 hour shifts in California, then the agency will be required to pay an overtime rate for any hour over 8 in a day. The agency will work this into their pay package calculations and base the overtime rate on the contract’s taxable base rate. So if the taxable base rate is $20 per hour, then the overtime rate will be 1.5 times the regular rate, or $30 per hour.
Another example is when you’re contracted to work 48 hours in a state that requires overtime to be paid after 40 hours have been worked in a week. The last 8 hours are going to be paid at 1.5 times your taxable base rate. So, if your taxable base rate is $20 per hour, then your overtime rate is $30.
Getting paid 1.5 times the base rate for these overtime hours is perfectly fine. Why? Because you’re also receiving your stipends and all the other benefits that are part of the contracted rate.
However, if the agency pays your extra hours as overtime hours based on the regular taxable rate, then they’re making out like bandits when you work extra hours. Why? For starters, all of the additional compensation variables have been paid off. All of the stipends and costs have been covered.
But, they’re still billing the hospital the same rate. And that’s the bill rate that allowed them to pay the taxable base rate PLUS the rest of your compensation package for your contracted hours. In fact, they may even be billing more if the hospital in question has an overtime bill rate for travel nurses.
For example, let’s say that you’ve worked an extra 24 hours by the end of a 468 hour contract with an agency that paid your extra hours as overtime hours based on the regular taxable rate. You would have made very little extra money for those hours. Meanwhile, the agency’s profit margin on those hours would be in excess of 40%.
This is why you’ll see many travel nurses decry working “overtime” as not worth it. You’ll also see many veteran travel nurses discuss the need to negotiate a better “overtime rate.” Again, we’re referring to these “overtime hours” as “extra hours” to differentiate between the two.
Use your blended rate to help negotiate your extra hours rate
This is why it’s important to negotiate a separate “extra hours” rate if this is important to you. Like all negotiations, having a good barometer can be a huge help. When negotiating an extra hours rate, nurses can use the blended hourly rate from their contract as a barometer.
To determine the blended hourly rate, simply break every variable in the pay package down to an hourly rate based on the number hours in the contract. If you’re unfamiliar with this, you can review our blog post on comparing travel nursing pay packages or watch our video on travel nursing pay.
The blended hourly rate of the contract should give you a general idea of what the agency is able to pay given the bill rate for the contract you’re working. You can start your negotiations with this figure. It’s also a good idea to let your recruiter know why you’ve chosen that figure. Let them know that this figure represents the blended rate that they’re paying for the contracted hours. They’ll know you mean business and that you know what you’re talking about!
Cost and revenue considerations when using the blended rate as a barometer
It’s great if you can negotiate an extra hours rate that is equal to or greater than the blended hourly rate. However, the extra hours rate is typically, but not always, fully taxable. And remember, the blended hourly rate contains a large portion of tax-free money. This means that the agency will incur higher costs on the extra hours rate because they need to pay more payroll taxes on it, again, because it’s all taxable. So don’t be disappointed if you have to take an extra hours rate that is a little lower than the blended rate.
On the flip side, the hospital in question may have a higher bill rate for overtime hours and extra hours. If they do, the difference is usually 10%-20% more. Unfortunately, there’s no way for you to know if there’s a higher bill rate for overtime hours. However, it never hurts to ask your recruiter. They may or may not tell you. You’ll never know if you don’t ask.
Understand how the agency defines extra hours
You’ll also want to be certain that you understand how your agency defines extra hours. This is especially true of agencies that use “overtime hours” as a catchall phrase. Misunderstandings on this topic can lead to major disappointments. Below is an image of the pay portion of a contract we received from a travel nurse.
As you can see, the agency does not have an extra hours rate. However, they do have an “Overtime Rate After 40 Reg Hours” of $45 per hour. This would be a great extra hours rate given the contract’s pay rate. The problem is that the nurse will never work enough to receive the $45 rate.
Why? Note that this contract is for 36 hours per week which means 3 12 hour shifts. Each 12 hour shift has 8 regular hours and 4 overtime hours because this contract is in California. Therefore, the nurse will not hit 40 regular hours until the sixth shift of the week. The nurse will have worked 24 extra hours by the time that happens!! In our view, this is bad form on the agency’s part and nurses need to watch out for this and similar approaches to extra hours pay.
Are extra hours important to you?
You’ll quickly find that different agencies handle extra hours in different ways. Some agencies offer to double the taxable base rate for extra hours. Some will pay 2.5 times the base rate. Some offer to add a fixed dollar amount to the taxable base rate. Some offer to pay the contracted rate for every hour worked, meaning that they’ll even pay more tax-free money when you work extra hours. However, you’ll also find many agencies that don’t offer anything in the way of extra hours pay. In which case, your extra hours rate will be the taxable base rate for regular hours and 1.5 times the taxable base rate for overtime hours.
Due to these differences, travel nurses will have varying degrees of success when negotiating their extra hours rates. Sometimes, you’ll easily get exactly what you want. Other times, you’ll find that the agency doesn’t even seem willing to negotiate. Ultimately, it’s up to each travel nurse to determine how important extra hours pay is to them.
If you decide that working extra hours is important and you have difficulty negotiating a fair extra hours rate with your agency, then you could threaten to decline the contract. This may jolt the agency into offering a better extra hours rate. However, declining a contract over the extra hours rate might not be the best option given that there are other solutions. Instead, you can find a local PRN agency to schedule your extra shifts with. In fact, you should inform your agency that you’ll be doing so. This might be all it takes to get them to offer a better extra hours rate. They should prefer 20% of something over nothing at all.
If you plan on working only your contracted hours, then negotiating a great extra hours rate might not be that important to you. Also, the contracted hospital may not have any extra hours available. However, you may end up staying an extra hour or so from time to time which can add up quickly. And it’s always nice to have the option of picking up extra shifts when they’re available. So you should at least make an attempt to negotiate a fair extra hours rate.
As always, we’d love to hear about your experiences with this topic and any questions you may have in the comments section below.