Many first time travel nurses are under the impression that travel stipends are intended to cover the entire cost of traveling to and from a travel nursing job. Unfortunately, this is usually not the case. Like all other aspects of the travel nursing pay package, the travel stipend is just one portion of the pie.
Again, agencies have a fixed amount of revenue (money) that they expect to bring in for each travel nursing contract. The revenue is determined by the bill rate for the contract and the number of hours to be worked during the travel nursing contract. For example, a contract may have a bill rate of $60/hour, and 468 (13 weeks at 36 hours per week) anticipated hours, for a total of $28,080 for the entire 13 week period. The important thing to note here is that this figure is not going to change if you are traveling from 200 miles away or 2,000 miles away. Let’s look at this from the agency’s perspective to get a clear picture of what’s going on behind the scenes.
Travel stipends from a travel nursing agency’s perspective
Every agency is going to consider the risk involved with the travel stipends they offer. You see, a travel stipend is an expense incurred ahead of collecting revenue. Remember, the agency doesn’t collect any money until a timecard is turned in. In addition, because fixed costs like the travel stipend are spread over the course of the contract, the company doesn’t actually recoup the entire cost until all the hours have been worked. Let’s look at a couple of examples to clarify.
The agency pays all travel costs up-front
One common method that agencies use to pay for travel is to just pay for all the costs up front. For example, the agency may purchase an airline ticket for the traveler. In this case, the agency isn’t going to recoup the entire cost until all contracted hours are complete. To illustrate this, let’s say the agency pays $500 for a round-trip ticket between California and Florida. Assuming that this is the total cost of the travel stipend, the agency is going to calculate the cost at $1.07 per hour when determining how much they have left for the rest of the pay pie. For example, if the bill rate was $60 per hour, then they’d have $58.93 per hour left to work with. They may also view it as a percentage of the bill rate or total revenue. For example, if the bill rate was $60, then $1.07 per hour would represent 1.7% (1.07/60) of the pie.
Now, if, for example, the nurse ends up working only 200 hours of the contract because the contract gets cancelled for some reason, then these numbers get thrown out of whack and the agency is forced to eat costs that it wasn’t anticipating. In this case, the $500 travel cost becomes valued at $2.50 per hour instead of $1.07 and it becomes 4.2% of the pie as opposed to 1.7%. While this may not sound like much, it adds up extremely fast and if it happens enough it can result in some serious losses and potentially combine with other factors to put the agency out of business.
The travel nursing company splits the travel stipend
Another common method that agencies use to pay out travel stipends is to provide half of the travel stipend on the first check and the other half on the last check of the assignment. For example, the agency may offer $1000 total, to be paid $500 on the first check and $500 on the last check of the assignment. In this case, the agency is calculating the cost of the $1000 travel stipend at $2.14 per hour ($1000/468 hours). But on the very first pay check of the contract, the agency is going to pay the first $500. If the contract is cancelled for any reason before half the contracted hours have been worked, then the company will take a hit.
For example, if the contract is cancelled immediately after week 2, then the agency will have to eat $345.92 in travel stipend expenses that they weren’t expecting. This is due to the fact that only 72 hours have been worked up to this point. Therefore, the company has only recouped $154.08 of the travel stipend money (72 hours at $2.14 per hour). The nurse must work half the contracted hours before the first $500 is fully recouped (234 hours at $2.14 per hour is $500).
Why don’t travel nursing agencies pay larger travel stipends?
Understanding this issue from the agency’s perspective helps us understand one of the reasons why agencies are reluctant to provide large travel stipends up front. They risk losing money. This is why many companies now cap the amount of the travel stipends they’re willing to offer. My experience indicates that the most common cap these days is $700. In other words, most companies are only willing to provide a maximum of $700 for travel stipends.
It’s not because they’re cheap, or they’re sticking it to the travel nurse. It’s because they’re concerned about the risk of losing large sums of money in a very tight business market. That said, if you have a really good track record with a particular company, then they may be more willing to take a chance on you and give you a higher travel stipend. However, remember that this doesn’t necessarily mean that they’re going to give you more money overall. They may just reduce the amount that they’re giving you somewhere else in the pay package.
This brings us to the other main reason that many agencies cap their travel stipends. Remember that moving money from one place to another can get the agency in trouble with the IRS for recharacterizing wages. For example, if an agency gives you a choice between $1000 for a travel stipend or $500 for a travel stipend and an additional $1.07 per hour, then they may be guilty of recharacterizing the tax-free stipend as a wage. The same is true for the reverse scenario. As a result, many agencies, and particularly the large agencies are very inflexible with the travel stipends they offer. By keeping their travel stipends and other tax-free reimbursements at set levels, they’re able to ensure that they don’t run afoul of this rule.
What does this mean for the travel nurse?
Now that you understand the travel stipend issue from the company’s perspective, we can discuss what it all means for you. First, chances are very strong that you’ll need to have enough capital to make it out to your assignment, especially if you’re driving. There was a time when agencies would send a prepaid gas or credit card to help travelers get from one place to another, but you’ll have difficulty finding that in today’s market. Second, you shouldn’t really look at the travel stipend as a major selling point unless you need cash immediately. Again, the travel stipend is just one component of the pay package. You need to compare entire packages in order to determine which is the best deal. Finally, chances are high that you will incur more in travel expenses than the agency’s stipend will cover. As a result, you may be able to write off the difference on your taxes if you keep adequate records.