Sample Breakdown of a Travel Nursing Pay Package

Travel nursing pay packages are complex because they incorporate many variables that are not common in traditional pay packages. Meanwhile, many people believe that travel nursing agencies are actively gouging hospitals and employees. In this article, we’ll provide a detailed breakdown of a travel nursing pay package, including all the costs that come out on the agency’s side. We hope this information helps travel nurses negotiate better pay packages and helps everyone achieve a more thorough understanding of how travel nursing pay works.

What is a travel nursing bill rate?

All travel nursing pay-packages begin with a “bill rate”. A bill rate for travel nurses is the hourly rate that an agency can charge the hospital for the travel nurse’s work. Essentially, bill rates account for all the revenue that travel nursing agencies generate. Therefore, all costs, including the travel nurse’s pay, come out of the bill rate.

Find your next travel healthcare job on BluePipes!

Bill rates vary from hospital to hospital and from contract to contract. As a result, travel nursing agencies calculate pay rates for each job based on each job’s specific bill rate.

In this article, we’ll use a bill rate of $90 per hour. This is a common bill rate for travel Registered Nurses in many parts of the country in the 2023 job market.

That said, it’s important to note that bill rates fluctuate depending on market circumstances. For example, bill rates are much higher when the travel nursing job market is hot and demand for travelers is high.

Are Travel Nursing Agencies Gouging Their Partners?

When bill rates are high, we routinely receive inquiries and see statements on social media asserting that travel healthcare agencies gouge hospitals and healthcare professionals. In most cases, the evidence is a comparison between the bill rate the agency charges the hospital and the pay rate the agency pays the healthcare professional.

For example, the evidence might be that the bill rate is $90 per hour and the pay rate is $53 per hour. Therefore, the accuser assumes, the agency is keeping the difference of $37 per hour, or 41% of the bill rate, as profit.

This assumption is wholly incorrect. Unfortunately, it is also prevalent and pervasive. It is routinely spread by self-proclaimed experts who have unfortunately become social media influencers.

Discover the ultimate travel nursing pay calculator.

The truth is that there are many compensation variables and costs that are not reflected in the pay rate or on the pay stub. When we account for these variables, the agencies’ actual profit margins become much more reasonable.

That said, it is still possible for an agency to gouge a traveler or a hospital. We hope that this breakdown of all the variables will help us recognize the difference more easily.

What are contract time variables?

In addition to the bill rate, we must also consider the travel nursing contract’s “time variables.” This is because agencies bill hospitals for time the traveler works. More time equals more money. Moreover, more time means that fixed costs, like a travel stipend, become a smaller percentage of total expenses.

Time varies from contract to contract. For example, you’ll find contracts for 36 hours per week and others for 40 hours per week. Some contracts are 13 weeks, while others are only eight weeks. Moreover, some contracts, like those in California, pay overtime after 8 hours in a day.

For this example, we’ll use 13 weeks and 36 hours per week as the time variables. These are the most common time variables for travel nursing contracts. We’ll also use standard overtime rules in this example (so there won’t be any overtime hours involved).

So, here are the details we have so far:

• Bill rate: $90/hour
• Duration: 13 weeks
• Hours per week: 36
• Total contract hours: 468
• Total anticipated revenue: $42,120 (468*$90)

What are travel nursing pay package burdens?

Now let’s take a look at a set of costs that the industry commonly refers to as “burdens”. These are expenses agencies incur which are directly related to the healthcare professional or securing the assignment for the healthcare professional. However, they are not listed on a pay stub or the contract between the agency and the traveler.

The original Universal Profile and Credential Management for travelers.

Please note that different agencies may classify these costs differently. However, we will be accounting for all costs in our example, so our calculations will ultimately end up in the same place. That said, here are some examples of burdens:

Orientation hours

Many agency/hospital contracts include non-billable orientation hours. Essentially, the agency agrees not to bill the hospital for a specified number of hours during the travel nurse’s orientation.

The standard range for non-billable hours is anywhere from 4 hours to 12 hours, but it can be more. Note that the agency still has to pay the travel nurse for this time. Therefore, it essentially turns into a cost for the agency.

Vendor management fees

Many hospitals utilize Vendor Management Services (VMS). These services provide a host of tools that help hospitals and agencies centralize, standardize and streamline the process of talent acquisition.

Of course, these services cost money. To collect that money, the VMS typically takes a cut of the bill rate. In the past, the VMS’s cut would typically range between 2% and 6%. These days, we’ve heard numbers as high as 20%. For example, if the bill rate was $150 per hour, then the VMS would take $30, leaving the agency with $120.

Tiered bill rates

Tiered bill rates are very similar to Vendor Management Fees. With tiered bill rates, the VMS separates their staffing agency partners into tiers. Each tier gets a different bill rate. However, the hospital is always billed the same rate.

Free eBook: How To Negotiate Travel Nursing Pay

It’s important to note that the only bill rate the hospital ever really knows about is the actual bill rate. Therefore, when hospitals share bill rates with travelers, they are almost always sharing the bill rate before any VMS fees or tier modifications.

Billing fees

Sometimes hospitals charge agencies a billing fee. The intent of this fee is to cover the hospital’s costs for settling the bills between the agency and the hospital. If this fee exists, then it’s typically 2 to 3 percent of the bill rate, sometimes less.

Liability Insurance

Almost every agency/hospital contract has a clause that requires the agency to carry liability insurance for each traveler. The contracts typically require both Professional and General liability insurance. The coverage is necessary regardless of whether or not the traveler carries their own liability insurance.

Licensing / Credentials / Medical Record Costs

Next, hospitals require agencies to submit and maintain credentials for each traveler that an agency has working at a hospital. These credentialing requirements vary from hospital to hospital. The requirements often include licenses, certifications, medical exams, drug screens, background checks and more.

Credentialing costs vary depending on what’s involved. It’s often between $150 and $1,000 per contract. Agencies know that sometimes it will cost more and sometimes less. Therefore, they usually try to determine an average cost they can apply to all contracts.

In this example, we’ll use 12 hours of non-billable orientation, a 6% vendor management fee, $650 for liability insurance and $500 for compliance costs.

So, at this point, we have the following:

• Non-billable orientation: $1,080 (12 hours*$90) = $2.31 per hour (1080/468)
• Vendor Management fee: $5.40 per hour (.06*90)
• Liability Insurance: $1.39 per hour (650/468)
• Compliance: $500 = $1.07 per hour (500/468)

Taxable base rates and payroll costs

Next, we’ll review the payroll costs the agency will incur. We begin with the “taxable base rate,” which is the taxable hourly rate the agency pays to the travel nurse.

Own your own skills checklists on BluePipes.

As we previously discussed, the travel nursing pay package is like a pie. Some agencies will offer a low taxable base rate and higher stipends, while others will offer higher base rates and lower stipends. The important thing to understand is that paying higher taxable base rates increases the agency’s payroll costs.

You see, both employees and employers pay Federal Insurance Contributions Act (FICA) taxes. The FICA tax for employers is currently 7.65 percent of gross compensation. Therefore, if an agency pays a taxable base rate of $10 per hour, they incur $0.765 in FICA costs per hour. By contrast, if an agency pays a taxable base rate of $20 per hour, 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 taxes can include disability insurance, workers’ compensation, and unemployment insurance costs. These taxes and burdens vary dramatically from state to state.

Finally, it’s important to note that federal payroll taxes and most state payroll taxes cap out at various income levels. However, the taxes typically apply to all the taxable income that travel nurses earn because travel nurses tend to receive a relatively small percentage of their income as taxable pay which means that travel nurses often do not reach the cap levels.

In this example, we’ll use a taxable base rate of $25 per hour and a state tax and burden cost of 3.5%.

So, at this point, we have the following:

• Taxable base rate: $25 per hour
• Employer’s FICA: $1.91 per hour ($25*.0765)
• State DI/UI/WC: $0.88 per hour ($25*.035)

Travel nursing tax-free reimbursements and benefits

Now we’re left with the tax-free reimbursements and benefits that the agency can potentially provide to the traveler. The most common tax-free reimbursements and benefits are:

• Travel stipends
• Meals and incidental expenditure (M&IE) stipends
• Lodging stipends or company-provided housing
• Medical benefits.

However, agencies may also offer rental cars, 401ks, tickets to major sporting events, and many other offerings.

In this example, we’ll use a travel stipend of $1,000, an M&IE stipend of $350 per week, and a lodging stipend of $2800 per month. We’ll also assume that the travel nurse will take the agency’s medical insurance. Let’s assume the cost to the agency for the medical benefits is $450 per month.

So, at this point, we have the following:

• Travel Stipend: $2.14 per hour (1000/468)
• M&IE Stipend: $9.72 per hour (350/36)
• Lodging Stipend: $17.95 per hour (2800*3/468)
• Medical Benefits: $2.88 per hour (450*3/468)

Sample breakdown of a travel nursing pay package

Let’s put everything together to see how this sample pay package breaks down. We’ll start by subtracting the burdens and payroll costs from the bill rate. While this is an unconventional approach, it will provide us with a clear illustration of how the bill rate breaks down to the pay rate.

We started with a bill rate of $90 per hour. From that, we are going to subtract our burdens and payroll costs. They are as follows:

• $2.31 per hour: Non-billable orientation
• $5.40 per hour: Vendor Management fee
• $1.39 per hour: Liability insurance
• $1.07 per hour: Compliance and credentials
• $1.91 per hour: FICA
• $0.88 per hour: State DI/UI/WC

These costs total $12.96 per hour. So, we’re left with $77.04 per hour ($90 – $12.96).

Now let’s subtract the compensation variables from the remaining $77.04 to see what the agency is left with to run their operations. The compensation variables are as follows:

• $25 per hour: Taxable base rate
• $2.14 per hour: Travel Stipend
• $9.72 per hour: M&IE Stipend
• $17.95 per hour: Lodging Stipend
• $2.88 per hour: Medical Benefits

The compensation variables above total $57.69 per hour. So, this leaves the agency with $19.35 per hour as their gross profit per hour worked ($77.04 – $57.69).

What’s the travel nursing company’s gross profit margin?

Everyone has probably heard the term “profit margin” or “gross profit margin.” A company’s gross profit margin is calculated as follows:

Gross Profit / Revenue = Profit Margin%

Different travel nursing companies calculate this in different ways. The main difference is in how they treat “revenue.” Some companies consider the total bill rate to be their revenue. In this case, the agency’s gross profit margin is 21.5% percent in our example. That’s the $19.35 gross profit divided by the $90 bill rate.

Create your free Travel Healthcare Resume on BluePipes!

Other companies define their revenue as only what they receive after removing the Vendor Management fee ($90 bill rate minus the $5.40 vendor management fee). In this case, the revenue would be $84.60. Therefore, their gross profit margin would be 22.87% percent. ($19.35 gross profit divided by $84.60.)

Travel nursing agencies typically strive to obtain gross profit margins between 20 and 25 percent. Therefore, this example would be a decent rate for the travel nurse.

Clearing the confusion

Now we can revisit the confusion caused by comparing the pay rate to the bill rate. In our example, the “pay rate” that the healthcare professional sees on their pay stub is $52.67. That’s the taxable hourly base, the lodging stipend and the M&IE stipend.

If we thought that the remaining $37.33 per hour went to the agency, then we would think the agency’s gross profit was over 42%. However, as we demonstrated above, the agency’s gross profit is only 21.5%.

Finally, it’s important to note that agencies must use the gross profit to cover their own operating expenses. Those expenses include pay for their recruiters, account managers, compliance team, payroll team, accountants and others. The costs also include software licenses, office space, phone systems and more.

Understanding the pay package in this light is highly beneficial for travel nurses. Travel nurses can use this information to inform their negotiations. They can also use this information to help them compare competing pay packages. As a result, they’ll be better able to spot good deals versus bad ones and ultimately make more money!