Travel Nursing Pay: Overtime Bill Rates

As we’ve noted time and again on this blog, bill rates are the single most important variable in determining travel nursing pay. The bill rate is the hourly rate that agencies can charge their client hospitals for the travel nurse’s time.

There are many different categories of bill rates. The overtime category is one of the more complicated bill rate categories and we’ll cover it in detail here. Understanding the issues at play with overtime bill rates will help travel nurses understand the limitations faced by agencies when determining “extra hours” pay which will help travel nurses with their compensation negotiations.

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What is a travel nursing overtime bill rate?

Simply stated, a travel nursing overtime bill rate is the rate that the agency charges the hospital for overtime hours. Unfortunately, this is much more complicated than it sounds. This is due to the fact that different hospital/agency contracts have different rules regarding when overtime rates can be charged and the rules aren’t always in line with state laws regarding the payment of overtime to employees.

Overtime Bill Rates vs. State Law

Some hospital/agency contracts stipulate that overtime rates can be charged only for hours worked in excess of a figure higher than the state’s overtime payment law requires. For example, the state might require overtime to be paid when someone works in excess of 40 hours in a week while the hospital/agency contract stipulates that the agency can only charge overtime if the traveler works in excess of 48 hours in a week. Or, state law may require overtime pay for hours in excess of 8 hours in a day while the hospital/agency contract allows for overtime billing in excess of 12 hours worked in a day.

Overtime Bill Rates vs. Blended Bill Rates

Moreover, many hospital/agency contracts have “blended bill rates”. A blended bill rate is one where the regular hour rate and the overtime hour rate are blended into one flat rate. This means that the agency is able to charge the same rate whether the traveler is working a regular hour or an overtime hour as defined by state law. So essentially, there is no overtime bill rate. Blended bill rates are particularly popular in states that require overtime to be paid for working more than 8 hours per day.

For example, the hospital/agency contract might have a blended bill rate of $64 per hour. $64 could be a blended rate for 8 regular hours at $55 per hour and 4 overtime hours at $82.50 per hour. Why is this significant? It’s significant when it comes to hours worked in excess of 12 hours per day.

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With the blended rate of $64, if a traveler works more than 12 hours in a shift, then the hospital only pays $64 per our instead of the $82.50 per hour they would have paid if there were an overtime bill rate. Because nurses often work in excess of 12 hours, albeit just slightly more than 12 hours in most cases, these costs could add up quickly. As a result, you may encounter some contracts where your agency will discourage you from working any overtime.

Supervisor Approval for Overtime Hours

Other hospital/agency contracts have a stipulation that requires supervisor approval for the overtime rate to be charged when one exists. This leaves approval of the overtime rate to the supervisor’s discretion. So if someone at the hospital other than the supervisor asks you to work overtime, the overtime rate may not be approved by the supervisor. This can put the agency in a tough spot.

Why aren’t travel nursing overtime bill rates 1.5 times the regular rate?

When overtime bill rates do exist, many travelers and recruiters might assume that the rates are 1.5 times the regular hourly bill rate. After all, state law requires that overtime pay be 1.5 times regular hour pay. Unfortunately, it’s pretty rare for the overtime bill rate to be anything near 1.5 times the regular hour rate. In fact, it’s very often the case that overtime bill rates are no more than $7 to $10 per hour higher than the regular hour bill rates.

Why is this the case? Obviously, it saves the hospital money. But there is some logic involved as well. Hospitals understand pay packages pretty well. They know that much of the travel pay package comes in the form of tax free stipends that should be capped due to wage recharacterization rules.

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In addition, many of the costs that agencies incur are fixed. For example, on-boarding costs, travel expenses, and housing are fixed costs. Hospitals also know that by law the agency is only required to pay 1.5 times the regular taxable pay rate. And they know the regular taxable pay rate is lower than the value of the entire compensation package. As a result, they may feel justified in paying lower overtime bill rates, or their negotiating position may be improved by these realities.

How does this limit travel nursing companies?

In cases where the overtime bill rate is indeed 1.5 times the regular hour rate, agencies have nothing to worry about. In fact, they’ll probably be begging their nurses to work as many hours as possible. However, in the majority of cases, where the overtime bill rate is less than 1.5 times the regular hour rate, agencies need to have a plan for balancing the costs and benefits involved with their nurses working “extra hours”.

Extra Hours vs. Overtime Hours

You see, the real balancing act for agencies relates to extra hours, not just standard overtime hours. We’ve discussed the difference between extra hours and overtime hours for travel nurses in a previous blog post.

Overtime hours are hours that qualify for overtime pay by state law, but are part of the normal contracted hours. Agencies are able to plan for the overtime hours beforehand. They simply factor it into their compensation calculators when determining the pay package for the assignment. 

By contrast, extra hours are hours worked in excess of the travel nurse’s contracted hours. Some extra hours might also be classified as overtime hours. However, it’s important to distinguish these hours as unique.

Again, as mentioned above, agencies have covered all their fixed costs and they no longer pay reimbursements once you have worked your contracted hours. Therefore, the agency has a lot of unappropriated money left over when you work extra hours.

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They could choose to keep that money for themselves. Or, they can pay it to the travel nurse in the form of an “Extra Hours Pay Rate” or other bonus.

Overtime Bill Rates and Extra Hours Pay

Overtime bill rates have a significant impact on how agencies decide to pay for extra hours. Some agencies might pay 1.5 times the regular hour taxable rate for the pay package. In this case, the travel nurse will most likely be getting the short end of the stick because the bill rate will most likely allow for more to be paid. Similarly, some agencies might pay 1.5 times the taxable overtime rate for the package.

Other agencies will add a specified hourly rate to the taxable regular hour rate and overtime rate for working extra hours. For example, they may add $20 per hour to the taxable regular hour rate and taxable overtime hour rate for the pay package.

Some agencies might even continue to pay the stipends as an hourly amount in addition to the taxable overtime rate even though this method would violate wage recharacterzation rules. In the worst case scenario, an agency might prohibit the travel nurse from working extra hours because the overtime bill rate is so low that it results in negative cash flow for the agency.

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One thing is for sure, it will be very rare to find agencies that pay 1.5 times the fully blended rate for the travel nursing pay package in question. For example, if the fully blended hourly value of a travel nurse’s pay package is $55 per hour (including base rate, M&IE, Travel Stipend, Housing, and all other pay variables), then the agency would have to pay $82.50 per hour in order to be paying 1.5 times the fully blended rate for the pay package. If we assume a payroll tax cost of 15%, then the agency would be required to pay an additional $12.37 per hour in payroll taxes. That would mean the bill rate would have to be $94.87 just for the agency to break even. Bill rates this high for travel nurses are nonexistent.

In any case, you’ll run into a surfeit of extra hour pay scenarios as a travel nurse. Understanding the issues at play on the agency’s side of the equation will help you in your negotiations. As always, please share your questions, comments, and experiences with this issue in the comments below!