Travel Nursing Pay from the Travel Nursing Company’s Perspective

Travel nursing pay is surrounded by mystery and intrigue. However, it’s really straightforward once you know all the ins and outs. In this article, we’ll take a look at travel nursing pay from the travel nursing agency’s perspective and provide links to related articles so you can gain the deepest possible understanding.

How Travel Nursing Companies View Their Financial Metrics

For starters, it’s important to understand how travel nursing companies view their financial metrics. Simply put, they view their financial metrics pretty much the same way all companies do.

First, they have their revenue or sales. Next, they have their “cost of goods sold”, which is the direct cost of producing the product. As bad as it may sound, the laborer, a travel nurse in this case, is the “good” that staffing agencies “sell”. This means that every cost associated with the travel healthcare professional, including their pay, is a “cost of goods sold” for a travel nursing agency.

These two numbers can give us the company’s “gross profit”. Specifically, the gross profit is Revenue minus Cost of Goods Sold.

Next, the company has its “operating expenses”. For a travel nursing company, these are expenses like recruiter salaries, marketing, administrative and research and development. If we subtract the operating expenses from the gross profit, then we get the operating profit.

Finally, the company has its “below-the-line” expenses. These are things like interest, taxes, depreciation and amortization. If we subtract below-the-line expenses from operating profit, then we get net profit or net loss.

This extremely basic overview provides us with all the background we need to understand how travel nursing companies view their pay packages. However, you can view our article on travel nursing agency profit margins to learn much more about this topic if you’d like.

How Do Travel Nursing Companies Generate Revenue?

Next, we need to understand how travel nursing companies generate revenue in order to understand how they view travel nursing pay packages. Travel nursing companies generate revenue by billing hospitals for the hours travel nurses work.

This dynamic leads many healthcare professionals to believe that the agency essentially takes money that the hospital would otherwise pay the travel nurse were it not for the agency acting as a “middleman”. However, this is not the case.

Instead, hospitals outsource a broad range of staffing services to travel nursing agencies who are able to provide the staffing services for a lower cost than the hospitals could achieve on their own. Therefore, the hourly rate the hospital pays the agency for the nurse’s work, commonly called the bill rate, is to cover the travel nurse’s pay as well as all of the other expenses that go along with the staffing process.

Put another way, if a hospital chose to staff these positions on their own, then they would incur all the staffing costs in-house. In turn, they would pay the clinician the same or less than the agency could in most cases.

In any case, this bundling of payments for various services in the form of an hourly bill rate serves to align incentives. Hospitals want to ensure they receive highly qualified clinicians capable of completing travel assignments. And this system ensures that agencies can recoup all their recruitment costs only if the clinician completes the assignment. This gives agencies the incentive to submit clinicians that they believe are capable of doing so.

Next, it’s important to note that bill rates vary by modality, city, hospital, unit, demand and many other factors. This creates an additional set of dynamics that agencies must consider when they determine pay.

Travel Nursing Agencies Want to Offer Competitive Pay

Contrary to popular wisdom, travel nursing agencies want to offer competitive pay packages for several reasons. First, agencies know that travel nurses discuss pay at work. Additionally, agencies now make their pay packages publicly available on job boards like BluePipes where travel nurses can compare pay. Perhaps most importantly, agencies want to retain their travel nurses and maintain a good reputation.

Agencies routinely review the market and collect data on pay to help them make sure their pay is competitive. They sometimes review job boards manually. They may also purchase pay related data tools from job boards.

Travel Nursing Agencies Need to Follow Pay Related Rules

Finally, travel nursing agencies need to follow various rules related travel nursing pay packages. Most of these rules pertain to the tax-free reimbursements that agencies include in their pay packages.

For example, agencies need to avoid recharacterizing wages as tax-free reimbursements in accordance with IRS regulations. Additionally, they must keep reimbursements at or below GSA limits.

Moreover, agencies must follow various federal and state rules related to employee pay. For example, they need to pay state taxes and benefits when necessary. Of course, they must also pay attention to minimum wage laws and much more.

At the end of the day, travel nursing pay is a balancing act for agencies. For each pay package, they’re looking to maximize the pay and benefits while covering all their expenses and following all the rules. In our next article, we’ll take a look at a couple of the approaches agencies use manage this balancing act.