Travel Nursing Pay – Working as an Independent Contractor
Many travel nurses and travel allied health professionals express interest in working as independent contractors. Unfortunately, the vast majority of healthcare workers, registered nurses included, do not meet the requirements set by the IRS to be considered independent contractors. In the end, it really depends on the particular work setting and the relationship between the payer and payee.
In the healthcare field, it’s most common for doctors, dentists and Advanced Practice Registered Nurses to meet the requirements for independent contractors. And even these professionals often do not meet the criteria depending on the facts of each individual case. Meanwhile, it is very rare for Registered Nurses and allied health professionals to meet the criteria.
You might be asking why we’re spending any time on this then. Unfortunately, many travel nursing agencies staff healthcare professionals as independent contractors. Furthermore, many books about travel nursing, or travel healthcare in general, espouse it as a viable option. You may even know someone who has done it themselves. None of this means that it’s accepted by the IRS.
Do travel nurses qualify as independent contractors?
According to the IRS:
The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.
The main focus here should be on the part of this statement that says, “payer has the right to control only the result of the work…” Note the emphasis added on “only.”
The IRS also states the following:
You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
In the case of nurses and the vast majority of allied health workers much more than just the outcomes of work are controlled by the contracted facility. For example, in the case of travel nurses, the hospital will determine the hours worked as well as break times. The nurse will be using supplies and equipment belonging to the hospital. In addition, there are managers and doctors at the hospital who are supervising the nurse’s work. Moreover, nurses must seek the permission of a physician for decisions outside the nurse’s scope of practice which is a frequent occurrence. Unfortunately, these factors, taken a a whole, will disqualify someone as an independent contractor.
Do some employers treat nurses as independent contractors?
Despite this, some agencies still place nurses and allied professionals as independent contractors in settings that don’t meet the requirements. The funniest thing about them doing so is that it will undoubtedly break another one of the standard rules regarding independent contractors. You see, the vast majority of healthcare organizations that utilize agencies require the agencies to carry professional liability and workers compensation insurance for all agency staff. Covering such items is a violation of the rules regarding independent contractors and will disqualify the healthcare professional.
You may also find hospitals and other healthcare providers who are willing to bring people on as independent contractors directly without an agency in the middle. However, the same rules still apply. If the payer controls anything other than the results of the work, then the situation does not meet the requirements for consideration as an independent contractor.
Why do some employers treat nurses as independent contractors?
So why does the treatment of nurses and healthcare professionals as independent contractors persist? One reason is that it’s easier for the payer, i.e. the agency or the hospital. For example, when an agency treats the nurse as an independent contractor, they don’t have to deal with payroll taxes, worker compensation, disability, or unemployment. They also don’t have to deal with the complicated compensation package that travel nurses receive which splits money up over various categories and provides various services like travel nurse housing and travel arrangements.
Instead, the agency simply pays an hourly rate to the nurse, and the nurse is responsible for everything else. And for the independent contractor, handling everything else presents a huge burden.
Why travel nurses should not want to be independent contractors
Independent contractors are really operating their own business in the truest sense. They pay the self-employment tax which accounts for the Social Security and Medicare payments typically made by the employer. They are required to file quarterly estimated tax payments on IRS form 1040-ES, as well as annual tax returns. They are required to carry their own liability insurance. They must keep a very detailed account of all income and expenses in order to write off as much as possible for tax purposes.
They might have to invoice the agency or hospital and run the risk of having to act as a bill collector from the agency or hospital who may pay on normal business terms (i.e. Net 60), or neglect to pay their bills at all. Let me be clear here; you may not get paid for 60 to 90 days, and maybe not at all without a fight. Oh, and let’s not forget the fact that you will definitely have to register your business at the federal and state level, and quite possibly the county or local level, in order to legitimately function as an independent contractor. Furthermore, agencies don’t typically act as advisers for independent contractors, so you’re on your own getting all of this set up.
Given the circumstances, I fail to see why any nurse or healthcare professional, other than a doctor, would even be interested working as an independent contractor. Many would argue that the independent contractor makes more money. I’d have to disagree. Any difference in gross figures is typically entirely soaked up by the additional costs of being a contractor. If there is any net revenue beyond that, it’s not worth the extra time and effort that contractors have to go through to keep on top of the business issues.
There’s a reason that the Small Business Administration lists “Savings in labor costs” as one of its top advantages of using independent contractors. In the end, independent contractors tend to earn less than their permanent counterparts.
Money issues aside, we’re still left with the fact that the vast majority of nurses and healthcare professionals don’t qualify under the IRS definition of an independent contractor. Furthermore, there are fewer and fewer opportunities for them in the industry. Most hospitals will not consider them directly and also forbid agencies from treating agency employees as contractors. In addition, the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) is now scrutinizing agency use of independent contractors and will not certify agencies paying W2 workers as independent contractors.
With all of this in mind, it’s prudent for nurses and healthcare professionals to approach independent contracting with caution. If the setting is such that you will be working in an established healthcare facility such as a hospital, correctional health center, or psychiatric facility, then the relationship will almost certainly not meet the requirements for independent contractors. And in every case, it’s important to factor in all of the extra costs associated with independent contracting when evaluating compensation offers.
As always, we’d love to hear about your experience with this topic or answer any questions you may have. Please post your questions and comments in the comments section below!
I am an LVN and was offered what seems on the surface an amazing job. Doing visits 3 times a day for straight cathing the same patient. The schedule is wide open at the moment so i get first dibs on the days i want to work. They are offering me $80 per VISIT minus 15% ($12) per visit that the agency gets. Visits are typically 1 hour but we all know they can be much shorter. So $72 per visit 3xs a day. Say i work 5 days a week, so 15 visits times $72 equals $1,080 per week for what seems a simple visit. The agency does not provide w2 only 1099. I’ve never filed 1099 so I don’t know what I will be getting into. I know I will have to pay my own taxes but can deduct scrubs, stethoscope, milage, etc. I’m just not sure if it’s worth the headache of tracking my own finances and possibly being audited and whether it will be worth paying a lot in taxes. Any insight would be much appreciated. I am currently working in hospice continuous care for $21hr so $72 visit sounds AMAZING.
What if the hospital paid me as independent contractor for 8 years. Taking no taxes or anything from my checks and paid no overtime, holidays,sick, etc for that whole time. Do I have a case to file with an attorney to recoup all those back paid things that should have been paid to me as an employee? They are wanting me to start full time employee first of year because they said they can’t pay me as independent contractor. Which is and has been okay for me. I’m just upset due to the fact they didn’t pay OT. I literally work or am on call 24/7. Normal hours are at least 50 hours a week. If I get called back in it is just regular pay. I’m very concerned about what I’ve lost in pay. Do I have a case to pursue
Hey Robyn,
It depends on what your role was at the hospital. The fact they are now wanting you to employ you as a W2 employee because “they can’t pay you as an independent contractor” indicates they may have discovered your role does not qualify to be classified as an independent contractor. You’ll need to speak with a labor lawyer or perhaps the state labor board to discuss whether or not you have a case. Given what you’ve described, it would be worth it to do so.
Late to this thread, but have a question. If I am a homecare RN wouldnt that be able to be a 1099 contractor? Since I would be going to an individuals house and not an employers?
It’s possible that you can qualify as a 1099 contractor in this scenario. However, if you follow the instructions of the employer, including the administration of medication, then you will most likely will not qualify. The key is that the payer can only control the outcomes and not how the work is performed. It doesn’t really matter where the work is performed. I hope this helps.
Kyle,
What if I start my own agency and I and a friend work for that agency? Is that legal??
Thanks for the inquiry, Tera. Yes, to the best of my knowledge that would be legal. However, please note that I am not a registered legal adviser or tax adviser. You’d need to check with a registered adviser to discuss your particular circumstances to be certain. I hope this helps!
What if my wife registered a nursing agency business under her own name, and I (the RN) worked FOR the agency (my wifes).
that is a legal way of getting the full money the hospital is paying for the agency nurse, yes?
Yes, you could set up a staffing agency, have the staffing agency negotiate contracts with hospitals, and work through the staffing agency.
Why would a nurse not be able to set up an LLC and become a sub-contractor of the agency? That is exactly how the construction industry works; those sub-contractors use the builders materials and have no control of the final product or “end result” either.
According to the IRS, “The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” In the example provided, the contractor, the payer in this case, maintains control over the “end result”, but the sub-contractor, the payee in this case, maintains control over what will be done and how it will be done to achieve the “end result”, which meets the general rule for an independent contractor.
Registered Nurses on the other hand are directed by the employer, or surrogates of the employer, on what will be done and how it will be done. Administering medications is one example. In the majority of cases, Registered Nurses administer medications based on a physician’s orders. In this case, the physician is controlling “what will be done”. This is one of the reasons Nurse Practitioners with furnishing licenses often qualify as independent contractors.
I have been following several discussions on this subject. Under the criteria stated physicians working locum tenens with a 1099 also would not qualify as an independent contractor. They also have hospital criteria for their services they have to meet related to shifts (my experience is ER), call, documentation. Physicians in a hospital situation do not have any more control over the “end result” than a registered nurse does.
In this scenario, the hospital is controlling the results of the work. Yes, they provide tools and resources, but that does not by itself negate the status as an independent contractor. At the end of the day, the physician controls and directs the provision of patient care. For example, physicians prescribe and administer medications. In the same setting, Registered Nurses administer medications, but do not have the authority to prescribe them. In this case, the administration of medications comes at the direction of the employer. This is one of the reasons it’s much more likely for Nurse Practitioners, who have furnishing licenses, to qualify as independent contractors.
Yes, I would agree that physicians working in a hospital ER setting would most likely not qualify as independent contractors. They must comply with charting requirements. They are scheduled by the hospital. They use the hospital’s supplies and equipment. And there are many other factors that may disqualify them.