Hey everyone! Welcome to the Truth About Travel Nursing Podcast! My name is Kyle Schmidt and I am your host. Thank you so much for joining us for episode 28 of the podcast. In this episode we’re going to take a detailed look at 7 travel nursing pay variables and provide some of the important considerations for each of them.
My hope is that the information we discuss will give you a much deeper understanding of these variables so that you can plan better and ultimately negotiate better pay packages.
Now, before we begin, it’s important to recap a few things about pay packages that we’ve discussed in previous episodes. First, it’s important to remember that travel nursing pay packages are best viewed as a pie chart. And what we mean by that is that each and every compensation variable that an agency offers should be considered as part of the pay package in an effort to determine the total value of the package. So, each compensation variable is a slice of the pie and together, they make up the total pie chart.
We covered how to do this in detail way back in Episode 3 of the podcast. In that episode, we asserted that this was the best to evaluate and compare pay packages. So, check that episode out for a detailed breakdown on how to do this.
Now, it’s also very important to point out that the size of the pay package pie is almost always open for negotiation. I point this out because you’ll hear many recruiters refer to the “pie” as being a static amount. In other words, money can be moved from one portion of the pie to another, but the size of the pie stays the same. For example, the recruiter might offer to move a little money from the lodging stipend to the travel stipend, but in the end, the same amount of money will be coming to you…an increase in one variable results in a decrease somewhere else.
But that’s only true if you have negotiated the best deal possible with the agency. Remember, the pay package is based on the bill rate for the assignment in question. The bill rate is what the agency is able to charge for an hour of your time at the hospital. And the agency is typically going to keep 20% to 30% of the bill rate for themselves I order to cover all of their internal costs. So that 20-30% represents the agency’s gross profit margin.
There is a big gap between 20 and 30%. The question is, how much of that are you going to be able to negotiate for yourself. I mean, if the original pay rate that’s offered to you represents a 25% gross profit margin for the agency, then there is potential for you to get an additional 5% added to your pay package.
That might not sound like much, but it’s actually a huge amount of money when it comes to compensation packages. 5% of a $65 per hour bill rate is $3.25 per hour. Over a 468 hour contract, that’s over $1,500. That’s more than $5,000 over the course of a year. And you know what? You can potentially get even more if you’re really good at negotiating.
Now, it’s not always the case that you’ll be able to negotiate more out of a pay package. But you’ll never know if you don’t try. Okay, so we’re veering a bit off topic here, but I wanted to lay the groundwork for the rest of our discussion because a lot of what we’ll discuss in this episode is connected to these issues.
To illustrate what I mean by this, I’m going to a read a quote from a travel nurse that was written on a travel nursing forum. The original poster on this thread asked how travel nurses were going about negotiating for better pay. Here’s what this travel nurse had to say:
Every now and then I respond to posts like this…I’ve been traveling about ten years and have never negotiated a thing. I don’t understand the concept! My agency …same one I’ve almost always worked with…gives me the numbers for a specific post and I decided whether that will work or not. There’s no way to say “I want this much” and have it be so. If I don’t like what the wage is, I look at another assignment. I’ve spoken about this with other travelers..none of whom I’ve met have ever negotiated for pay. That being said, yesterday I was told my agency must be great if they ALREADY offer license reimbursement, travel pay, etc. I didn’t know some agencies don’t offer that. I have a mortgage and therefore a bottom line….but I don’t let money guide me totally. I travel for the TRAVEL..not the money. However, people all over this site claim they negotiate and ask for what they want. That’s just not been my experience. (Sorry for the ramble!)
Okay, so the first thing that concerns me is that this traveler has never negotiated for better pay in 10 years. Wow. I mean, I don’t think you’d find even one career advisor in this country who would recommend that you not negotiate your pay packages. Study after study proves that people who engage in negotiating consistently earn more than those who don’t. At the same time though, this traveler is okay with that, and there is nothing wrong with that. Besides, negotiating is not the topic of this episode.
Instead, I want to focus on this idea that the agency must be great because it ALREADY offers license reimbursement, travel pay, etc. Again, this episode is about compensation variables like license reimbursements, travel pay, etc. And the main thing we need to know about these variables in general is that they don’t make one pay package better than another simply by virtue of being offered.
For example, let’s say one agency offers license reimbursement and another agency doesn’t. And let’s say the license reimbursement comes out to $300. Now let’s say the agency that doesn’t offer the license reimbursement is offering $300 more per month for the lodging stipend than the other company. All else being equal, that comes out to $600 more over the course of the contract.
Again, agency pay packages shouldn’t be judged simply based on the fact that one company offers something and another doesn’t. The reason that we’re discussing this first is so that we can avoid saying the same thing for every benefit and pay variable we discuss here today. Some agencies are going offer all of the variables we discuss here today and others won’t. But that by itself doesn’t mean that one agency has a better pay package than another.
Okay, so let’s start looking at these variables already, shall we?! The first one we’re going to discuss is the taxable base rate. We’ve discussed this sporadically in other episodes, but it’s important to go over it here because it touches so many other parts of the pay package. There are several important considerations when it comes to this variable. First, some companies pay really low taxable base rates so they can pay more in tax-free money. For example, they’ll pay $10 or $12 per hour taxable and then pay much more for the lodging stipend or the M&IE stipend.
Of course, this will significantly increase your net pay, which is really appealing. The problem is that a really low taxable wage could get you in hot water with the IRS. The IRS requires that employees who receive tax-free reimbursements be paid wages that are in line with what someone in the same profession would reasonably expect to make in the regular employment market. And of course, nurses make more than 10-$12 per hour.
The main way that travelers get stung by this is when the agency they worked with gets audited. The IRS is more apt to go after an agency than they are to go after one individual traveler. When they do, all the travelers the agency worked with get dragged into the case.
So, what should the taxable hourly rate be for a travel nurse? Well, there is no definitive answer. At least the IRS hasn’t provided a definitive answer. However, recent court cases indicate that somewhere between $18 and $22 per hour is the minimum expectation.
Okay, so there are some other considerations to be aware of. Your taxable hourly rate is what your unemployment, workers compensation and disability payments are based off of should you need to rely on these benefits. Your taxable hourly rate is what your social security contributions come from, and therefore has an impact on your future social security payments. The taxable rate is what lenders, like auto lenders and home lenders, will base your borrowing power on. And your taxable income also has an impact on various aspects of your retirement savings capability.
And that brings us to the second compensation variable we’re going to discuss, a 401k savings plan. Many agencies don’t have 401k savings plans, but some of them do. A 401k is one form of retirement savings account. And whether or not the agency you work with has a 401k, it’s still important to know about 401ks because a future agency you work with may offer it. Besides, it’s always important to consider saving for retirement.
This is actually something that I think is extremely important for travel healthcare professionals. And it’s something that very few people pay any attention to. And I think that’s a big mistake.
Here’s why. Your future social security benefit, the amount of money you receive monthly for social security once you qualify to receive it, is based on the average monthly income of your 35 highest earning years. So the lower that average, the lower your payments.
As I mentioned previously, travel nursing pay packages typically include smaller taxable rates, like $20 per hour. So if you engage in travel nursing for a lengthy period, then there is a really good chance that some of these lower paying years are going to make their way into your calculation which could reduce your benefit payments. So if you are engaged in travel nursing for 10 to 15 years or more, then that’s going to happen for sure. The point is, you want to make sure you’re saving adequately for retirement because of this.
And even if you engage in travel nursing for only a couple of years, it’s still important to plan for retirement and start saving for retirement. So many people, like half the country, never save for retirement and they’re stuck in their later years with only social security to rely on.
Okay, so let’s take a look at these 401ks. The first thing to know about 401ks is that they’re what’s known as a “tax-deferred” savings plan. This means that you don’t pay taxes on the money that you contribute to the 401k, but you do pay taxes on it when you withdraw it. For example, let’s say you earned $50,000 last year and contributed $7,000 of that to your 401k. You would only pay income taxes on $43,000; the $7,000 wouldn’t be taxed.
This is a huge advantage, especially when you have a higher income tax rate. But travelers need to consider that they probably don’t have a high income tax rate because they’re getting a lower taxable hourly rate. For example, let’s say you got paid $20 per hour taxable and you worked 48 weeks at an average of 36 hours per week. You would end up with only $35,500 in taxable income. If you had a bunch of other tax write-offs, which many travelers do, then your taxable income would be reduced even more.
So, in the end, there’s a possibility that you’d be better off putting your money into a Roth IRA. A Roth IRA is a type of retirement account that lets you contribute post-tax money now, but you don’t get taxed when you withdraw it after age 59 ½. The point is that you might be better off paying no taxes later instead of paying no taxes now because your current tax burden is low.
You can open a Roth IRA with most any financial firm. Your bank, companies like E*Trade and others should all offer these accounts. It’s important to note that the maximum contribution you can make to a Roth IRA is $5,500 assuming that you earn less than $183,000, which I think it’s safe to say that travel nurses earn less than that. So, if you choose to go with a Roth IRA but you want to invest more than the limit, then you’ll need to use the 401k.
Okay, so that’s what I think travelers need to know about tax deferment and 401ks. Another potential benefit of 401ks is what’s called an employer match. You see, 401k plans allow employers to match contributions that their employees make to the plan. These matching payments are tax-deductible for the employer, so that’s the incentive the employer has to make them.
For example, an employer might have a 25% match. In this case, the employer will contribute $.25 for every dollar you contribute. So you essentially start out with a 25% gain. This is essentially free money. And I think most financial advisers would recommend that you make as big a contribution as you can in order take advantage of the match.
There are a few things to consider here. First, the maximum annual contribution you can make to a 401k is $18,000. These maximums are typically increased annually, so if you’re listening to this episode in the future, be sure to verify that number if you’re interested. Second, employers typically have a maximum match. For example, they might have a 25% match on the first $5000 you invest and then nothing after that.
Third, 401ks typically have a vesting period on the matching money. Now, the money you contribute is yours, always. But the money that the employer contributes can have stipulations placed on it. For example, they might say that the matching money doesn’t become vested for 1 full year, meaning that it doesn’t become payable to you until you’ve been with the company for 1 full year. Many agencies have such vesting periods and they’re really important for travelers to know about because travelers often do not stay with agencies long enough to qualify for the vesting period.
Finally, when you leave an agency and go to work with someone else, your 401k money can be transferred out to an IRA Rollover account. You’ll need to open an IRA Rollover account with a financial institution of your choice and then you can request the transfer. It’s a good idea to do this because it gives you more control over the money.
Okay, so we just covered some financial information and I need to remind you that I am not a registered financial advisor, so this is not advice. It’s for informational purposes only. Everyone’s tax situation and retirement needs will be different, so you’ll need to consult with a registered adviser in order to get legitimate financial advice.
Okay, so that’s 401ks. Let’s talk medical benefits next! Exciting stuff! Now, we could probably devote an entire podcast episode to medical benefits. But we’re going to keep it simple here and discuss the major issues for travel healthcare professionals to be aware of.
The good news is that things are a little simpler now that the Affordable Care Act has been instituted. One of the main reasons that they’re simpler is that there are now Minimum Essential Coverage Requirements. Before, you really needed to research exactly what was covered by the health plan offered by any given agency because there were no minimum requirements. Now, you’ll at least know that a minimum amount of coverage is being offered. However, it’s a good idea to ask the agency if the plan they offer is deemed a “Qualified Health Plan” and also ask them for a table of benefits. This way you’ll know for sure.
Now, under the new healthcare law, companies that employ more than 50 full-time employees are required to provide Qualified Health Plan Coverage or face a penalty if any of their employees applies for and receives government subsidized coverage through the insurance market place. So there may be plenty of agencies out there that are not offering coverage.
Again, the good news is that you’ll be able to secure your own coverage fairly easily through the marketplace; no more getting denied for pre-existing conditions or anything like that. However, the catch is that you’re actually required to carry health coverage or you can get penalized. But there are some rules here that may be of interest to you as a traveler.
Next year, 2016, and in subsequent years, the penalty is the greater of $695 per adult and $347 per child OR 2.5% of family income. However, there is no penalty for a single gap in coverage of less than 3 months.
Now, the main question that most travelers have is should I go with the agency’s health plan or should I secure my own? And the answer is going to be different for everyone. It just depends on what you’re comfortable with.
However, one thing to consider is that you’ll most likely change health plans every time you change agencies. And many travelers change agencies frequently. If you do, then you can end up with lapses in coverage or not be able to maintain continuity of care. Your main doctor might not be covered by the new plan, or some prescription drug that you need might not be covered by your new plan.
If you look into getting your own coverage, then it’s a good idea to talk to someone about the fact that you’re a travel nurse. There is a very good chance that you’ll be using healthcare coverage in a different state than where you obtained your coverage and that makes a difference, so you’ll want to be aware of that.
So that’s medical benefits. Let’s move on to discuss rental cars. Many travelers, especially first time travelers wonder if agencies will provide them with a rental car. Rental cars were quite common back in the day, prior to 2008. Then, many agencies stopped offering them and they were pretty hard to come by.
There are two reasons for this. First, the bill rates for travel nursing jobs decreased significantly during the recession, so agencies weren’t able to afford rental cars and offer an appealing rate. Rental cars are quite expensive so it just ate into the rate too much.
Second, rental cars are really difficult for agencies to work with. They carry a huge liability risk. Agencies have to deal with insuring them. They’re a logistical nightmare for agencies to deal with in terms of getting set up, returned and everything else.
Now, with the hot travel nursing job market in 2015, more agencies may be offering rental cars because bill rates have increased quite a bit so the money is there. That said, they’re probably still difficult to come by and you may not even want one given the costs involved.
If you already have a car, then it’s going to be more cost-effective to just travel with your car. In most cases, you can drive it to your assignment or maybe even ship it for much less than the total cost of a rental. If you don’t have a car, then you can probably get by with a combination of public transportation, uber or lyft, and zipcar.
If you do get a rental car, then be sure that you know everything there is to know about how it’s insured. If the agency insures it, then what exactly is covered? If you have your own auto insurance, then you may already be covered for the rental car, so check with them. If you get insurance from the rental car company, then be certain you know exactly how much it will cost. Add on fees like insurance are where rental car companies make their money and they add up fast.
Okay, so that’s rental cars, let’s move on to discuss license and certification reimbursements. Many agencies offer these, but again, they shouldn’t be viewed as some amazing additional perk that one agency offering and another is not. They’re all part of the pie.
So, one of the important things to know about license and certification reimbursements is that in the vast majority of cases they need to be agreed upon or discussed before the contract starts and they need to be added to the contract. In other words, you typically won’t be able to request them after the contact has been solidified.
Why is that? Again, the vast majority of agencies are going to build this cost into their pay rate calculations. This is where the money to cover the cost comes from. So adding this cost after the fact adds an additional cost to the pay package and reduces the agency’s expected gross profit margin.
Now, there are some agencies that will pay for a license or certification after the fact. However, these agencies typically account for the cost with what is typically called a “standard burden”. In this case, the agency adds a standard cost to every contract to cover the cost of various items that might pop up during the contract. For example, the agency might have a standard burden of 3% of the bill rate. This way, they’re able to account for miscellaneous and unforeseen costs that pop up during the contract.
It’s also important to remember to save your receipts for licenses and certifications. Agencies often require them to pay out the reimbursements. And besides, you need them for your own tax records anyway.
Okay, so there is another aspect of the pay package that is pretty similar to license and certification reimbursements and that’s reimbursements for clinical records. And here we’re talking about things like titers, physical exams, PPD’s and other clinical requirements. Now, most people wouldn’t consider these as a pay variable.
However, there are many companies that don’t cover these costs. And again, that doesn’t necessarily mean that their pay packages are worse than the companies that do cover these costs, because the companies that cover the costs are accounting for them in some way when determining the value of their pay packages. Most companies use a “standard burden” to account for these costs.
I think the important thing to remember when it comes to clinical records is that you should always ask if the cost will be covered. And be sure to ask exactly how it works. Mainly, if some unforeseen test needs to be taken in the middle of the contract, will the agency cover the cost? This way, you’ll be able to plan in advance. Also, always obtain and save copies of your clinical records. Remember, the agency isn’t under any legal obligation to provide copies to you, but the healthcare provider is. So obtain your copies from the healthcare provider, whomever that happens to be.
Okay, so let’s move on to discuss travel stipends. Almost every agency is going to offer a travel stipend as part of their pay package. Different agencies are going to offer different amounts and they might even handle them in different ways.
The two most common amounts I’ve heard these days are $500 and $700 for the entire contract. Back in the day, it was common to see travel stipends of $1000 and even $1500. Those amounts became more rare because bill rates went down and because agencies started to the stipend payouts as too risky.
You see, typically, the agency is going to pay the first half of the travel stipend on the first pay check of the contract and the second half on the last paycheck of the contract. So if the traveler bails on the contract in week 2 of the contract, then the agency would be out the $500 or the $750 they paid for the travel stipend. So, there is a little more risk there.
So because of this risk, agencies may continue to offer the lower travel stipends of $500 to $700. Now, that often doesn’t cover the entire cost of the travel expenses you’ll incur. But again, it’s not that agencies are necessarily keeping any more of the money for themselves. Instead, the difference makes its way into the pay package in another way. It’s added to the base rate, or the lodging stipend or somewhere else. In any case, when it comes to travel stipends, the important things to know are how much they’ll be and how they’ll be paid out.
Okay, so I think that’s a good place to wrap up this episode. We’ve discussed 7 of the most common pay variables that make up the travel nursing pay package. We talked about the taxable hourly base rate, 401ks and retirement saving, medical benefits, rental cars, license and certification reimbursements, clinical record reimbursements, and travel stipends.
It’s really important to remember that all of these things are part of the pie. So just because one agency offers one and another doesn’t, or one agency offers more of one than another agency, doesn’t necessarily mean that the pay package is better. To properly evaluate and compare packages we need to consider every variable in the pay package in order to determine the full value of what’s being offered.
That said, you can also look at these variables as services that agencies provide for a price. So, if you really want a particular service and some agency doesn’t offer it, then move on to one that does.
It’s also important to note that we did not discuss housing, lodging stipends, or M&IE stipends in this episode. That’s because we devoted 2 entire episodes to housing and lodging stipends, those were episodes 13 and 20, and we’re going to devote an entire episode to M&IE stipends in the near future.
Okay, so as always, we’ll have the transcript of this episode along with links to much of the information we discussed up on the show notes page for this episode. That will be blog.bluepipes.com/episode28. Please feel free to post your questions and comments about this topic on the show notes page. We greatly appreciate it and we’re always happy to respond there. And please let us know if you think we missed something important.
Again, thank you so much for listening. We greatly appreciate your taking the time join us. If you enjoy the podcast and find the information useful, then we would greatly appreciate your taking the time to provide us with a rating on iTunes or whatever platform you’re listening on. The ratings help us get found so we can share this information with more people and keep the show going. And a special thank you to those of you who have already provided us with a rating. It truly is appreciated.
Okay, so until next episode, have a safe and prosperous travel healthcare adventure.
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