How Does Pay Work?

One of the main questions people have in regards to travel nursing is how compensation works, and rightfully so. It makes sense to want to know how you will be paid for your efforts in the hospital and for the potential inconvenience of being away from home. This can be a little complicated, so don’t get intimidated before we start. I will do my best to simplify the process as much as possible without sacrificing the integrity of the information presented. Please also remember that this is very much from the point of view of a traveling nurse. There are many many traveling nurses with countless staffing agencies so it would be nearly impossible to depict every situation as it applies to individuals and the agencies they work under. That said, I will try to explain how compensation works in a way that can be applied to the majority of agencies that I’ve come across. The best way to visualize how compensation works is to think of your compensation as going into a pot. Keep this “pot” in mind as you continue to read.

As I begin to write this, I empathize with math textbook writers. You may notice that there are more images and spreadsheets to explain as it may be better than trying to explain with words.

Bill Rate

You are earning the agency you work for money by working at the hospital during your shifts.  Your company technically bills the hospital for your services per hour. This amount of money that is paid to your company per hour worked is called a bill rate. The hospital and the company have already agreed upon a bill rate at this point for which to pay. This was conducted in the contract between the hospital and your company. Some hospitals pay for contracts upfront, and others pay it like they would an invoice or credit card statement. I imagine that it differs based on relationships and agreements already in place. However, none of this concerns us. The bottom-line is that you work, your company bills the hospital at a predetermined rate for your hours worked, and then that money gets placed in your pot.

bill rate

Company Cut

The money from the hospital gets paid to your company and gets placed in your pot. From your pot, your company takes a portion for services provided. The way in which companies do so differ. Some companies take a percentage where others charge a flat fee. It’s important when interviewing companies and recruiters that you ask how they go through this process. Depending on how you feel, you may be more inclined to work with one model over the other. However, you may not at all feel this way which is okay too. Just know that the incentives for each model are different. With the flat rate model, they may offer you as much as they can right away because they work more towards acquiring higher volumes of contracts. Whereas the percentage model may be more inclined to offer in order to submit bigger price-tag contracts to make a juicer pay-out. Neither way is wrong as long as you look out for your well-being, analyze the packages, and research the areas. Following this process, the remaining amount is yours and reflects what many companies will refer to as your gross pay (or pre-tax pay).

gross pay

Keep in mind that the contract your company and the hospital have is different than the contract that you and your company have so the payout is different. Remember there are services that your company provides. It is not common practice for companies to share what they are charging the hospital. They typically will not mention bill rate, and only focus on gross pay when quoting pay packages. In order to keep a working relationship, it’s important to know what you’re worth and what the area pays. Again, what’s fair is fair.


Remember that I am not a tax professional and that you should seek the assistance of a professional if you have any questions. My aim here is to summarize as best I can. For this explanation, I am assuming that you qualify for tax-free stipends because you are working away from home and duplicating your expenses, thus maintaining your tax-home. For more in-depth information, please see TravelTax.

This next part is tricky and can trip people up. All that remains in the pot is yours (and Uncle Sam’s in the form of taxes). However, there are certain ways that the money can be divvied up which is unique to travelers in order to maximize the take-home amount on our paychecks. There is the possibility for many travelers to qualify for tax-free stipends or per diems. These stipends can be etched into your gross pay to shrink your taxable income all while keeping your gross pay the same. The result is a lower taxable income amount, lower taxed amount withheld, and a chunk of tax-free money in the form of stipends or reimbursements.

taxable income

You might ask, “Why don’t I just have my pay situated in such a way that the whole part is in the form of these tax-free reimbursements?” Well, you’re not foolish for asking. The reason is that the taxed part of the income is reported W2 income, whereas the tax-free reimbursements/stipends are not. You will most definitely get audited and owe A LOT of money if your pay is structured this way. The general rule of thumb which I’ve seen is that your taxable hourly rate should never be less than $20/hr for the sake of increasing your stipend amounts.

But, wait! How do I know what the stipend amounts are for the area I’m traveling to? Well, the government has defined them here. Basically, you look up the area in which you are traveling – by city and state or zip code – and the site will populate the per diem rates (or a number of money employers are allowed to offer as reimbursements per day for employees who travel). The categories listed are 1) lodging and 2) meals & incidental expenses. Some companies will clump these together while others may list them separately.


When considering a contract, it is important to have a basic understanding of algebra and be able to shift focus and reverse engineer from gross pay to hourly pay rate and vice versa. Doing this will help you to ensure you are meeting that $20 minimum rule of thumb. It’s also important to note that we cannot exceed the amount of per diem guidelines in most situations. (For the exceptions, please see the resources listed above). Let’s create a quick example to hopefully illustrate this process a little better.

Say you wanted to work at Yale-New Haven Hospital in New Haven, Connecticut – one of the best health systems in the North East – starting in September 2017. After discussing with your recruiter, they determined that they have a contract there and your company is willing to pay you $1800 gross per week for 36 hours worked.

$1800 gross ÷ 36 hours worked = $50 per hour worked (before taxes)

Now that we have our pay rate, we need to see how the stipends can be maximized, so we look up Per Diem Rates for New Haven, Connecticut on the GSA Per Diem Rates Look-Up.

new haven per diem

Above we see that highlighted in the lodging rate for September and the meals and incidental expenses rate per day for the city of New Haven.

In this example, the monthly lodging rates are the same throughout the time span shown. However, some counties and cities, especially those that are more seasonal, may have varying lodging rates each month for which you have to take into account.

Also, remember that you are living away from home 7 days a week, but are working 3-5 days per week. Make sure to take that into account when trying to understand the math here.

Start with the $20/hr rule:

$50 – $20 = 30

(Hourly Rate) – (Rule of Thumb Taxable Hourly Rate) = (Stipend Potential Per Hour)


$30 × 36 = $1080

(Stipend Potential Rate Per Hour) × (Hours Worked) = (Stipend Potential Total)


($104 + $64) × 7 = $1176

[(Lodging Per Diem) + (Meals & Incidental Expenses Per Diem)] × (Days in a Week) = (Maximum Combined Stipend Amount Per Week)


$1080 < $1176

(Potential Stipend Total) < (Maximum Combined Stipend Amount Per Week)

Therefore, the stipend amounts we estimated using the $20 rule of thumb work because we did not go over the maximum limit as outlined by the government. However, if the estimates we made were more than the maximum limits, we would need to increase our taxable rate and do some tweaks.

The good news is, most companies do all of this math for you. I just feel that it’s important that you know how it is produced so that you can be more educated when negotiating rates and effectively bring home the most money possible by maximizing your tax-free stipends in your pack package.

Pay Periods

Pay periods differ from agency to agency as well as their pay frequency. Although, I find that it’s common for agencies to use a Sunday to Saturday pay period with payday each week on either a Thursday or Friday.

Other Benefits

Other benefits may include travel reimbursements to and/or from assignments, sign-on and completion bonuses, medical/dental/vision, and 401K plans. Some contracts or companies may offer all these benefits whereas others may not offer any. This allows for flexibility and creativity when forming a contract and relationship with a company. It all depends on the situation and the individual’s needs. It is important to remember that this all comes from your pot, so in reality, these are all just routes to receive the compensation you have worked towards.

Key Points

  • The money you earn working each hour is placed in your “pot” with various ways of being divided up before it reaches your bank account
  • Bill rate is the amount your company charges the hospital for your services
  • Pay rate is the taxable amount you receive from your company per hour
  • Stipends/Per Diems/Reimbursements are tax-free amounts for those who qualify
    • These provide a way to shelter your income from taxes and are typically paid out in weekly checks alongside your wage
  • “Blended rate” is what some recruiters will call the sum of hourly pay rate and stipends per hour amount
  • Pay periods and frequency are unique to each company
  • Benefits offer flexibility and creativity

3 thoughts on “How Does Pay Work?”

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