Have you ever wondered how much of your hard-earned money Travel Companies keep when you accept a travel healthcare contract? If you have, you’re definitely not alone.
One of the most frequent questions we receive revolves around the percentage of the bill rate – the amount healthcare facilities pay travel companies – that should rightfully go to the travel healthcare professional versus how much the company should retain. It’s a completely understandable concern. Travelers want assurance they aren’t being exploited by travel staffing companies and are receiving fair compensation for their valuable work.
Many healthcare travelers see the situation quite simply: they are the ones providing the essential healthcare services, while the travel company is perceived as an unnecessary intermediary, taking a disproportionately large cut. This line of thinking naturally leads to the question: what if we eliminated the “middleman”? Wouldn’t we earn significantly more and finally receive our fair share? This thought process often leads professionals to consider becoming independent contractors in the travel healthcare field.
While these perspectives are understandable and reflect my own initial thoughts, a deeper exploration into this subject has revealed a far more complex financial relationship between healthcare facilities, staffing companies, and travel healthcare professionals than is immediately apparent.
Unfortunately, there’s no straightforward answer to the common question, “How much of the pay do travel therapy companies keep from a travel contract?” (and the underlying question: what is a fair percentage?). The complexity begins with understanding the financial calculations involved. Furthermore, it’s crucial to consider the numerous behind-the-scenes costs that must be covered before both the traveler and the travel company realize any actual earnings. Only after examining these variables can we begin to assess what constitutes a “fair” distribution for all parties involved.
In my discussions with numerous recruiters and industry leaders over the past few years, it’s become evident that even many recruiters themselves lack a complete understanding of the intricate process behind calculating pay packages from a given bill rate. Often, these calculations are automated through programs or spreadsheets, requiring recruiters to input and adjust only a limited number of figures.
I initially addressed the topics of travel therapy bill rates and pay packages in 2018 (currently 2022 as I write this). Although my understanding was reasonably sound at the time, the subsequent three years have significantly deepened my appreciation for the nuances inherent in these subjects.
In this article, I aim to clarify why pinpointing an exact percentage that travel companies are keeping and/or should be keeping from a contract is incredibly challenging, due to the multitude of variables at play.
Are You Getting a Fair Deal from Travel Companies?
Skepticism towards travel companies and recruiters is common among both new and experienced travel healthcare professionals. Often fueled by anecdotal stories, many believe that recruiters routinely attempt to take advantage of them by intentionally offering lower pay than justified. While such recruiters undoubtedly exist, my experience interviewing nearly 100 recruiters since 2015 suggests they are less prevalent than commonly perceived. Negative experiences with recruiters tend to spread more rapidly than positive or even neutral ones. Travelers often assume recruiters are heavily incentivized to maximize the company’s share of the bill rate by minimizing traveler pay. However, in reality, recruiter compensation is often independent of the traveler’s pay package. Furthermore, recruiters are generally motivated to present their best offers upfront to secure your business and foster long-term working relationships. Honesty and transparency ultimately benefit them.
Travel healthcare professionals often inquire about bill rates and pay packages when seeking to determine if they’ve received a competitive offer. Sometimes, they may already know the bill rate and their take-home pay and are trying to calculate the company’s cut, suspecting unfair treatment.
A typical scenario unfolds like this: “I’m receiving $1,650 per week after taxes, and I’ve learned the bill rate for this contract is $65 per hour. This means the travel company is retaining over 35% weekly. Am I being cheated?”
On the surface, this calculation seems logical, suggesting the travel company is keeping a substantial portion. However, this simple calculation overlooks crucial factors. The traveler is performing a calculation based on the gross bill rate and comparing it to their net take-home pay.
Let’s examine the math in this example:
$65/hour x 40 hours = $2,600 (Gross Bill Rate)
$1,650 (Weekly Take-Home Pay) / $2,600 (Gross Bill Rate) = 0.635 (63.5% – Traveler’s Share)
1 – 0.635 = 0.365 x 100 = 36.5% (Travel Company’s Assumed Share)
However, this calculation is flawed because it doesn’t account for taxes and other significant variables. The critical oversight is that the bill rate is a pre-tax (gross) amount, while the traveler’s weekly take-home pay is post-tax (net). Therefore, simply multiplying the hourly bill rate by 40 hours gives a pre-tax figure, while the $1,650 take-home pay is after tax deductions.
The traveler’s net pay is calculated after subtracting federal, state, and payroll taxes (Social Security and Medicare) from their taxable income. These tax withholdings are remitted to the government, not retained by the travel company. Furthermore, employers, including travel companies, are obligated to pay an additional 7.65% of the taxable pay for their portion of the traveler’s payroll taxes. These taxes are unavoidable and are not part of the company’s revenue or profit. Even if a traveler worked as an independent contractor, bypassing the travel company, they would still be responsible for these taxes, which would reduce their earnings.
To more accurately assess the travel company’s share, we must account for all forms of weekly monetary compensation paid to the traveler, including taxes withheld by the government, both on the traveler’s and the company’s behalf. Let’s revisit the previous example, assuming a taxable hourly rate of $21 and weekly stipends of $1,000:
Revised Calculation Accounting for Weekly Taxes:
$21/hour x 40 hours + $1,000 = $1,840 (Weekly Gross Pay)
$21/hour x 40 hours x 0.0765 = $64 (Employer’s Portion of Payroll Taxes)
($1,840 + $64) / ($65/hour x 40 hours) = 0.732
1 – 0.732 = 0.268 x 100 = 26.8% (Travel Company’s Share After Accounting for Taxes)
This revised calculation reveals that approximately 10% of what initially appeared to be the travel company’s share is actually allocated to federal and state taxes, as well as future Social Security and Medicare benefits.
Even at 26.8%, the travel company’s share might still seem substantial. However, we must consider further elements. This figure doesn’t yet encompass the full scope of compensation paid to the traveler and expenses covered by the travel company on the traveler’s behalf. Beyond taxes, the example traveler likely receives reimbursements (e.g., state licensing, travel expenses to and from assignments) and benefits from onboarding and credentialing costs typically covered by the travel company (background checks, drug tests, PPD tests, etc.).
Furthermore, travel companies incur expenses for liability and workers’ compensation insurance for travelers and often subsidize a portion of health insurance premiums. Some companies also provide benefits like access to online CEU services such as Medbridge or other perks.
After factoring in taxes, reimbursements, and all costs covered by the travel company, the actual percentage retained by the company, initially appearing to be between 26% and 36%, is likely closer to 15%-20% in this scenario. This percentage will fluctuate based on the contract’s taxable hourly rate (which impacts tax withholdings) and the specific reimbursements and onboarding costs associated with each assignment.
Even with a 15%-20% figure, you might still wonder if this is an excessive amount for travel companies to retain. However, there are still more factors to consider, particularly whether the contract was secured through a Vendor Management System (VMS) or a Managed Service Provider (MSP). These systems act as intermediaries, streamlining the process of matching travel healthcare professionals with facility openings. For their services, VMS/MSPs charge fees, which can reach up to 6% of the bill rate. The majority of travel healthcare positions are filled through VMS/MSPs, making this fee a significant consideration. I discussed the impact of VMSs and MSPs in more detail in my article on the highest paying travel therapy companies, which you can find here.
Travel Company Operational Costs and Profit Margins
All the expenses discussed above either directly compensate the travel healthcare professional or are paid on their behalf, and should be considered part of their total compensation package. After accounting for these, travel companies typically retain around 15%-20% of the bill rate. But does this figure represent their actual profit? Are travel companies making exorbitant profits from our contracts?
This remaining percentage must cover the travel company’s operational expenses and provide them with a profit margin to sustain their business. Significant expenses for travel companies include: staff salaries (recruiters, account managers, HR, payroll, marketing, etc.), office rent and utilities, and marketing costs (conferences, advertising, traveler promotional items, and referral bonuses). Depending on company size, which dictates staffing levels and office space, these costs can be substantial.
Another often-overlooked expense is the money travel companies set aside to cover potential contract cancellations, reduced hours, and “orientation hours.” Travel companies incur upfront costs for credentialing and reimbursements before a traveler begins working. If a contract is prematurely terminated, either by the facility or the traveler, the company risks financial loss on that contract. This cancellation risk must be factored into their profit margins. Similarly, if a traveler has a 40-hour guarantee or guaranteed stipends in their contract, and their hours are reduced, the facility may not compensate the travel company for those guaranteed hours, but the company is still obligated to pay the traveler. Therefore, travel companies must reserve funds from each contract’s bill rate to cover such scenarios. Furthermore, some facilities may not pay for what they deem “orientation hours” at the contract’s start – potentially one to two days – arguing the traveler is still orienting and not fully productive. Despite experienced travelers often being expected to be productive immediately, some facilities still refuse to pay for these initial hours. However, travel companies typically still compensate the traveler for these hours, another cost factored into their margins.
After considering all these factors, the actual profit margin for travel companies from the bill rate is likely less than 10%. Profitability varies significantly depending on contract circumstances. Some contracts might yield a 10% profit, while others could result in losses if contracts are prematurely cancelled or unforeseen events, like the pandemic’s onset, disrupt facility payments.
Calculating Your Fair Share from a Contract Bill Rate
As you can see, even with knowledge of a contract’s bill rate, determining the travel company’s actual share and the allocation of funds to various costs is complex. Consequently, defining a “fair percentage” for your compensation becomes even more challenging.
At a minimum, to attempt such calculations, you would need to ascertain:
- Whether the position is managed through a VMS or MSP.
- Whether the facility compensates for orientation hours.
- Whether stipends are guaranteed during periods of reduced hours.
- If the travel company subsidizes health insurance costs.
- The cost of liability and workers’ compensation insurance covered by the company.
- The total upfront reimbursements and credentialing expenses.
- The amount of tax withheld from your taxable pay and the company’s payroll tax obligations.
Even if you could obtain all this information – which is highly improbable – you would then need to deduct these costs to understand what remains for your compensation and the company’s share.
Without knowing these variables, determining a fair percentage of the bill rate for your compensation is virtually impossible. This complexity is why most recruiters avoid disclosing bill rates, as transparency can lead to confusion and mistrust rather than clarity, especially for those unfamiliar with these nuances.
The intricate nature of these calculations often leads to travelers making quick, inaccurate estimations that lead them to believe they are being exploited, even when they are not.
Finding a Fair Solution When Working with Travel Companies
For travel healthcare professionals working with staffing companies, numerous behind-the-scenes costs and calculations are beyond our direct control. Some travelers might consider independent contractor status to potentially “cut out the middleman” and increase earnings. However, this path involves significantly more responsibility. As an independent contractor, you become responsible for securing and negotiating your own contracts, legal agreements, benefits, taxes, credentialing, liability insurance, and more. Furthermore, without a travel company intermediary, you lose the safety net and pay guarantees they provide. You assume all responsibilities. Moreover, as outlined earlier, unavoidable costs like taxes and insurance simply shift to your responsibility instead of being covered by the company. Consequently, the actual increase in earnings as an independent contractor is often marginal – primarily the travel company’s profit margin. If this option interests you, extensive research is essential to understand its complexities.
However, most travel healthcare professionals prefer the convenience of working with staffing agencies that handle these administrative burdens. Travel companies manage the behind-the-scenes complexities and facilitate contract setup. Of course, this service necessitates a profit for the company. But how can you ensure you’re not being charged excessively?
One approach is to work with smaller travel companies, which theoretically have lower overhead and smaller profit margins, potentially leading to higher traveler pay. However, the choice between large and small companies involves trade-offs. Larger companies might have larger margins but may also have direct contracts that avoid VMS/MSP fees, while smaller companies may incur these fees. Larger companies may also offer greater security, such as guaranteed stipends, which reduces their margins but provides traveler security. The travel healthcare landscape is rarely black and white, and no perfect solution exists.
Therefore, we recommend building relationships with several recruiters at different companies (both large and small) whom you trust to be transparent and honest about travel positions and pay. This way, whether you know the bill rate or not, or understand the company’s operating costs, you can trust your recruiter to advocate for you during negotiations and secure the best possible pay for each position. This approach removes the uncertainty and allows you to focus on comparing offers from different companies and selecting the most suitable ones. Negotiation is always an option, but with a trustworthy recruiter, you shouldn’t need to constantly push for better rates. They should present their best offers upfront and be transparent about pay and contract details.
Finding trustworthy recruiters can be challenging. That’s why we created Travel Therapy Mentor to assist in connecting travelers with reputable recruiters and companies, in addition to providing educational resources. We continuously interview, evaluate, and refine our network of recruiters based on interviews, reputation, performance, and traveler feedback. We strive to connect travelers with high-quality recruiters and companies best suited to their individual needs. For personalized recommendations to companies and recruiters we trust to treat travelers fairly, please complete our recruiter recommendation form here.
I hope this article has shed light on pay packages and the factors influencing their calculation from a given bill rate. If you require further clarification, please email us or leave a comment below.
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Written by Jared Casazza, PT, DPT – Jared has been a traveling physical therapist since 2015. He has mentored and educated thousands of healthcare travelers and is a leading expert in the field of travel therapy.
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Published by Travel Therapy Mentor
Travel Therapy Mentor is brought to you by two traveling physical therapists, Jared and Whitney Casazza, who have been working as travel healthcare professionals since 2015. We are here to help mentor others who are considering starting a travel career, as well as provide information to current travelers to grow and expand their knowledge. View all posts by Travel Therapy Mentor
