clarification on low wage + high stipend

meandragonbrett · Oct 7, 2013

Most travel nurses aren't working as a 1099.

white gloves · Oct 7, 2013

Strike one for this recruiter already.

NedRN · Oct 8, 2013

Both W-2 and 1099 wages have their pluses, and you need another CPA. Any moron knows that with a 1099 you will deduct housing, travel, and per diems on your Schedule C first dollar before it is reported on your 1040. Unlike with W-2 wages, you can also deduct health insurance fully before your taxable income is reported. If you have a corporation, even more tax benefits are possible.

W-2 wages is indeed how most travelers get paid, and the benefit there is that you can use GSA tables to pay housing stipend, not actual housing costs as do 1099 workers. If you find the right agency, it means a minimum of $36,000 a year not taxed plus your per diem. That is a huge benefit - you need to ditch your CPA. Google Traveltax for one who understands healthcare travelers.

white gloves · Oct 8, 2013

Update:

The recruiter understands I'm getting paid more than $45/hr at my current full time, permanent job. She said she'll match it with low wage + high stipend. Came the contract and it reads $20/hr, $30/hr if overtime, $11x daily lodging per diem (woah, wait a min, so if I don't work 5 days a week, I'll get paid much less....). What do you guys think if I asked the recruiter to get me the highest hourly wage?

PS- Thank you NedRN. It was sobering.

NedRN · Oct 8, 2013

You need to talk to other agencies. It is the only way to get a true understanding of fair market value for you in any given location.

Your per diem is paid 7 days a week, not just work days unless the contract shows it is paid per hour worked (which is becoming much less common these days - not liked by the IRS even though the weekly amount is likely to be the same).

Highest hourly taxable wage will result in significantly lower net pay for two reasons: the big one is that you will pay more in income taxes. The other reason is that the agency has to pay employer payroll taxes on that additional taxed hourly, resulting in less money available to pay you. For example, you drop your per diem by $10 an hour converting it to taxable hourly, the agency has to pay about a $1 an hour in payroll taxes (FICA, unemployment, and workers comp). That means they have to pay you $1 an hour less to maintain their desired profit margin on the fixed bill rate. That may not sound like much, but it means about $500 less per assignment that you can put in the bank just from that alone (plus your direct increase in income taxes paid). Double whammy! Your quote was based on the assumption of high stipend and low hourly. A new quote will be lower (by $1 an hour per example) plus you will be paying more in income taxes.

While your OT rate is common given your low base rate, it is also just plain stupid and effectively a pay cut. If the assignment has know OT availability and you want to work OT, negotiate the rate separately. I would shoot for at least $50 an hour. The agency will still make good money at that rate, and it is all extra profit for them, their fixed costs have already been paid by your 36 or 40 hours worked. You are the one doing the extra work and they should provide an incentive. $30 an hour is not an incentive, you make more than that all told on your base hours.

pinktermite · Oct 18, 2013

Totally agree with Ned. All of it. If your OT rate is not atleast 50 bucks, don't bother. The OT is outside the contract, and easy profit for the company, I've gotten OT rates mostly in 55-60/hr range, I consider that fair to company and myself alike. Yes, fire your accountant. For me, the biggest benefit to traveling is minimizing my taxable income. And it's all legal.

NedRN · Oct 18, 2013

If the agency is being paid time and a half on the bill rate, even $60 an hour is not really equitable. Let's say there is a $60 bill rate (pretty common) and they are billing $90 for overtime. That represents $30 an hour pure (net) profit for the agency. If they get the same gross profit margin (not net) that they get for regular hours, it should be $9 to $15 an hour. And even at that rate, that represents a large increase over regular hours for the agency, probably triple.

Not all contracts pay time and a half on OT. Base rate plus $10 is becoming more common, but even there, agencies will still make a small profit on paying $60 an hour on $70 billed after all their expenses have been met by the regular hours already worked. It is almost never wrong to ask for a higher OT, both for the agency (to provide incentive to the traveler to ask for OT), and of course the traveler.