Quote from perfexion
Here are the basics of how this business works.
I always thought one way or another, everything comes from your pay package. There is no free money. The agency doesn't pay you out of their own pocket. There is one pay package that the hospital pays, and it is divided up to cover your pay, housing, travel and other reimbursements. And whatever is left over usually goes towards perks like swag, bonuses or a "tip" for your recruiter. Only, we have no control over where the money goes or how much is allotted to what area. That's what was explained to me by a travel nurse i know who started her own agency. I don't know if that's just her agency or if it's the business model of every agency.
Hopefully this will be simple enough but happy to followup.
On virtually all contracts, there is an all inclusive bill rate per hour worked.
This is what the agency bills the hospital for your work. It could be a standardized rate set by the hospital or vendor manager (which is basically an outsourced HR), or every agency may have a slightly different rate, or there could be a crisis rate, or a negotiated rate for a particularly important need or rare traveler that is presented. These rates are what the market will bear: higher when there are fewer travelers and/or greater needs, lower when there are many travelers and fewer needs. They vary by specialty, geography (higher housing costs means higher bill rates typically to cover), and the acuity of needs.
Slight digression: California is the only state with a mandated staffing ratio, which is why there always seems to be urgent needs there. Hospitals in other states (other than unionized hospitals) can simply increase patient load on nurses depending on unit. Which can often means that when they book a traveler, they need someone in the worst way! Good recruiters like Chris (my presumption, no personal experience with him) that also know the particular hospital can let you know before you are committed about the likely working conditions.
From this bill rate "pie", a portion goes into what the agency needs to run their business sustainably and profitably. This is what Chris is referring to simply as the "margin". Travel companies currently have an average industry wide margin of about 25%, but the range can be dramatic. Sometimes a particular assignment may lose money for the assignment where they are keeping a valuable client or traveler happy for three months. The usual spread is between 18 and 50% on a given assignment - except perhaps at agencies that discuss and market bill rates. Typically those are between 20 and 30% of the bill rate pie. Even there, just like a car dealer, they are not going to show you actual paid invoices. For example, agencies generally make a higher margin on overtime.
The agency margin includes all costs needed to run their business.
Recruiters, accountants, hospital contract getters (often a vital link in direct communication about you with the hospital, not your recruiter), benefits and compliance specialists, marketing, office costs and utilities. Most of these people do not make what travelers make so bear that in mind when talking to your agencies.
The rest of the bill rate pie is yours!
However it seldom looks like it because of the way it is broken into many smaller slices, some of them nearly invisible. For example, your health insurance (if even offered) is coming out of the bill rate and is part of your compensation, not just your copay deduction if there is one. So is the employer's share of payroll taxes, workers comp, and unemployment.
What is visible is still complicated. Hourly rate, housing subsidy (or supplied housing), per diem, travel pay, and completion bonus (if any). I highly recommend use of PanTravelers calculator to boil these numbers down so they can be directly compared. You do want to know which assignment or agency is paying the best right? Pay is not the only factor to consider of course, but it is really helpful!
So honestly, how the industry works is interesting to some of us, but you don't need in depth industry knowledge to do well
. When you buy a car, you are not looking at a dealer's business model. You want the car you want, and you compare your end cost. How they do the accounting is irrelevant to your pocketbook.
Same thing with travel. You want the assignment you want, and to get paid well. Varying agency margins will not matter to you if you simply use the calculator. In fact, not even your hourly pay matters, just your total compensation, or your take home pay (both are useful numbers and the calculator does both).
No work, no bill rate.
This is a very important point that agencies tend to gloss over. If you miss an hour, no pay. Because a lot of your compensation is paid whether you work or not, the agency needs a way to "claw back" the overpayment. Thus missed hour penalties are specified (should be a real hourly amount) in your contract. So while it is called a penalty, and feels like one, it is not. If you got paid an all inclusive rate and not the complicated way that agencies pay (to maximize your take home pay), you wouldn't expect to be paid when you don't work. All missed hour penalties should do (if fair) is bring you back to exactly that place.
That said, you should read that portion of your contract closely and make sure you understand it. Some agencies will allow a few missed hours without penalty, but you can be sure that it is in their margin and you are really in fact paying for it.