Net Take Home Pay Vs Gross Pay Quotes for Travel Therapy Pay Packages

April 11, 2023 ~ Travel Therapy Mentor ~ Leave a comment

It’s no secret that travel therapy pay packages can be confusing, especially for new and prospective travelers.

I’ve often gotten messages and comments from therapists not familiar with travel therapy pay saying that there’s no point in traveling when you can make just as much money at a permanent job. This is almost always just a misunderstanding in how the compensation is quoted, which is understandable because it is confusing. They look at a take home pay number for a travel job, and compare that to the gross pay they’re making at permanent job, and assume those two numbers are talking about the same thing, but this is incorrect. Even comparing pay between two travelers can be difficult due to all of the variables involved.

Travel Therapy Pay is Unique

While almost everyone in the regular working world discusses pay uses either an hourly pay number, or a gross yearly salary, those numbers don’t really make sense to use when talking about travel therapy jobs.

There are too many variables to determine a “typical travel therapy salary” on an annual basis. The biggest variable is how many weeks the therapist works each year, since flexibility to take long periods of time off and even semi-retire is a huge perk of travel therapy.

An hourly rate doesn’t make sense without knowing the stipend amounts and the number of hours expected or guaranteed.

As a remedy to this, in the travel therapy world, pay is almost always quoted in a weekly “take home” amount, otherwise known as the total weekly net or after-tax pay. This is the amount you can expect to see deposited into your bank account each week when working a contract. This amount typically includes both the hourly rate (minus taxes) plus the non-taxed stipends for housing, meals, and incidentals.

If you’re completely unfamiliar with how travel therapy pay packages are set up, I suggest reading this article or this article to gain a better understanding of this topic.

Unfortunately, while the standard is to quote a weekly after tax total, or “weekly take home pay,” there are also issues with this method.

Drawbacks of Quoting Take Home Travel Therapy Pay

If you’ve only ever looked at travel therapy pay packages, it may come as a surprise to learn that therapy is the only area of travel healthcare that commonly discusses compensation in terms of take home pay aka after-tax pay. Travel nursing and other travel healthcare disciplines almost always discuss compensation is a weekly gross (before tax) amount.

Why is that? It’s because take home pay numbers can also be confusing and hard for recruiters to determine accurately.

Think about it, for a recruiter to quote accurate take home pay for a job, they have to know details about your life to try to determine what your tax rate will be. They also have to know what benefits you’re going to choose that come out of your paycheck before taxes.

Here are some things that can cause take home pay to be different for one traveler compared to another:

Are you single or married?
Do you have dependents?
What is the state income tax rate in your tax home state?
Which health insurance plan are you going to choose?
Are you going to opt for life insurance or disability insurance offered by the company?
Are you going to contribute to a 401k plan if offered by the company?
Do you have any side hustles/other jobs that will impact the amount of tax withholdings on your paycheck?

Difficulty for Recruiters

Now, put yourself in a recruiter’s situation. What if you quote a traveler take home pay for a job assuming they’re single with no dependents, have a tax home in a state with no income tax, carry their own health insurance, and aren’t going to contribute to the company 401k plan, and then all of those assumptions are wrong. The actual take home pay the traveler receives could be much higher or lower than the quoted amount, but it wasn’t the recruiter’s fault. The traveler may feel like they were lied to, when in reality that wasn’t the intention of the recruiter at all. Even the highest paying travel therapy companies can run into issues with this.

You may think, “Oh well they should just ask those things before quoting a pay amount,” and that’s true, but some travel therapists don’t want to give all of that information to a recruiter who they may not even take the job with. Also for situations like with our hot job list or other publicly posted pay packages, the recruiters have no contact with the traveler before determining the pay package posted, so they just have make assumptions that of course may lead to inaccuracies for the individual traveler.

What About Gross Pay?

With all of the assumptions that go into determining a take home pay quote in travel therapy, you may think that quoting gross pay would be better. Well, yes and no. It certainly leads to less confusion since recruiters aren’t having to guess on your tax rate and the benefits you’ll choose, but there are issues as well. The main problem with quoting a weekly gross pay amount is that there’s no way to know how much of that pay is taxable and how much of it are tax free stipends.

For example, let’s say a recruiter quotes you $2,500/week gross pay for a travel contract. That sounds pretty good, but the amount you actually receive each week can vary a lot depending on if the taxable hourly rate is high or low. If the job is $20/hour taxable pay with $1,700/week in tax free stipends, then your weekly paycheck will be much higher than if it’s $40/hour taxable pay with $900/week in tax free stipends. This might not seem like a big deal, but if you’re trying to decide between two jobs based on pay, then a difference between $100-$200/week in take home pay could really sway your choice.

What’s the Best Way to Discuss Travel Therapy Pay?

Unfortunately there’s no perfect answer here. Hourly rates and annual salary are inadequate, and weekly take home pay and weekly gross pay both have drawbacks.

Take home pay quotes lead to unavoidable inaccuracies, and sometimes even hard feelings between travel therapists and recruiters. Gross pay quotes lead to less information being communicated, which can make choosing between jobs based on pay hard for the traveler. Gross pay also means a little more work on the part of the traveler to determine their own expected tax rate and calculate their own approximate net weekly pay.

Overall, gross pay is probably a little better to quote than take home pay, since many more variables are eliminated. But for whatever reason, that has never been the standard in the travel therapy world, and it’s hard to change what people expect.

I’ve seen some people in various Facebook groups claim that any recruiter that is quoting gross pay is intentionally trying to mislead or take advantage of travel therapists. This is almost never the truth. Usually recruiters will quote gross pay in order to avoid the inherent confusion that comes with trying to guess someone’s tax and benefits situation. Certain companies even have policies that do not allow their recruiters to quote the net pay due to inaccuracies and miscommunications this has led to in the past. You certainly shouldn’t be choosing to work with a recruiter or not based solely on how they communicate pay information. There are many much more important variables when picking great recruiters.

Ensuring Your Travel Therapy Pay Package Quote is Accurate

Whether you work with a recruiter who quotes you weekly take home pay or weekly gross pay, it isn’t a big deal if you’re a smart travel therapist that understands the limitations of each, and understands how to calculate your own pay package. Just make sure that you are clear on which way they are quoting the pay to avoid further confusion. If you have one recruiter quoting net and the other quoting gross, you will be sorely disappointed when you realize that the reason the gross weekly pay package was so much higher was that it was before taxes! So just have clear communication with the recruiter if they quote you a weekly amount: be sure to ask is this weekly net or weekly gross.

If your recruiter quotes you a weekly net take home pay number for a potential contract, you need to understand that this is just an estimate based on the average travelers’ situation and could be a little more or less for you based on your personal taxes and benefit elections. No big deal. The recruiter is probably doing their best to be accurate, but it’s never going to be perfect. Quoting approximate net pay can give you a good idea of a rough estimate of your weekly take home pay, which will make it easier for you to quickly compare jobs side by side. Once you’ve been quoted the approximate weekly take home pay, you can do the leg work to figure out a more precise weekly take home number for yourself before accepting the contract.

If your recruiter quotes you a gross pay number, no problem. It’s easy to get a rough estimate of the take home pay amount yourself.

Whether you’re quoted the net weekly take home or the gross weekly amount, you just need to find out how the pay package is broken down to run the calculations for yourself. Ask the recruiter what the hourly taxable rate is, and what the stipend amount is.

To get a rough estimate for my own taxes, I take the hourly rate and multiply by 40 hours, and then subtract 20% of that to account for estimated taxes. I then add in the tax free stipends and have a pretty good guess of what I’ll receive on my weekly paycheck. If I want to be even more accurate, then I’ll use a pay check calculator as discussed in this article. The calculators at Paycheck City are great for this. I’ll then subtract whatever I estimate that the pretax benefits I choose will cost (such as insurance premiums and 401k contributions).

So in summary, as long as you have a good understanding of how pay packages are broken down, you can get a good estimate of what your own weekly pay will be no matter whether the recruiter quotes it as net or gross. It’s very important to know that recruiters are not “good” or “bad” for quoting it one way or the other, this usually has to do with their company standard. A savvy traveler will not be fazed by it being quoted one way or the other. In fact, smart travelers will prefer to see the pay package breakdown and run the calculations themselves.

Being an Informed and Savvy Traveler

Something that helps significantly with getting accurate, as well as the highest possible, pay quotes is working with high quality and reliable recruiters at good travel companies. If you need help getting connected with some that will work well for your situation, be sure to fill out our recruiter recommendation form. We’ve spent years interviewing recruiters and companies to find the best ones for all sorts of different situations.

If you’re brand new to travel therapy and want to learn more information that will help you to be successful and avoid mistakes, start with our free Travel Therapy 101 series. If you want to take your learning to the next level and use travel therapy to become financially independent, then our comprehensive travel therapy course “Becoming a Financially Successful Travel Therapist” is for you.

Best of luck in your travel therapy journey!

Written by Jared Casazza, PT, DPT – Jared has been a traveling physical therapist since 2015. He has become an expert in the field of travel healthcare through his experience, research, and networking over nearly a decade.

Taxable Pay as a Travel Therapist

December 22, 2022April 4, 2023 ~ Travel Therapy Mentor ~ 1 Comment

What is a reasonable hourly taxable pay rate for a travel therapist?

This is a question we get quite often, which is understandable. This area of travel healthcare is confusing and certainly not black and white. Pretty much everyone knows that travel therapists earn more than permanent therapists on average. What some therapists don’t realize though is that the reason travelers earn more is due to the stipends (also called per diems) that are offered on travel contracts.

If you’re new to this concept, it’s important to learn the basics about travel therapist pay and how travel pay packages are set up first.

Some travelers who travel without a tax home receive their stipends as fully taxed income, in which case they don’t earn nearly as much as they would otherwise after taxes each week. Travel therapists without a tax home often wonder if it’s actually financially worth it to be a traveler, and in some cases it isn’t depending on the bill rate of the job and the amount the travel companies keeps.

But, the majority of travel therapists do have a tax home, which means that they are eligible to receive their housing, meals, and incidental stipends tax free. This is great and certainly means more take home pay each week. But naturally, many travel therapists when negotiating contracts and looking at their pay packages wonder how much of the money should be received in the form of stipends and how much should be received as hourly taxable pay.

Why Do Travel Therapists Receive Stipends?

The first thing that’s important to understand is why travelers would receive tax free stipends in the first place. Obviously the stipends themselves are for housing, meals, and incidentals while traveling for a contract, but why would they be tax free for some therapists but taxed for others? The reason for this is that if a travel therapist has a tax home that they’re traveling away from temporarily for work, then the IRS doesn’t see it as fair for them to have to pay taxes on money that they’re using for additional expenses that they’re already incurring back home.

This is the same reason that those traveling away from home for business can write off the cost of their lodging, meals, incidentals, and transportation against their business income. For example, think of a pilot or other professional who travels away from home often for work. Those costs had to be incurred as part of the job, and the individual still has all of their fixed costs back at home as well, so they’re not obligated to pay taxes on those travel related costs that are associated with their job.

On the other hand, those travel therapists without a tax home don’t have any costs back home, so there’s no reason for them to be getting a tax break on their lodging, meals, and incidentals since the costs at their “travel job” are the only living costs they’re paying. Once you understand the reasoning, it makes perfect sense, although it can be confusing at first.

To learn more about travel pay when traveling with vs. without a tax home, check out this article and this video.

Evolution of Taxable Pay Over Time

We can all agree that in most cases, if a therapist can’t earn more money as a traveler, then it doesn’t make much sense to do it. After all, there are certainly cons of travel therapy that can make it a hassle. Packing and moving often, finding temporary housing, getting licensed in various states, and having the risk of a contract being cancelled early are all headaches. Figuring out benefits when working with multiple travel companies is also a concern that permanent therapists don’t have to deal with. Yes the adventure and freedom aspects of being a travel therapist are amazing, but ultimately probably not worth the downsides for most therapists if extra money isn’t involved. Because of this, for clinics to entice therapists to take travel contracts, they have to be willing to pay more for them to offset the cons and risks. Otherwise no one would take the position.

Initially when travel healthcare was new, this meant that a facility would offer a taxable pay rate at or higher than a permanent therapist would make at a comparable job in that location. The stipends were then added on top of that pay rate to cover housing, meals, and incidentals. The stipends weren’t very high because often the facilities couldn’t afford to pay both a high taxable rate and high stipends.

Over time, there are incentives which have gradually shifted more of the travel therapist’s pay toward stipends and less to taxable pay. You see, it benefits the travel therapist, the facility, and the travel company for taxable pay to be lower and stipends to be higher. This is because the taxes you pay as a traveler and the taxes the travel company pays on your behalf (FICA) are both lower when taxable pay is less. That means more money for you each week after taxes and lower expenses for the travel company. The facility benefits as well because they can pay a lower relative bill rate and still be competitive when compared to permanent positions when looking at after tax pay than they’d otherwise be able to. So, these days, travel companies try to offer as low of a taxable hourly rate as possible to the therapist, while offering the highest tax-free stipends possible, to get the highest after tax weekly take home pay for the therapist that the bill rate will allow.

Again, if all of this is very confusing to you, it’s best to start by learning the basics of travel therapist pay here and here.

So now you might be wondering, if making the taxable pay as low as possible benefits everyone involved, why not make it really low? Like minimum wage low? Here’s where the IRS enters the chat.

How Low of Taxable Pay is Allowed?

Everyone benefits from a low taxable pay… except for the government. Lower taxable pay means less tax revenue for both federal and state governments. To keep the government from losing out in this travel work arrangement, the IRS has put rules and guidelines in place. One way they’ve done this is to set maximum allowable amounts for housing, meals, and incidental per diems that they adjust based on the cost of living in the area of the job. You can find these maximum amounts on the GSA website. This keeps travel therapists and travel companies from agreeing on unreasonably high tax free stipends on a contract.

For example, if you take a travel therapy contract in a high cost of living city like San Francisco, the allowable stipends (AKA per diems) for a job there will be very high. So, if the bill rate from the facility is high enough, the travel company can pay you a LOT in tax-free stipends. Whereas if you take a travel therapy job in rural Kansas, the allowable per diems will be much lower, so there are restrictions on how much of the bill rate the company can allocate to tax-free stipends.

As most travelers, and the IRS, know though, not all travel jobs have a high enough bill rate to max out those stipends, while keeping the hourly taxable pay in a reasonable range. There is only so much money in the “pot” (the bill rate that the facility is paying) to go around, and it has to be divided accordingly into the taxable hourly rate and the stipends.

If the GSA per diem rates were the only safeguard, then on those lower bill rate contracts, that would mean that a travel company could just pay a traveler minimum wage for their taxable rate, while putting all of the extra money into stipends to max them out. This would save both them and the traveler money on taxes. However, the IRS knows that there are incentives for companies to do this, and if left with no rules they would do this every time. So, guidance was put out by the IRS to stop this from happening. Not paying high enough taxable wages in order to move money into tax free stipends is known as wage recharacterization and is illegal.

Avoiding Wage Recharacterization

So, we want to make as much as possible after taxes as travel therapists. Part of this means paying less in taxes (in addition to working with high paying travel companies and negotiating well) by having higher tax free stipends and a lower taxable hourly rate. But we don’t want to reduce the taxable rate so much that we risk wage recharacterization. So, we have guidelines on the maximum stipends via the GSA website. But, how do we know what is an appropriate hourly taxable wage? How low is too low?

If only it was that easy. If you know anything about the IRS, you should know that nothing is black and white. Unfortunately, there’s no clear answer here. Part of it depends on your discipline (PT, OT, SLP, PTA, COTA, etc). Part of it depends on what a comparable permanent job would pay in that setting and location. Part of it depends on how high the bill rate for the job is, and if your stipends are able to be maxed out or not. Part of it depends on how you, your accountant, and your travel company (likely guided by their lawyers and accountants) interpret wage recharacterization.

The safest bet would be to accept a taxable hourly wage that is the same as the permanent staff is making in the facility where you’ll be working as a traveler, and then just take the remainder as tax free stipends. This would mean much lower take home pay than you’d make with higher tax free stipend amounts, but absolutely no risk of the wages being considered as recharacterized. On the other end of the risk spectrum, you could insist on only taking minimum wage for every contract and get as much as possible in tax free stipends. This would mean a much higher paycheck, but it would put you at serious risk of having to pay taxes and fines if ever audited due to wage recharacterization. I have heard of several therapists doing this over the years. The right decision is probably somewhere in between.

Your taxable hourly wage should be a reasonable amount for the work performed, without being so high that it makes travel therapy no longer worth it. For me, as a traveling physical therapist, I have always chosen to err on the side of caution with a taxable rate in the $20-$30/hour range depending on the contract. My justification for this pay range is that I know some therapists who have taken permanent jobs making that hourly wage in the past, so it’s much easier to justify this rate than it would be accepting minimum wage as a physical therapist. It’s also low enough that my tax free stipends are usually plenty to cover my living expenses (and have extra to put towards savings) while on contract.

What Should You Choose for Your Taxable Pay as a Travel Therapist?

Ultimately, there’s no clear answer here, and the decision is up to you. Choose an amount that you could justify based on the particular contract. If you feel uncomfortable making a decision, then consulting a professional is warranted. I recommend setting up a consultation with a trusted CPA who is knowledgeable on taxes for traveling professionals to get their opinion. Our preferred CPA who works with healthcare travelers is Nermina Culesker at Choice 1 Accounting and Tax. You can set up a consultation with her here if you’d like to discuss your taxable pay as a traveler or other travel tax related questions. Having worries of an audit hanging over your head isn’t worth making a little extra each week by cutting corners on how your pay is allocated. Peace of mind is valuable.

If you’re brand new to travel therapy and this was all very confusing to you, then I’d recommend checking out our free Travel Therapy 101 series to learn the basics. If you want more in depth knowledge before jumping into travel therapy to improve your odds of financial success, then our course, Becoming a Financially Successful Travel Therapist is the way to go. If you want help getting connected with great recruiters for your situation, then fill out our recruiter recommendation form to get our top picks based on interviewing hundreds of recruiters over our years as travel therapists.

Written by Jared Casazza, PT, DPT – Jared has been a traveling physical therapist since 2015. He is also a personal finance enthusiast. He has become an expert in the field of travel healthcare through his experience, research, and networking over nearly a decade.

Category: Travel Therapy and Finances