How Locum Tenens pay works: A Complete Guide to Compensation Structure

Quick Facts: Locum Tenens Compensation at a Glance

Data sources: Physician Side Gigs physician-reported database (2025); agency-published rate surveys cited with conflict-of-interest disclosure where applicable. See our data transparency statement at the end of this article.

Introduction

If you’ve spent your career as an employed physician or advanced practice provider, locum tenens compensation will look unfamiliar at first — and the way it’s typically explained won’t help. Most guides on this topic are published by the agencies paying you, which means they’re written to make the package sound as attractive as possible rather than to give you a complete picture.

This guide does something different. It explains how locum tenens compensation actually works — the full structure, including the parts that complicate the headline rate. That means covering how your hourly or daily rate is set, how housing and travel stipends factor in, what the 1099 classification means for your tax situation, what agencies cover and what they don’t, and how to translate a quoted rate into a realistic take-home number.

If you’re new to locum tenens, start here. Nearly every other guide on this site builds on concepts introduced below. If you’re already working locums but feel like you’re missing pieces of the financial picture, this is worth reading through — most providers don’t get a complete explanation of the compensation structure until they’ve already signed several contracts.

One thing you won’t find here: the kind of enthusiasm that characterizes most agency-produced content. Locum tenens can be an excellent financial decision for the right provider in the right situation. It can also be a complicated one. Our job is to give you the information to make that assessment yourself.

How Locum Tenens Rates Are Structured

Locum tenens compensation is quoted in one of two ways: an hourly rate or a daily rate. Which format you see depends on the specialty, the facility, and the agency — there’s no universal standard, and understanding the difference matters when you’re comparing offers.

Hourly vs. Daily Rates

Hourly rates are straightforward — you’re paid a set amount for each hour worked. Daily rates, sometimes called per diem rates, are a fixed amount for a defined shift regardless of exact hours. A daily rate of $2,000 for a standard 10-hour hospitalist shift works out to $200/hour, but if that shift runs 12 hours the effective hourly rate drops to $167. When you’re evaluating a daily rate offer, always clarify what constitutes a standard shift and what happens if you routinely work beyond it.

Guaranteed Minimums

Some contracts include a guaranteed minimum — a floor below which your pay won’t drop even if the facility has a slow census day and your hours are cut. This is more common in hospital-based specialties like hospitalist medicine and emergency medicine than in procedural or surgical specialties. A guaranteed minimum is worth negotiating for if it isn’t offered, particularly for assignments where census volatility is known.

Shift Premiums

Most agencies and facilities pay premiums for less desirable shifts. Night differentials, weekend rates, and holiday premiums are common — typically 10–25% above the base rate depending on the specialty and market. If you’re flexible on scheduling, these premiums can meaningfully increase your effective hourly rate over the course of an assignment without requiring any rate renegotiation.

Call Coverage

If your assignment includes on-call responsibilities, that coverage should be compensated separately from your base rate. Call pay structures vary — some facilities pay a flat daily call stipend, others pay an activation rate when you’re actually called in. Uncompensated call is a red flag in any locum contract. If the scope of call isn’t explicitly defined and priced in the agreement, get clarification before signing.

The Stipend Layer: Housing, Travel, and Meals

The headline hourly or daily rate is only part of your locum tenens compensation package. Most assignments include stipends for housing, travel, and sometimes meals — and understanding how these work is important both for evaluating offers and for managing your tax situation correctly.

How Stipends Work

When you take a locum assignment away from your established tax home, the IRS allows agencies to reimburse your housing and travel expenses tax-free, provided those expenses are legitimate and the assignment is temporary. In practice, this means a portion of your total compensation arrives as stipends rather than as taxable wages — which increases your effective take-home pay compared to what the hourly rate alone suggests. The requirements for tax-free stipend treatment are specific and worth understanding in detail before you accept any package — see our Housing Stipends and Taxes guide for the full breakdown.

A typical package might look like this: a base hourly rate of $180/hour plus a $150/day housing stipend and a $50/day meal and incidental allowance. The hourly rate is taxable. The stipends, structured correctly, are not.

Housing Stipends

Agencies handle housing one of two ways — they either arrange and pay for your housing directly, or they provide a housing stipend and let you arrange your own accommodations. The stipend option gives you more flexibility and the potential to pocket the difference if you find housing below the stipend amount. The agency-arranged option removes the logistical burden but gives you less control.

Travel Stipends

Most assignments cover travel to and from the assignment location, either through direct reimbursement or a flat travel allowance. For assignments requiring flights, agencies typically book travel directly. For drive-to assignments, mileage reimbursement is common — the IRS standard business mileage rate for 2026 is 72.5 cents per mile.

The Tax Home Requirement

The tax-free treatment of stipends depends entirely on maintaining a legitimate tax home. If you don’t have a permanent residence — or if your locum work becomes so extensive that the IRS considers it your primary work location — stipends may become taxable. This is one of the most misunderstood areas of locum tenens taxation and one that agencies rarely explain clearly because it doesn’t affect their margins. We cover this in detail in our 1099 tax strategy guide.

What Stipends Are Not

Stipends are not a bonus and they’re not guaranteed profit. They’re designed to offset real expenses. Providers who treat stipend income as pure upside without tracking actual housing and travel costs can find themselves in a difficult position at tax time. Document your expenses.

The 1099 Reality: What Independent Contractor Status Actually Means

Most locum tenens arrangements classify you as a 1099 independent contractor rather than a W-2 employee. Agencies and facilities prefer this structure, and for many providers it offers real financial advantages — but it also comes with responsibilities that employed physicians never have to think about.

No Tax Withholding

As a 1099 contractor, no federal or state income tax is withheld from your payments. You’re responsible for estimating your tax liability and making quarterly estimated payments to the IRS. Missing or underpaying estimated taxes results in penalties — not just a bill at tax time. If you’re transitioning from employed medicine, this is the adjustment that catches most new locums off guard.

Self-Employment Tax

Employed physicians split Social Security and Medicare taxes with their employer — each pays 7.65%. As a 1099 contractor, you pay both sides: the full 15.3% self-employment tax on net earnings. For 2026, the Social Security wage base is $184,500, meaning the 12.4% Social Security portion applies to earnings up to that threshold; the 2.9% Medicare portion applies to all net earnings with an additional 0.9% surcharge above $200,000 for single filers.

On a $300,000 locum income, the self-employment tax burden is substantial compared to employed status. This is the primary reason many locum physicians explore S-Corp election — a strategy that can legally reduce self-employment tax exposure by allowing you to split income between a reasonable salary and distributions. We cover this in detail in our S-Corp guide.

No Employer Benefits

As an independent contractor you receive no employer-sponsored health insurance, no retirement plan contributions, no paid time off, and no disability coverage. These aren’t small omissions — for a physician transitioning from an employed position with a full benefits package, the true cost of replacing these benefits needs to factor into any income comparison. A locum rate that looks significantly higher than your employed salary may be closer to equivalent once benefits replacement costs are accounted for.

The Upside of 1099 Status

The 1099 structure isn’t purely a burden. As an independent contractor you can deduct legitimate business expenses — continuing medical education, licensing fees, professional dues, home office expenses, and more. You can contribute to a Solo 401(k) or SEP-IRA with substantially higher limits than a standard employee retirement account. And beginning in 2026, the 20% qualified business income (QBI) deduction under Section 199A is permanent — the scheduled sunset was eliminated by the One Big Beautiful Bill Act, making long-term S-Corp and pass-through planning more predictable than it has been in recent years.

W-2 Locum Arrangements

Not all locum arrangements are 1099. Some agencies offer W-2 employment, which means tax withholding, employer-side FICA contributions, and sometimes limited benefits. W-2 arrangements typically come with a lower gross rate to offset the agency’s increased costs — but for providers who find quarterly estimated tax management burdensome, the tradeoff may be worth evaluating. Neither structure is universally better; the right choice depends on your income level, business structure, and tax situation.

The Bill Rate: What Agencies Charge and What That Means for You

This is the section most agencies hope you never read carefully.

When a facility needs locum coverage, it doesn’t negotiate your rate directly — it negotiates with the agency. The agency quotes the facility a bill rate: the total hourly cost the facility pays for your services. Your hourly rate is a portion of that bill rate. The difference is the agency’s margin.

How Bill Rates Work

If a facility is paying an agency $350/hour for an emergency physician, and your contract shows $250/hour, the agency is retaining $100/hour — roughly a 29% margin. On a 40-hour week, that’s $4,000 per week flowing to the agency above what reaches you. On a 13-week assignment, that’s $52,000.

Agency margins in locum tenens typically run between 25% and 40% of the bill rate depending on specialty, market, and how much the agency is covering in additional costs — malpractice insurance, housing, travel, credentialing, and administrative overhead. Some of that margin is legitimate operational cost. Some of it is profit. The line between the two is rarely disclosed.

Why Agencies Don’t Publish Bill Rates

No major locum tenens agency publishes its bill rates, and most contracts include clauses prohibiting you from discussing your rate with the facility directly. This information asymmetry exists entirely in the agency’s favor. The facility knows the bill rate. The agency knows both numbers. You know only your rate — unless you ask the right questions or the facility is willing to share what it’s paying.

Some facilities, particularly larger health systems with established locum programs, are willing to discuss bill rates informally. If you develop a direct relationship with a facility and want to explore a direct contract — bypassing the agency entirely — understanding bill rate math is essential context.

What the Margin Covers

To be fair to agencies, the margin isn’t pure profit. A legitimate agency is covering malpractice insurance premiums, credentialing and privileging costs, housing and travel logistics, recruiter compensation, compliance, and the risk of assignment cancellations. These are real costs. But the range of margin across agencies for equivalent services varies enough that shopping your rate across multiple agencies for the same type of assignment is always worth doing.

What This Means for Negotiation

You are not negotiating against the facility’s budget — you are negotiating against the agency’s margin. An agency that quotes you $200/hour on an assignment billing at $320/hour has more room to move than one billing at $260/hour. You won’t always know the bill rate, but you can establish a market rate floor by getting competing offers from multiple agencies for similar assignments. Agencies that know you’re comparing offers negotiate differently than agencies that assume you aren’t.

The single most effective negotiating tool available to a locum provider is a competing offer from another agency for a comparable assignment.

What Agencies Cover — And What They Don’t

One of the most common sources of financial surprise for new locum providers is discovering mid-assignment that something they assumed was covered isn’t. Agencies vary in what they include, and the gap between what’s standard and what’s negotiable isn’t always clear until you’re already in a contract.

What Most Agencies Typically Cover

Malpractice insurance is the most significant benefit agencies provide. Most cover claims-made or occurrence-based malpractice coverage for the duration of your assignment — but the type of coverage matters enormously, and tail coverage is where many providers get caught off guard. We cover this in detail in our malpractice insurance guide, but the short version is this: always confirm in writing what type of coverage you have and who is responsible for tail coverage when the assignment ends.

Housing is typically covered either through a direct arrangement or a stipend, as covered above. Travel to and from the assignment location is standard. Credentialing and privileging costs at the facility are generally handled by the agency, though the timeline for credentialing is a frequent source of assignment delays.

What Agencies Do Not Cover

Health insurance is your responsibility. For a physician coming from an employed position with employer-sponsored coverage, replacing this benefit is a significant cost. Unsubsidized individual market premiums vary considerably by age, location, plan type, and family size — physicians should realistically budget $800–$1,500 or more per month for comprehensive individual coverage, and more for family plans. ACA subsidies are generally not available at physician income levels.

Retirement plan contributions are your responsibility. No agency contributes to a 401(k) or pension on your behalf. As a 1099 contractor you can establish your own Solo 401(k) or SEP-IRA, but the contributions come entirely from you.

Disability insurance is your responsibility. This is one of the most underinsured areas for locum providers — a long-term disability without employer-sponsored coverage and no own-occupation policy in place is a serious financial risk for a high-income provider. It’s worth addressing before you leave an employed position.

Licensing fees for states where you don’t already hold a license are handled inconsistently — some agencies cover them, some don’t, and this is negotiable. If an assignment requires you to obtain a new state license, clarify upfront who pays and who manages the process. We cover multi-state licensing strategy in detail in our licensing guide.

The Benefits Gap Calculation

When comparing a locum rate to an employed salary, the benefits gap is the number most providers underestimate. A rough framework: add health insurance replacement cost, retirement contribution replacement, disability insurance premium, and malpractice tail coverage liability to the employed side of the ledger before declaring the locum rate superior. In many cases the locum rate still wins — but the margin is smaller than the headline numbers suggest.

Real Take-Home Math: A Worked Example

Abstract rate discussions only go so far. Here’s what locum compensation actually looks like when you run the full numbers on a realistic assignment.

The Scenario

A hospitalist physician takes a 13-week locum assignment with the following package:

• Base rate: $200/hour
• Scheduled hours: 182 hours/month
• Housing stipend: $150/day
• Meal and incidental allowance: $50/day
• Travel: covered by agency directly
• Malpractice: covered by agency

Gross Compensation Breakdown

The Tax Reality

Estimated Net After Federal Tax

That works out to approximately $6,415/month net after federal tax — before state income tax, health insurance premiums, retirement contributions, and any disability insurance costs.

The $200/hour rate sounds compelling. The full-package gross of $127,200 for 13 weeks sounds exceptional. The net picture — roughly $83,400 before state taxes and benefits costs — is still strong, but it’s a different number than the headline rate implies. A physician replacing a $280,000 employed salary with full benefits needs to factor all of this in before concluding the locum arrangement is financially superior. It may well be. But the math needs to be done honestly.

Note: Federal tax estimates are approximations based on 2026 IRS brackets. Individual tax situations vary. Consult a licensed tax professional before making financial decisions based on these figures.

Data Transparency Statement

Locum tenens compensation data presents a sourcing challenge that most sites in this space don’t acknowledge: the majority of published surveys are funded by staffing agencies with a financial interest in making locum compensation appear as attractive as possible. We think you deserve to know where our numbers come from and what their limitations are.

Sources Used in This Article

Hourly rate ranges are drawn primarily from the Physician Side Gigs physician-reported compensation database, which aggregates anonymous, self-reported data from practicing locum providers. This is among the most conflict-free data sources available in the locum tenens space, though self-reported data carries its own limitations including self-selection bias.

Where agency-published surveys are referenced on this site, we note that conflict of interest explicitly. Sources including CompHealth, Weatherby Harris, and AMN Healthcare publish annual compensation data that is useful as directional context but should be understood as produced by parties with commercial interests in the locum tenens market.

The Doximity Physician Compensation Report and Medscape Physician Compensation Report are used where relevant as broader physician compensation benchmarks. MGMA data is referenced where figures are publicly available.

What We Don’t Know

Real-time market rate data for locum tenens is not publicly available in the way that travel nursing platforms have made nurse compensation more transparent. We do not have access to live bill rate data or current agency margin figures. Rate ranges published on this site represent general market conditions based on available sources and should be used as orientation, not as negotiating anchors without additional market research on your specific specialty and geography.

Our Editorial Standard

No agency, malpractice provider, financial service, or any other commercial entity pays to influence the content on this site. Affiliate relationships, where they exist, are disclosed. Our editorial positions are our own.

If you find data on this site that appears outdated or inaccurate, contact us. We’d rather be corrected than be wrong.