A nursing agency is a staffing company that connects nurses with healthcare facilities that need temporary or on-demand workers. These agencies maintain a pool of licensed nurses ready to fill shifts on short notice, cover extended vacancies, or work contract assignments lasting weeks to months. The industry is massive, generating roughly $40 billion in annual revenue across the United States.
How Nursing Agencies Work
The basic model is straightforward. A nursing agency recruits, credentials, and maintains a roster of nurses who want flexible or temporary work. When a hospital, nursing home, or clinic has a staffing gap, it contacts the agency, which matches available nurses to the open shifts. The healthcare facility pays the agency a contracted rate, and the agency pays the nurse from that amount, keeping the difference as its margin.
Nurses who work through agencies are typically employed by the agency itself, not by the hospital or facility where they show up. This means the agency handles payroll, benefits, and often malpractice insurance coverage. The facility provides orientation, supervises clinical work, and sets patient care expectations. Both the agency and the facility can share liability if something goes wrong with patient care, so agencies carry malpractice policies that cover their nurses and any vicarious liability claims against the business.
Types of Nursing Agencies
Not all nursing agencies operate the same way. The differences come down to assignment length, location, and the kind of nurse being placed.
- Travel nursing agencies send nurses to facilities across the country on contracts that typically last 8 to 13 weeks. This is the largest segment of the industry, projected at $14.2 billion in 2025. Travel nurses relocate for each assignment and receive compensation packages that include housing stipends and travel reimbursements on top of their hourly pay.
- Per diem agencies fill individual shifts on short notice, usually at facilities near where the nurse already lives. Per diem nurses pick up work day by day or week by week without committing to a long contract. This segment accounts for about $4.5 billion annually.
- Home health agencies place nurses in patients’ homes rather than institutional settings. These nurses provide ongoing care for people recovering from surgery, managing chronic illness, or needing end-of-life support.
- International nursing agencies recruit nurses from other countries to work in the U.S., handling visa sponsorship and credentialing. This is a smaller but growing segment, projected at $1.3 billion in 2025.
Why Hospitals Use Nursing Agencies
Hospitals and other facilities turn to agencies when they can’t fill shifts with their own permanent staff. The reasons vary, but chronic workforce shortages are the main driver. High turnover fueled by demanding work environments, limited career advancement, and inadequate workplace support has left many facilities perpetually short-staffed. The COVID-19 pandemic made this worse, exposing and amplifying staffing problems that already existed.
Beyond the baseline shortage, facilities face predictable surges. Flu season, summer vacation periods, and census fluctuations all create temporary gaps that don’t justify permanent hires. Agency nurses let hospitals scale their workforce up or down without the long-term commitment of recruiting, onboarding, and retaining full-time employees. Given the structural challenges driving the nursing shortage, hospitals will continue relying on agency staff for the foreseeable future.
What Agency Nurses Get Paid
Agency nurses consistently earn more per hour than their permanently employed counterparts. In 2023, travel nurses averaged $2,657 per week compared to $1,341 for permanent staff nurses. That gap has narrowed since the pandemic peak in early 2022, when travel nurse wages were 148% higher than staff nurse pay, but agency work still commands a significant premium.
The compensation isn’t just about the hourly rate. Travel nurses receive pay packages with several components, many of which are tax-free if the nurse maintains a permanent residence (called a “tax home”) separate from their assignment location. A typical package might include $250 per week for meals and incidentals, $2,000 per month for housing, and a $500 travel reimbursement, all non-taxable. Agencies may also offer license reimbursement, retirement plan contributions, and health insurance. Per diem nurses generally earn a higher hourly rate than staff nurses but don’t receive the same housing and travel perks.
The higher pay reflects the trade-offs. Agency nurses give up job stability, workplace relationships, and the institutional knowledge that comes with working in one place long-term. They’re expected to walk into unfamiliar facilities and perform competently with minimal orientation.
The Tradeoff for Facilities
Agency staffing solves an immediate problem but creates longer-term tensions. Research on nursing homes found that facilities classified as high utilizers of agency staff (the top 25%) had significantly higher turnover among their permanent registered nurses, about 7.7 percentage points higher than facilities that relied less on agency labor. Turnover among certified nursing assistants was also 1.9 percentage points higher in heavy-use facilities.
The dynamic is not hard to understand. Permanent staff who see temporary workers earning substantially more for similar work can become demoralized. The added burden of orienting a rotating cast of agency nurses also falls on permanent employees, adding to their workload. Some facilities find themselves in a cycle where agency use drives turnover, which creates more vacancies, which requires more agency use.
On the other hand, facilities with higher occupancy rates and more nursing staff hours per patient consistently showed lower turnover across all staff types. Investing in adequate baseline staffing appears to reduce both the need for agency labor and the churn it can create.
The Industry Right Now
The healthcare staffing market is in a correction period after the pandemic-era boom. Total revenue is projected at $39.4 billion in 2025, a 6% decline from 2024. Travel nursing has been contracting for three years straight as pandemic-driven demand and pay rates have come down. Modest growth of about 2% is expected across the industry in 2026.
The fastest-growing segment is locum tenens staffing (temporary physician placement), projected at $9.6 billion in 2025. International nurse recruitment is also expanding as facilities look beyond domestic supply to address persistent shortages. Agencies that invest in technology platforms and build strong relationships with their clinical workforce are best positioned in what remains a very large market despite the recent pullback.
What This Means If You’re a Nurse
If you’re considering agency work, the core appeal is flexibility and pay. You choose when and where you work, and you’ll almost certainly earn more per hour than a staff position offers. Per diem work suits nurses who want to pick up extra shifts locally without a long-term commitment. Travel nursing suits those willing to relocate temporarily for higher total compensation packages.
The downsides are real. You won’t have the same job security, and benefits like paid time off or tuition reimbursement are less common. You’ll need to adapt quickly to new electronic health record systems, unfamiliar unit layouts, and different team dynamics at each assignment. Some agencies provide malpractice coverage, but many nurses carry their own individual policies as an added layer of protection.
Before signing with any agency, compare the full compensation package rather than just the advertised hourly rate. Ask specifically about housing stipends, tax-free reimbursements, health insurance, cancellation policies, and what happens if an assignment ends early. The differences between agencies can add up to thousands of dollars over a single contract.