What Does Per Diem Mean? - All You Need To Know
In Latin, Per Diem translates to “for each day”. When talking about business expenses or employee classifications, people usually use Per Diem.
Other phrases used include “per diem meal allowance” or “per diem employee”. Today, we will look in more detail at what a per diem employee is as well as the benefits and drawbacks of this type of work.
A Per Diem Employee
If employees work as needed then they are considered per diem employees. These employee schedules will be different each week. Typically, their hours will not be set or guaranteed and they won’t be eligible for any employee benefits that the employer offers.
Per diem employees don’t get paid hourly wages, instead they get paid set rates for the amount of days that they have worked. This amount is decided depending on what the employee’s availability is as well as what the employer needs.
There are some per diem employees that manage to hold a career out of this arrangement due to the fact that they are hired by several employers at a time. However, a lot of other people do per diem work as a side project to add to their income.
Employers sometimes turn to per diem workers in order to cover their primary staff if they are taking holiday or sickness leave.
You will most likely per diem work in education for substitution teacher, healthcare, and even construction work.
Independent Contractor vs. Per Diem
Oftentimes people get per diem workers confused with independent contractors. Let’s take a look at the difference between the two.
The commonality between the two lies with the fact that both of these employees work as they are needed. There are, however, some differences between the two when considering benefits, worker protection, and taxes.
The first difference is that per diem workers are technically considered as employees. The taxes for these employees paychecks are automatically withheld. As well as this, they receive W-2 income.
If a per diem employee works overtime then they are also entitled to overtime pay as well as minimum wage.
Employers of independent contractors do not need to pay FICA taxes for the compensation that they give. AS well as this, the independent contractors themselves do not need to receive the same benefits that the employees do.
Pros and Cons for Employers & Employees
Being a per diem employee can come with its own benefits as well as its own drawbacks. We will look in more detail at the pros and cons of being a per diem employee as well as an employer.
Pros for Employers
The biggest benefit to hiring a per diem employee is that you are able to get the extra help that your workforce needs when you need it. By paying for the help that you need when you require it from a per diem employee, you are able to get the helping hand you need without committing to a long-term contract.
Another benefit is that employers don’t need to give their per diem employees the same benefits as their regular employees. This usually means that you are saving some money.
Cons for Employers
Even though hiring per diem employees comes with its own set of benefits, there are also some drawbacks to this. Per diem employees tend to ask for a higher rate of pay than your regular employees.
On top of this, per diem employees are in charge of their own schedule meaning that they are well within their rights to reject a shift should then need to. This means that employers may feel a little unstable when it comes to hiring a per diem employee.
Pros for Employees
This type of employment offers a wide variety of flexibility, especially in the education, healthcare, and construction industries. Per diem employees are able to work when they see fit and say no to shifts that don’t work for them.
This means that a work-life balance is more achievable for a per diem worker. Per diem employees also have the benefit of choosing who they want to work for.
Lastly, the hourly rates for per diem employees tend to be a lot higher than the wages for full time employees. Sometimes they are even higher than the rates of the part time workers.
Cons for Employees
If you prefer a stable work environment and schedule, then per diem work probably isn’t what you’re looking for. There is a lot of job uncertainty that comes with this lifestyle and it is not uncommon to find yourself in periods without any work.
Some per diem workers also find that they may not end up with enough work to cover paying the bills. Making a career out of this work is definitely a feat.
On top of this, per diem workers don’t benefit from the same employee benefits that the full time employees get. This means that you may find yourself having to pay for health insurance yourself.
Lastly, per diem workers are not eligible for paid vacation leave or paid time off.
Sometimes you may find the term Per Diem being used in reference to travel expenses. This means that it is the amount of money that an employee is allowed to spend per day for expenses such as meals and accommodation.
Employers have to set per diem rates for this purpose due to the limitation that the IRS places for companies to be able to write off their taxes. If an employee needs to pay more than the per diem rate, then they would need to pay for this themselves.
This way of managing travel expenses also means that the company's accounting is much simpler. This is usually arranged by the means of a company credit card, allowing them to use their per diem expenses.
Also read: Cost Of Living By State In USA
Per Diem Rate for the GSA
The GSA (General Services Administration) is an agency that supports other federal agencies. This federal agency is in charge of determining what rates of pay per diem workers will receive.
You will often find that private companies will turn to the GSA in order to establish the benchmark for the rate of pay. This rate is usually the same as the amount that the IRS allows businesses to claim as expenses.
However, companies are allowed to pay their per diem workers more than per diem rate that the GSA establishes if they so wish. Employees must then pay taxes on the excess.
To summarize, when we talk about per diem work we mean that per diem employee works as they are required. These employees tend to be paid a daily amount rather than an hourly rate.
This work can be made into a career, but tends to work best as something you can do on the side to earn some extra cash as work hours are not guaranteed like they are in full time employment.
We hope this information has helped you to understand what per diem employment is and how it works.
It is imperative that employees can access their pay stubs so they can keep them for their own records.