What is Per Diem Employment?

The term “per diem” originates from Latin, meaning “per day.” It refers to work or compensation arrangements structured on a daily basis, rather than the more traditional hourly or salaried formats. In modern contexts, per diem is commonly used to describe two distinct but related concepts:

Work Compensation: Payment for short-term, flexible employment where workers are compensated for each day they work, often at a fixed daily rate.
Travel Allowances: A daily stipend provided to cover travel-related expenses, such as meals, lodging, and incidental costs during business trips.

Per diem employment is tailored for temporary or on-demand roles, making it a popular choice for industries with fluctuating staffing needs or project-based workflows. Employers value its flexibility, while employees appreciate the opportunity for higher pay and schedule control.

Fixed Daily Rates

One of the defining characteristics of per diem employment is its compensation structure. Unlike hourly or salaried roles, per diem employees are paid a predetermined daily rate, which is often higher than the equivalent hourly pay for regular employees. This premium reflects the lack of long-term benefits and job security associated with per diem roles.

In the context of business travel, the per diem daily allowance is calculated based on federal guidelines or company policies to cover essential expenses like lodging and meals, ensuring employees don’t have to pay out-of-pocket or track every receipt.

Common Industries Utilizing Per Diem Workers

Per diem employment is widespread in industries that require flexible staffing to address dynamic or seasonal demands. Examples include:

Healthcare:
- Travel nurses hired during peak periods or emergencies.
- Radiology technicians or other specialists covering for regular staff on leave.
Education:
- Substitute teachers filling in for permanent faculty members.
Construction:
- On-demand labor for specific projects or peak workload times.
Government and Hospitality:
- Temporary event staff or administrative roles.

These industries rely on per diem workers to address gaps in staffing while avoiding the overhead associated with permanent hires.

Differences from Full-Time Employees and Independent Contractors

Per diem employment occupies a middle ground between traditional employees and independent contractors. Key distinctions include:

From Full-Time Employees:
- Benefits: Per diem employees generally do not receive health insurance, retirement plans, paid time off, or other perks provided to full-time staff.
- Protections: Despite the lack of benefits, per diem employees are still classified as employees and thus eligible for protections like minimum wage and overtime laws under labor regulations.
From Independent Contractors:
- Taxation: Per diem workers receive W-2 forms with taxes automatically withheld from their paychecks, unlike independent contractors who are issued 1099-NEC forms and must manage their own taxes.
- Worker Status: Per diem workers are considered employees and may be subject to company policies and supervision, whereas independent contractors operate as self-employed individuals with more autonomy.

‘Pro-Tip’

Leverage Tax Deductions: Track work-related expenses (e.g., travel, equipment) and consult a tax professional to maximize deductions and minimize your taxable income.

How Does Per Diem Work?

Per diem work is structured to provide maximum flexibility for both employers and employees. It involves temporary, on-demand employment where workers are compensated based on the number of days they work or are provided with a daily allowance for travel-related expenses. Below is a detailed breakdown of how this unique employment arrangement operates.

Employment Context

Per diem work typically arises in situations requiring temporary or immediate staffing. Employers hire per diem workers to address specific needs without committing to long-term contracts.

Temporary or As-Needed Hiring:
Workers are employed only when their services are required. This may include filling in for absent staff, covering peak demand periods, or contributing to short-term projects.
Replacements and Project-Based Work:
- Staff Replacements: Per diem workers often step in to cover for full-time or part-time employees on leave (e.g., maternity leave, vacations, sick days).
- Specialized Projects: Companies may hire per diem employees for niche roles, such as managing a temporary construction project or handling seasonal demand in logistics.

Compensation Structure

The per diem pay system is based on a fixed daily rate rather than hourly wages or a salaried income. This structure reflects the unique demands and flexibility of the role.

Fixed Daily Rates:
Employees are compensated with a predetermined daily amount, which often exceeds equivalent hourly pay. This higher rate offsets the absence of traditional benefits like health insurance, paid time off, or retirement plans.
Premium Pay for Specialized Roles:
- Certain industries, such as healthcare and construction, may offer additional premiums for specialized skills or certifications.
- Workers may also earn overtime if their daily hours exceed the legal threshold, depending on the employer’s policies and local labor laws.

Travel Expense Allowance

For per diem workers required to travel, employers often provide a daily stipend to cover work-related expenses. This travel allowance simplifies reimbursement and ensures compliance with tax regulations.

Expense Coverage:
Per diem allowances typically include:
- Meals: Breakfast, lunch, and dinner costs.
- Lodging: Hotel stays or equivalent accommodations.
- Incidentals: Small expenses like tips, laundry, and parking fees.
Accountable Reimbursement Plans:
To ensure tax compliance, employers manage travel allowances through accountable plans. These plans require employees to:
- Submit documentation (e.g., trip purpose, location, and duration).
- Report expenses within a reasonable timeframe, often 60 days.
  Allowances within federal guidelines (e.g., GSA rates in the U.S.) are non-taxable, while excess amounts may be taxed.

Hours and Scheduling

Per diem employment offers unparalleled scheduling flexibility, but it also comes with a lack of predictability in hours and assignments.

No Fixed Schedules:
Workers are called in based on employer needs, which may vary from day to day or week to week. There is no guaranteed number of hours or shifts.
Employer Needs and Worker Availability:
Employers notify workers about available shifts, and workers have the freedom to accept or decline assignments. This dynamic ensures flexibility but can lead to income instability.
Part-Time and Full-Time Hours:
Per diem workers may take on shifts that resemble part-time or full-time hours, depending on the employer’s requirements. For example:
- A nurse may work consecutive per diem shifts that total full-time hours during peak flu season.
- A construction worker might work sporadically on projects as needed.

‘Pro-Tip’

Maintain a Flexible Schedule: Make yourself available during peak demand periods (e.g., flu season in healthcare or holiday rush in logistics) to maximize opportunities and earn premium rates.

Per Diem Employment vs. Independent Contractors

While per diem employees and independent contractors both offer flexibility in the workplace, they differ significantly in terms of employment classification, tax implications, and benefits. Understanding these distinctions is critical for both workers and employers to determine which arrangement is most appropriate for their needs.

Employment Status

Per Diem Employees:
- Per diem employees are classified as employees of the company they work for.
- They are subject to the employer’s policies and may have specific responsibilities and reporting structures.
- Employers must comply with labor laws regarding minimum wage, overtime, and other employee protections.
Independent Contractors:
- Independent contractors are self-employed individuals who provide services under a contract.
- They operate independently, often determining how, when, and where they perform their work.
- Contractors are not subject to the same labor laws as employees and do not have a formal employer-employee relationship.

Taxation

Per Diem Employees:
- Receive a W-2 form at the end of the tax year, detailing their income and withheld taxes.
- Taxes for Social Security, Medicare (FICA), and federal and state income taxes are automatically withheld by the employer.
- Employers contribute to Social Security and Medicare taxes for their per diem employees.
Independent Contractors:
- Receive a 1099-NEC form, reporting income paid for services rendered.
- Responsible for managing their own taxes, including self-employment tax, which covers Social Security and Medicare contributions.
- Contractors must estimate and pay taxes quarterly, unlike employees whose taxes are withheld regularly.

Benefits and Worker Protections

Per Diem Employees:
- Protected by labor laws, including eligibility for minimum wage and overtime pay when applicable.
- May not receive traditional benefits such as health insurance, paid time off, or retirement plans. However, they are entitled to protections against discrimination, wrongful termination, and unsafe working conditions.
Independent Contractors:
- Not entitled to employee benefits or protections, including overtime pay, minimum wage, or unemployment benefits.
- Operate under the terms of a service contract, which may outline payment terms, scope of work, and liability but lacks the broader protections offered to employees.

Practical Examples

Healthcare: Per Diem Nurses vs. Freelance Consultants

Per Diem Nurses:
- Work as employees for a hospital or healthcare facility on an as-needed basis, often filling in for full-time staff during peak periods or staff shortages.
- Receive daily pay rates with taxes withheld, are eligible for overtime, and must adhere to workplace policies and protocols.
- Benefit from predictable scheduling within the limits of their per diem arrangement.
Freelance Healthcare Consultants:
- Operate independently, advising healthcare organizations on matters like compliance, policy implementation, or operational efficiency.
- Paid per contract or project, often at a higher rate due to specialized expertise and self-employment.
- Responsible for their own taxes, benefits, and liability.

Education: Substitute Teachers vs. Self-Employed Tutors

Substitute Teachers:
- Work as per diem employees for schools, filling in for absent teachers.
- Paid a daily rate with taxes withheld and eligible for minimum wage protections.
- Follow school policies and may teach pre-assigned material.
Self-Employed Tutors:
- Provide private tutoring services to students, often on a freelance or contractual basis.
- Negotiate rates directly with clients, manage their own schedules, and are responsible for marketing their services.
- Do not receive benefits or protections but have complete control over their work.

Summary Table: Key Differences Between Per Diem Employees and Independent Contractors

Feature	Per Diem Employees	Independent Contractors
Tax Form	W-2	1099-NEC
Tax Withholding	Employer Withholds	Self-Managed
Minimum Wage & Overtime	Eligible	Not Eligible
Benefits	Limited (varies by employer)	None
Worker Protections	Covered by labor laws	Not Covered
Control over Work	Employer-directed	Self-directed

‘Pro-Tip’

Automate Compliance Monitoring: Use scheduling software that automatically flags potential compliance violations, such as overtime or insufficient rest periods between shifts. This reduces the risk of legal issues and fines.

Benefits of Per Diem Employment

Per diem employment offers unique advantages for both employees and employers. By fostering flexibility and adaptability, this type of arrangement caters to the evolving needs of modern workplaces. Below is a detailed breakdown of the benefits for both parties:

For Employees

Flexibility
- Control Over Schedule: Employees have the freedom to accept or decline assignments, allowing them to work on their own terms.
- Work-Life Balance: This arrangement is particularly attractive to those managing other responsibilities, such as education, caregiving, or personal projects.
- Varied Work Locations: Workers can choose roles in different geographical areas or facilities, depending on availability and interest.
Higher Pay Rates
- Premium Compensation: Per diem employees often receive higher daily rates compared to their hourly or salaried counterparts.
- Pay Reflects Lack of Benefits: Employers offset the absence of traditional benefits, such as health insurance and retirement plans, by offering competitive wages.
Diverse Work Experiences
- Exposure to Various Roles: Employees can work in different environments, industries, or departments, gaining valuable experience across multiple fields.
- Skill Enhancement: This variety allows workers to develop new skills, broaden their expertise, and increase their employability.
Short-Term Commitment
- No Long-Term Obligations: Employees can take on roles without committing to a full-time schedule or permanent employment.
- Perfect for Transitional Periods: Ideal for individuals in-between jobs, testing out industries, or balancing other life changes.

For Employers

Reduced Long-Term Commitment
- No Benefits Obligations: Employers are not required to provide health insurance, paid time off, retirement plans, or other perks typically associated with full-time employment.
- Lower Administrative Costs: Simplifies payroll and benefits administration, saving time and resources.
Scalability
- Flexible Staffing: Employers can adjust the size of their workforce based on seasonal, project-based, or immediate needs without the burden of permanent hires.
- Crisis Management: Per diem workers are ideal for addressing last-minute staffing shortages, such as covering sick leaves or handling peak demand periods.
Streamlined Reimbursements
- Simplified Expense Management: Employers provide fixed daily allowances or payments, reducing the complexity of tracking individual expenses.
- Cost Predictability: A predetermined per diem rate allows for more accurate budgeting and financial planning.
- Compliance Assurance: Fixed rates aligned with federal or company policies ensure adherence to tax and labor laws.

‘Pro-Tip’

Create a Personal Benefits Fund: Since per diem work rarely offers benefits, allocate a portion of your income to private health insurance, retirement savings, and emergency funds.

Challenges of Per Diem Employment

While per diem employment provides flexibility and adaptability, it also comes with notable challenges for both employees and employers. Understanding these obstacles is crucial for individuals considering this work arrangement and for companies relying on per diem staffing to meet their needs.

For Employees

Lack of Stability
- Inconsistent Hours: Per diem workers are employed on an as-needed basis, which means their work hours can fluctuate significantly from week to week. Some weeks may offer full-time equivalent hours, while others may provide no work at all.
- Unpredictable Income: Without guaranteed hours, workers face irregular paychecks, making it difficult to budget or plan for long-term financial goals. This instability may not suit individuals relying on a steady income.
Limited Benefits
- No Access to Traditional Benefits: Unlike full-time employees, per diem workers typically do not receive health insurance, retirement plans, or paid time off (PTO).
- Financial Burden: The lack of employer-sponsored benefits often forces per diem employees to seek costly private insurance or forego retirement contributions, impacting their overall financial well-being.
Tax Implications
- Reimbursements Can Be Taxable: If per diem reimbursements for travel expenses exceed federal rates (e.g., GSA guidelines in the U.S.), the excess amount is considered taxable income.
- Documentation Requirements: Workers must maintain detailed records of expenses, including dates, locations, and purposes of travel, to comply with tax regulations. Failing to provide adequate documentation may result in additional tax liability.
- Self-Employment-Like Tax Burdens: Although taxes are withheld, the variability of income and additional tax considerations can resemble the challenges faced by independent contractors.

For Employers

Higher Upfront Costs
- Premium Pay Rates: Per diem workers often command higher daily rates compared to regular employees, as their pay compensates for the lack of benefits and stability.
- Budget Constraints: These elevated costs can strain budgets, especially for businesses with frequent staffing shortages or high per diem utilization.
Worker Availability
- Scheduling Challenges: Per diem employees prioritize flexibility, which means they may not always be available when needed. Employers might struggle to fill last-minute shifts or meet urgent staffing demands.
- Reliance on a Pool of Workers: To maintain flexibility, companies must often manage a larger pool of per diem staff, which increases administrative complexity.
Variable Work Quality
- Temporary Nature of Roles: Since per diem workers are not deeply embedded within the organization, they may lack the same level of commitment or engagement as full-time staff.
- Learning Curve: Frequent changes in staff can disrupt workflow, as new workers may require time to familiarize themselves with company processes and expectations.
- Performance Inconsistencies: Employers risk variability in performance and dedication, which can impact overall team cohesion and productivity.

Navigating the Challenges

Both employees and employers can mitigate these challenges with proactive measures:

For Employees:
- Build a diverse portfolio of work opportunities to reduce reliance on a single employer.
- Invest in financial planning and private benefits, such as health insurance or retirement savings.
- Maintain accurate records of expenses to avoid unexpected tax liabilities.
For Employers:
- Develop clear scheduling systems to manage per diem availability effectively.
- Offer competitive daily rates and incentives to attract reliable workers.
- Provide thorough training to ensure per diem employees can quickly adapt to company standards and contribute effectively.

Per Diem Statistics

Question	Answer
How does GSA set boundary lines for where per diem rates apply?	GSA sets rates based on locality and federal law (5 U.S.C § 5702), establishing standard rates for most counties. Exceptions may include non-standard areas based on agency requests, with ZIP or FIPS codes guiding boundaries.
How can a CONUS non-standard area (NSA) receive a special review?	Federal Agency Travel Managers must submit requests detailing geographical areas, hotel data, and usage statistics. Requests postmarked by 12/31 are eligible for current year reviews.
How can I request the establishment of a new NSA?	Follow the same process as NSA special review requests. Requests received after 3/31 will not be included in the following fiscal year’s cycle.
What if a city is not listed on the CONUS Per Diem website?	Check the county using the Census Geocoder. If the city and county are not listed, the area receives the standard CONUS rate.
Can hotels refuse to honor the per diem rate?	Yes, honoring per diem rates is a business decision for each property. Hotels may choose to offer or deny the rates.
Is the hotel’s GOV rate the same as the federal per diem rate?	No, the GOV rate may differ. Approval for actual expenses is required if the GOV rate exceeds federal per diem rates.
Are lodging taxes included in the CONUS per diem rate?	No, lodging taxes are reimbursable as a miscellaneous expense but are not included in the per diem rate.
Are taxes and gratuities included in M&IE rates?	Yes, M&IE rates include taxes and tips.
What is considered an incidental expense?	Fees and tips given to porters, baggage carriers, hotel staff, and ship staff.
How often is an M&IE study conducted?	Traditionally every three to five years. Since FY 2016, GSA reviews rates every three years.
What is the M&IE reimbursement rate for travel days?	Federal employees are reimbursed at 75% of the total M&IE rate for the first and last travel days.
Can I mix lodging and M&IE rates?	No, federal regulations do not allow “mix and match” reimbursements. Lodging and M&IE are separate categories.
Do I need to provide receipts?	Receipts are required for lodging and authorized expenses over $75 unless an acceptable reason is provided.
What if there are no hotels available at per diem?	Agencies can authorize actual expense allowances up to 300% of the per diem rate. Use FedRooms.com to confirm availability first.
Do I receive meal reimbursement for day travel?	Yes, for travel longer than 12 hours, travelers are entitled to 75% of the M&IE rate.
How much per diem can I pay a contractor?	Per diem rates apply only to federal employees. Contractors should check their contracts for travel allowances.
How much can a trucker deduct for meals?	Truck-related deductions are outside GSA policies. Refer to the Department of Transportation or IRS for guidance.

Data Retrieved From: https://www.gsa.gov/

‘Pro-Tip’

Use Scheduling Software: Platforms like TimeTrex can simplify assigning shifts, tracking availability, and ensuring compliance with labor laws.

Tax Implications of Per Diem Work

Per diem work has specific tax implications for both employees and employers, primarily concerning reimbursements for travel expenses and compliance with federal guidelines. Understanding these implications is essential to avoid unexpected tax liabilities and to maximize the benefits of the per diem system.

For Employees

Non-Taxable Reimbursements
- Within Federal Guidelines:
  Per diem reimbursements for travel expenses—such as meals, lodging, and incidental costs—are generally non-taxable if they fall within federal limits set by the General Services Administration (GSA) or the U.S. Department of State for international travel.
- Accountable Plans:
  Employers typically use accountable reimbursement plans, which require employees to document their expenses and report them promptly. Under these plans, compliant per diem payments are excluded from the employee’s taxable income.
Taxable Excess Payments
- Above Federal Limits:
  If reimbursements exceed federal per diem rates, the excess amount is considered taxable income. For example, if the GSA rate for lodging is $150 per day but the employer provides $200, the additional $50 is taxable and must be reported.
- Unaccounted Reimbursements:
  Payments made without proper documentation, such as an expense report detailing the trip’s purpose, location, and duration, are also taxable.
- Reported on W-2 Forms:
  Any taxable per diem payments are included in the employee’s W-2 form, increasing the individual’s taxable income for the year.
Record-Keeping Requirements
- Employees must maintain detailed records of their travel expenses, including receipts and logs of dates, times, locations, and the business purpose of the trip.
- Documentation ensures compliance with IRS regulations and protects against unnecessary taxation.

For Employers

Tax Deductibility of Payments
- Under Accountable Plans:
  Per diem payments made under accountable plans are tax-deductible for employers as a business expense.
- Documentation Requirements:
  To qualify, employers must maintain clear records of employee travel, including expense reports and supporting documentation.
Compliance with Federal Guidelines
- IRS and GSA Standards:
  Employers must adhere to federal per diem rates established by the IRS or GSA to ensure that reimbursements remain tax-deductible and non-taxable for employees.
- Excess Payments:
  If per diem amounts exceed these limits, the excess must be treated as taxable wages and subject to withholding taxes. Failure to comply with these guidelines can result in additional taxation and penalties.
Simplified Administration
- By adhering to federal guidelines and using fixed per diem rates, employers can streamline expense management and reduce the administrative burden of processing individual receipts.

Key Considerations

Employees:
To minimize tax liability, ensure that per diem reimbursements are within federal guidelines and submit expense reports promptly with all required details.
Employers:
Adopt accountable reimbursement plans and align payments with IRS or GSA standards to maintain tax deductibility and ensure compliance with labor laws.

2025 Per Diem Update Highlights

Category	Details
Scope of Per Diem Rates	Per diem rates apply to the continental United States (CONUS), which includes the 48 contiguous states and the District of Columbia. These rates reimburse federal employees for official travel expenses.
Components of Per Diem Rates	Rates include a maximum lodging allowance and a meals and incidental expenses (M&IE) component. The standard CONUS rate is $178 ($110 lodging, $68 M&IE).
Non-Standard Areas (NSAs)	There are 296 NSAs with rates higher than the standard rate for FY 2025. NSA rates reflect higher costs in these areas.
Lodging Rate Methodology	Lodging rates are based on Average Daily Rate (ADR) data, which is calculated by dividing a property's room rental revenue by the number of rooms rented. ADR provides an accurate average lodging rate for each area.
Standard Rate Changes for FY 2025	The standard CONUS lodging rate increased from $107 to $110. The M&IE rate increased from $59 to $68.
M&IE Rate Tiers for NSAs	Revised from $59-$79 in FY 2024 to $68-$92 in FY 2025.
Locations Moved to Standard Rate	Ft. Wayne, IN (Allen County) Canton, OH (Stark County) Mentor, OH (Lake County) East Greenwich / Warwick, RI (Kent County) Waco, TX (McLennan County) Wisconsin Dells, WI (Columbia County)
Actual Expense Reimbursement	If per diem rates are insufficient, the Federal Travel Regulation (FTR) allows agencies to reimburse up to 300% of the maximum per diem rate. Refer to FTR § § 301-11.300 through 11.306 for details.

Data Retrieved From: https://www.gsa.gov/

‘Pro-Tip’

Standardize Expense Policies: Set clear guidelines for travel reimbursements and per diem allowances to avoid confusion or disputes with workers.

Common Roles and Applications of Per Diem Employment

Per diem employment spans a variety of industries and roles, offering flexibility for employees and scalability for employers. These roles often address temporary, seasonal, or project-based needs, making per diem employment a valuable staffing solution in numerous fields. Additionally, per diem pay structures and allowances vary by region, reflecting the cost of living and specific requirements.

Industries and Roles

Healthcare
- Travel Nurses:
  Travel nurses are one of the most recognizable per diem roles. They work in different healthcare facilities, often stepping in during staffing shortages or peak demand periods, such as flu season or public health emergencies.
- Radiology Technicians:
  Radiology techs may be hired on a per diem basis to operate diagnostic imaging equipment during high-demand periods or to cover regular staff absences.
- Key Characteristics:
  - High pay rates due to specialized skills.
  - Flexibility to work in diverse locations and facilities.
Education
- Substitute Teachers:
  Schools often rely on per diem substitute teachers to fill in for full-time educators who are on leave or absent. These teachers are responsible for maintaining classroom continuity, delivering lesson plans, and managing student activities.
- Tutors and Support Staff:
  Some per diem roles in education also extend to tutoring or providing support for special education programs.
- Key Characteristics:
  - Short-term commitments, often on a day-by-day basis.
  - Opportunities to explore different teaching environments.
Logistics
- Temporary Delivery Drivers:
  The logistics industry frequently uses per diem workers during peak seasons, such as the holiday rush, to ensure timely delivery of goods.
- Warehouse Support:
  Workers may also assist in warehouses with tasks like sorting, packing, and inventory management during high-demand periods.
- Key Characteristics:
  - Flexible shifts based on immediate operational needs.
  - Opportunities for supplementary income during busy seasons.
Media
- Freelance Reporters:
  Media outlets often hire per diem reporters to cover breaking news, special events, or elections. These roles may involve conducting interviews, writing articles, or capturing photos and videos for immediate publication.
- Content Producers:
  Media professionals in roles like video editing or social media management may also work on a per diem basis to meet project deadlines or assist with special campaigns.
- Key Characteristics:
  - Creative flexibility to work on unique assignments.
  - Opportunities to build portfolios and professional networks.
Construction
- On-Demand Labor:
  Per diem workers are essential in construction projects that require additional manpower during peak phases, such as framing, roofing, or finishing.
- Specialized Skills:
  Roles may include skilled trades like electricians, plumbers, or heavy equipment operators hired for specific project durations.
- Key Characteristics:
  - Short-term engagement aligned with project timelines.
  - Higher rates for specialized skills or certifications.

Regional and International Variations

Domestic Rates Set by the GSA
- The General Services Administration (GSA) in the United States establishes per diem rates for travel-related expenses, such as lodging, meals, and incidentals.
- Rates vary by city and are updated annually to reflect changes in the cost of living. For example:
  - High-cost cities like New York or San Francisco have higher per diem rates to accommodate local expenses.
  - Rural areas may have significantly lower rates.
- Applications:
  Employers often use GSA rates to determine fair and compliant allowances for domestic travel.
International Allowances Managed by the U.S. Department of State
- For international assignments, per diem allowances are managed by the U.S. Department of State and are tailored to the specific country and city of travel.
- Factors influencing these rates include exchange rates, local cost of living, and geopolitical conditions.
- Examples:
  - London, UK: Higher allowances due to the city’s elevated cost of living.
  - Nairobi, Kenya: Lower rates adjusted for regional standards.
- Applications:
  These rates ensure that employees traveling abroad for business are adequately compensated for their expenses while maintaining compliance with tax and reporting requirements.

‘Pro-Tip’

Audit for Compliance: Ensure all per diem payments comply with local labor laws, especially regarding overtime, minimum wage, and tax reporting. Non-compliance can lead to penalties.

Per Diem Rates and Policies

Per diem rates and policies establish the framework for compensating employees for work or reimbursing travel-related expenses. These rates ensure fairness, compliance with federal guidelines, and consistency in managing employee reimbursements. Below is a detailed exploration of how per diem rates are set, how employers adjust them, and what expenses they cover.

How Rates Are Set

Per diem rates are influenced by several factors, ensuring they reflect the actual costs employees might incur during their work or business travel.

Key Factors Impacting Rates:
- Location:
  Rates vary significantly by location due to differences in cost of living. For example, cities like New York or San Francisco typically have higher per diem rates compared to smaller or rural areas.
- Cost of Living:
  High-cost regions receive higher allowances to cover increased expenses for meals, lodging, and incidentals.
- Industry Standards:
  Some industries, such as healthcare or media, may set higher per diem rates to attract skilled professionals for short-term roles.
Federal Benchmarks:
- Domestic Travel:
  In the United States, the General Services Administration (GSA) establishes per diem rates for federal employees and businesses using federal benchmarks. These rates are updated annually and vary by city and state.
- International Travel:
  For international assignments, the U.S. Department of State provides per diem rates based on the destination’s cost of living, exchange rates, and regional factors.
- High-Low Method:
  Some employers use the IRS “high-low” method, which sets a single higher rate for high-cost locations and a lower rate for all other areas.

Employer-Specific Adjustments

While federal guidelines provide a standardized foundation, many employers tailor per diem rates to align with their specific business needs.

Corporate Policy Adaptations:
- Employers often adjust federal rates to match their budgets or operational requirements.
- For example, a company may provide a flat rate for all domestic travel rather than varying rates by location for simplicity.
Urban vs. Rural Allowances:
- Urban areas generally have higher per diem rates due to increased lodging and meal costs.
- Rural areas or low-cost regions receive lower allowances to reflect local economic conditions.
- Example:
  - New York City: $179 per day (lodging) and $74 (meals and incidentals). Values vary by month.
  - Boise, Idaho: $126 per day (lodging) and $59 (meals and incidentals). Values vary by month.
  - To find up to date values see: https://www.gsa.gov/
Custom Adjustments for Projects or Roles:
- Employers may offer premium per diem rates for specialized roles or challenging assignments to attract skilled professionals.

Expense Coverage

Per diem rates are designed to simplify expense tracking by covering common costs employees incur during work-related travel.

Meals:
- Includes breakfast, lunch, and dinner costs. Federal rates often specify allocations for each meal, ensuring employees can budget appropriately.
- Alcoholic beverages are typically excluded from reimbursement.
Lodging:
- Covers hotel stays or equivalent accommodations.
- Employers often establish partnerships with specific hotel chains to manage costs and simplify booking.
Incidentals:
- Includes smaller expenses like gratuities, parking fees, laundry services, and other minor costs incurred during travel.
- Some policies provide a lump sum for incidentals, while others require itemized reporting.

‘Pro-Tip’

Evaluate Long-Term Potential: Use per diem arrangements to assess a worker’s fit before offering them a full-time role. This approach reduces the risks of bad hires while maintaining operational flexibility.

Per Diem Pay Calculation

Per diem pay is straightforward in its calculation but can vary depending on several factors, including the industry, location, and the specific needs of the employer. Understanding how per diem pay is determined and managed helps employees and employers alike ensure fairness, accuracy, and compliance.

Pay Example

The simplest way to calculate per diem pay is to multiply the daily rate by the number of days worked. For example:

Scenario:
A per diem worker is hired to work five days in a week with a daily rate of $150.
Calculation:
Pay for the week = Daily Rate × Number of Days Worked
Pay for the week = 150 × 5 = 750
Outcome:
The worker earns $750 for that week.

This straightforward calculation applies whether the per diem payment is for work performed or a travel allowance. However, variability in daily rates and schedules may result in fluctuating income, which is common for per diem employees.

Factors Influencing Rates

The daily rate for per diem employees depends on several factors that reflect the nature of the job, industry standards, and regional cost considerations.

Industry Demand:
- Roles in high-demand industries often offer higher per diem rates. For example:
  - Healthcare: Travel nurses may earn daily rates above $300 due to the critical need for their skills.
  - Media: Freelance reporters may receive competitive pay for covering major events.
Job Complexity:
- Positions requiring specialized expertise or certifications tend to have higher rates.
- Example: A radiology technician hired on a per diem basis for a specialized procedure may earn significantly more than a general administrative per diem worker.
Geographical Location:
- Urban areas and regions with a higher cost of living offer elevated rates to offset the increased expenses.
- Rural areas, conversely, may have lower rates.
- Example:
  - A per diem nurse in New York City may earn a daily rate of $350, while the same role in a rural area might pay $200.
Seasonal or Project-Based Demand:
- Employers may adjust rates during peak seasons or for time-sensitive projects, such as construction deadlines or healthcare surges.

Tools for Management

To ensure accurate and fair calculations of per diem pay, employers use various tools and guidelines tailored to their operational needs.

GSA Calculators:
- Employers often rely on the General Services Administration (GSA) online calculators to determine daily allowances for lodging, meals, and incidental expenses during travel.
- The GSA tool provides location-specific rates, ensuring consistency with federal standards.
Custom Policies:
- Companies may establish their own per diem policies that adapt GSA or IRS guidelines to better suit their business models.
- For example:
  - A corporation might offer a flat rate for all domestic travel, simplifying administration.
  - A healthcare provider might use tiered rates based on the skill level or certification of the worker.
Expense Tracking Software:
- Employers use digital tools to manage per diem payments, streamline reimbursement processes, and track compliance. Examples include integrated payroll systems or apps that log workdays and travel expenses in real time.

‘Pro-Tip’

Cross-Train Per Diem Staff: For industries with varied tasks, train per diem employees in multiple roles. For example, in healthcare, a nurse trained in multiple departments can fill more shifts.

Is Per Diem Work Right for You?

Per diem work offers unique advantages but is not suitable for everyone. Whether you are an employee seeking flexibility or an employer managing staffing challenges, understanding the suitability of per diem employment is critical. Here’s a detailed look at how to determine if it aligns with your needs.

For Employees

Per diem work is an attractive option for individuals who value autonomy, supplemental income, and opportunities for growth. It is ideal for:

Those Prioritizing Flexibility
- Control Over Schedule:
  Per diem employees can accept or decline assignments based on their availability. This level of control is perfect for individuals balancing personal commitments, education, caregiving, or other part-time jobs.
- Varied Work Environments:
  The opportunity to work in different locations or organizations offers variety, which can be refreshing for those who dislike routine.
People Seeking Supplemental Income
- Secondary Income Stream:
  Per diem work can complement a full-time or part-time job, providing an additional source of income without the long-term commitment.
- Higher Pay Rates:
  Competitive daily rates often mean workers can earn more in a shorter time frame compared to traditional hourly roles.
Individuals Focused on Skill Development
- Gaining Diverse Experiences:
  Per diem roles often allow employees to work across various industries or departments, providing exposure to different practices and challenges.
- Building a Professional Network:
  Working in multiple organizations helps employees expand their connections, which can lead to future job opportunities.
- Testing Career Paths:
  For those uncertain about committing to a specific industry or job role, per diem work offers a low-risk way to explore different options before making a long-term decision.

Who Might Find It Challenging?

Individuals who prefer a predictable schedule and income.
Workers who rely on employer-provided benefits like health insurance or paid time off.

For Employers

Per diem employment is a practical solution for organizations that need staffing flexibility to adapt to changing demands. It is best suited for:

Organizations with Fluctuating Staffing Needs
- Seasonal Businesses:
  Companies experiencing peak seasons, such as retail during holidays or agriculture during harvest, can benefit from hiring per diem workers to meet temporary spikes in demand.
- Healthcare Providers:
  Hospitals and clinics often use per diem staff, such as travel nurses or on-call technicians, to fill shifts during emergencies or when regular staff are unavailable.
Businesses with Project-Based Workflows
- Construction and Engineering Projects:
  Per diem workers can be hired for specific tasks or phases of a project, reducing overhead while ensuring timely completion.
- Media and Event Management:
  Freelancers and temporary staff are ideal for handling events, launches, or media campaigns that require specialized skills for a short duration.
Companies Looking to Reduce Long-Term Commitments
- Cost-Effective Staffing:
  Per diem employment eliminates the need for long-term benefit commitments like health insurance, retirement contributions, or paid leave.
- Scalability:
  Employers can quickly scale their workforce up or down as needed, allowing for agile responses to market changes or sudden increases in demand.

Who Might Struggle with Per Diem Staffing?

Businesses requiring consistent team cohesion and long-term employee engagement.
Employers who cannot afford the higher daily rates associated with per diem roles.

‘Pro-Tip’

Simplify Payroll Processes: Use dedicated payroll tools to handle per diem payments efficiently, ensuring accuracy in tax withholdings, overtime pay, and travel reimbursements.

Frequently Asked Questions (FAQ) About Per Diem Employment

How does per diem work affect unemployment benefits?

Per diem employment can impact eligibility for unemployment benefits since income earned from per diem work is considered when calculating unemployment compensation.

For Employees:
- If your per diem income exceeds a certain threshold, your unemployment benefits may be reduced or temporarily paused.
- However, if you have weeks with no per diem assignments, you may still qualify for benefits.
For Employers:
- Employers may still pay into unemployment insurance for per diem employees, depending on local labor laws and the classification of the worker.

Are per diem employees eligible for workers' compensation?

Yes, per diem employees are generally covered by workers’ compensation laws if they are classified as employees rather than independent contractors.

Key Considerations:
- Eligibility depends on the nature of the work, workplace policies, and local labor regulations.
- Employers are required to provide workers’ compensation for per diem employees injured while performing job-related duties.

Can per diem employees negotiate their daily rates?

Yes, negotiating daily rates is possible, especially in industries with high demand for skilled professionals like healthcare or media.

Tips for Employees:
- Highlight your experience, certifications, and availability to justify a higher rate.
- Research industry standards and federal per diem rates to support your request.
Tips for Employers:
- Be prepared to offer competitive rates, especially if the role requires specialized skills or involves high-demand periods.

How do employers track per diem hours and assignments?

Employers use various tools to manage and track per diem assignments effectively:

Time Tracking Software:
- Tools like TimeTrex are used to log hours and assignments in real time.
- These tools ensure accurate pay calculations and simplify administrative tasks.
Scheduling Platforms:
- Employers may use platforms like Deputy or When I Work to assign shifts and monitor worker availability.

Can per diem employees transition to full-time roles?

Yes, many organizations offer opportunities for per diem employees to transition to full-time positions.

For Employees:
- Demonstrate reliability, skill, and a willingness to take on additional responsibilities to increase your chances of being offered a permanent role.
- Communicate your interest in a full-time position with your employer.
For Employers:
- Per diem arrangements can serve as a trial period to evaluate a worker’s fit before offering a long-term role.

Are there legal restrictions on how many hours a per diem employee can work?

No, there are no specific federal restrictions on the number of hours a per diem employee can work, but some considerations apply:

Overtime Pay:
- If a per diem employee works more than 40 hours a week, they are entitled to overtime pay under federal labor laws.
State Regulations:
- Certain states may have additional requirements for maximum hours or overtime pay.

Can per diem employees hold multiple jobs?

Yes, per diem employees are free to work for multiple employers simultaneously, as long as scheduling conflicts are avoided.

For Employees:
- Maintain clear communication with each employer about your availability.
- Be cautious about overcommitting, which could lead to burnout.
For Employers:
- Understand that per diem workers may not prioritize your shifts over other commitments.

How are per diem workers protected against workplace discrimination?

Per diem employees are entitled to the same protections against discrimination as full-time employees under federal and state laws.

Key Protections:
- Employers cannot discriminate based on race, gender, religion, age, disability, or other protected categories.
- Complaints can be filed with the Equal Employment Opportunity Commission (EEOC) if discrimination occurs.

Can per diem employees be terminated without notice?

Yes, in most cases, per diem employees can be terminated without notice since their employment is typically at-will.

Exceptions:
- If a contract specifies terms for termination, employers must adhere to those conditions.
- Local labor laws may also impose additional requirements for notice or severance.

What happens if a per diem employee declines an assignment?

Per diem employees are generally not penalized for declining assignments unless their contract specifies otherwise.

For Employees:
- Declining too many shifts may reduce future opportunities with the employer.
- Keep open communication with employers to maintain a good working relationship.
For Employers:
- Maintain a pool of per diem workers to ensure adequate coverage in case someone declines an assignment.

Are per diem workers required to provide their own equipment or tools?

It depends on the industry and the employer’s policies.

Employer-Supplied Tools:
- Healthcare and construction industries typically provide necessary tools and equipment.
Worker-Supplied Tools:
- Freelancers or media professionals may be required to use their own equipment, such as cameras or laptops, especially if they work in multiple locations.

How do international per diem policies differ from domestic ones?

International per diem policies are often more complex due to variations in currency exchange rates, tax laws, and cost-of-living adjustments.

Key Differences:
- International per diem rates are often higher than domestic rates due to additional expenses like visas, transportation, and higher living costs in certain countries.
- Employers may provide separate stipends for unique international costs, such as language training or cultural adjustments.

Disclaimer: The content provided on this webpage is for informational purposes only and is not intended to be a substitute for professional advice. While we strive to ensure the accuracy and timeliness of the information presented here, the details may change over time or vary in different jurisdictions. Therefore, we do not guarantee the completeness, reliability, or absolute accuracy of this information. The information on this page should not be used as a basis for making legal, financial, or any other key decisions. We strongly advise consulting with a qualified professional or expert in the relevant field for specific advice, guidance, or services. By using this webpage, you acknowledge that the information is offered “as is” and that we are not liable for any errors, omissions, or inaccuracies in the content, nor for any actions taken based on the information provided. We shall not be held liable for any direct, indirect, incidental, consequential, or punitive damages arising out of your access to, use of, or reliance on any content on this page.

Share the Post:

About The Author

Time To Clock-In

Start your 30-day free trial!

Experience the Ultimate Workforce Solution and Revolutionize Your Business Today

Saving businesses time and money through better workforce management since 2003.

What is Per Diem Employment?