Managing per diem employees properly ensures compliance with labor laws, reduces legal risks, and improves employee relations. As a small business owner, you must manage your per diem employees correctly to maintain fairness, productivity, and legal compliance in the workplace.
‘Per diem’ meaning: Understanding the term
‘Per diem’ comes from Latin and simply means ‘for each day’. In business terms, this means workers get paid each day for the hours they work without fixed schedules or benefits.
Per diem employees are the ones who work when they’re needed. They don’t have set hours but step in when their employers need them. This setup is great for businesses that run non-stop and need staff available all the time.
For example, hospitals often hire per diem nurses to cover night shifts, weekends, and holidays when staffing needs are higher. Similarly, companies may maintain a pool of per diem employees to fill in when regular staff members are absent due to sickness or taking paid time off.
Per diem employees typically work fewer hours than full-time staff members and don’t receive the same benefits package. However, this arrangement offers flexibility in scheduling, allowing per diem workers to adapt their hours to suit their availability and other commitments.
Let’s understand this better with an example.
Meet Rachel, a small business owner who runs a boutique graphic design studio, and her latest project requires some extra hands on deck.
However, she’s hesitant to hire full-time employees due to the fluctuating nature of her workload and the associated overhead costs of salaries, benefits, and taxes. Freelancers or contractors are also not ideal for this project, as she wants a more consistent team presence and involvement.
Feeling overwhelmed and unsure what to do, Rachel starts asking around for advice. She talks to fellow business owners in her network and does some online research to explore her options. That’s when she stumbles upon the concept of per diem employees.
Rachel learns that per diem employees can provide the flexibility she needs for her project without the long-term commitment of hiring full-time staff. They can work on an as-needed basis, stepping in when her workload is heavy and scaling back when things quiet down.
Excited by this previously unexplored solution, Rachel decides to try it.
However, since this is Rachel’s first time with this kind of employee arrangement, she may not have considered certain aspects of hiring per diem employees. For instance, she may not know that she must update her company handbook to include policies for per diem employees, clarifying expectations and outlining the terms of their employment.
If you find yourself in a similar situation, fret not! This blog will provide you with tips to ensure you’re treating per diem employees the right way.
Is per diem the same as independent contractor or freelancer?
People often confuse per diem employees with contractors and freelancers; however, that’s not the case. Per diem employees are hired on an as-needed basis for specific shifts or periods, receiving hourly pay and some benefits.
In contrast, freelancers and contractors work independently on temporary projects, setting their own rates and managing their own taxes and benefits. While per diem employees are closely tied to the employer’s organization, freelancers and contractors operate with greater autonomy in managing their work and business affairs.
How to manage per diem employees correctly
Following are some tips that can help you can manage your per diem workforce more effectively, ensuring that both the company and the employees know their responsibilities and the potential consequences of not meeting them.
1. Understand what a per diem employee really is
Misclassifying employees can lead to legal troubles for employers, so it’s important to get it right to avoid potential issues down the road.
Sometimes, employers label workers as per diem when they’re actually working regular hours (8 hours a day or 40 hours a week). This can be a problem if it’s done with the intention to avoid giving benefits.
To avoid this mistake, keep an eye on how much your per diem employees are working. If they’re working a regular schedule, they might not be per diem. Therefore, you should consider reviewing their hours every few months. If they’re working a consistent schedule, they might need to be classified as full-time employees who are eligible for full-time benefits.
2. Treat per diem employees fairly, just like regular ones
Per diem employees should get yearly evaluations and, if needed, face the same rules as other workers when it comes to discipline. If your company doesn’t have clear rules for discipline in your handbook, you can grab a template online to update it.
Make sure your performance reviews cover per diem workers as well. Keep track of how they’re doing, just like you do for regular employees. This helps you have a record of their work that might come in handy later.
For example, if a per diem worker consistently shows up late, you’ll have records to back up any decisions you need to make about their employment.
3. Write everything down
Keeping good records is key when you have per diem employees. It can save you from headaches if they ever need to file for unemployment benefits.
Make sure to note any changes in their shifts, like last-minute cancellations or if they turn down work. It’s also important to get written notices when they decide to quit and to document when regular employees switch to per diem status.
Good documentation doesn’t just help with unemployment claims; it can also be crucial in legal matters. Clear records can make a big difference if there’s ever a disagreement about what happened in a conflict.
4. Set clear rules for per diem workers
Your company handbook should spell out what’s expected from per diem employees.
For example, make it clear that if a per diem worker doesn’t pick up shifts for a while, it’s considered their choice to quit. Typically, this is after around 60 to 90 days without work. If they later try to claim unemployment, they’ll need to prove why they quit. If there’s no good reason, they might not get benefits.
This means that if a per diem worker doesn’t pick up any shifts for three months and then tries to claim unemployment, they might not succeed if they can’t show a good reason for not working.
Another instance could be that per diem workers should notify their supervisors at least 24 hours in advance if they cannot accept an assigned shift. Consistent last-minute cancellations or no-shows can lead to removal from the per diem roster.
So make sure to specify the procedures for accepting and declining shifts. This helps ensure that staffing levels are reliable and that all employees understand the importance of their commitment to scheduled shifts.
5. Make sure per diem workers get time off
Per diem employees, though typically don’t receive benefits, should still have access to paid time off (PTO) and sick days. The laws on this matter vary by location, but in most states, per diem workers are entitled to some form of paid time off.
To ensure your per diem employees receive the appropriate PTO, establish a clear policy specifically addressing time off and sick leave. Familiarize yourself with the laws in your city and state to ensure your policy complies with regulations. Encourage your per diem workers to keep track of their work hours and time off to assist your company in adhering to the law.
If a per diem worker falls ill and requires time off, they should be able to take it without losing pay. Having transparent rules in place clarifies what is permissible, benefiting both you and the employee.
6. Recognition, feedback, and performance reviews
Recognizing the contributions of per diem employees is essential for fostering a positive work environment. To demonstrate appreciation for their efforts and encourage continued dedication, you can implement recognition programs or incentives for exceptional performance.
Additionally, providing regular feedback on their work allows continuous improvement and ensures they feel valued and accomplished within the organization.
Alongside recognition and feedback, conducting periodic performance reviews is crucial for assessing the progress and contributions of per diem employees, as you would for regular employees.
These reviews provide an opportunity to discuss strengths, areas for development, and any adjustments needed to meet job expectations. By offering constructive feedback and acknowledging achievements during these reviews, per diem employees are motivated to excel in their roles and contribute effectively to your team’s collective success.
7. Create schedules for each employee
To keep track of your per diem workers’ hours, it’s a good idea to make a schedule for each of them. Even though their hours might vary, having a schedule helps them know when they’re supposed to work.
This reduces the chances of them being late or not showing up. Plus, having schedules helps you keep tabs on their hours, which is important for record-keeping and making sure they don’t work too much.
You can use a simple spreadsheet or calendar software to create these schedules. Just make sure to share them with your per diem workers before their shifts so they know when to show up.
8. Consider using management software
Managing per diem workers can be a bit tricky. For instance, one potential problem with per diem employees is managing their compensation accurately and ensuring compliance with tax regulations. Keeping track of their varying hours and rates can be complex, and any errors could result in costly fines or legal issues for your business.
So it might be helpful to use management software to create and keep track of schedules. It’s also handy for storing all the important documents related to your per diem workers, keeping everything organized for each of your employees.
Take some time to research different management software options to find one that fits your company’s needs and works well for your per diem employees.
The bottom line
While per diem employees offer the flexibility that many small businesses need, managing them comes with specific responsibilities, including payroll and compliance. Improper management of such employees can put your business at risk by negatively impacting fairness, productivity, and adherence to labor laws.
When faced with financial challenges related to managing per diem employees, CoCountant can assist you in managing your per diem employees’ compensation, integrating them into your payroll, tracking expenses and invoices, and ensuring compliance — allowing you to focus on what you do best: growing your business.