Hiring per diem employees offers your business flexibility and cost efficiency, especially during unexpected staffing gaps or peak periods. Learn what hiring per diem means and how this strategic staffing solution can keep your operations smooth without the overhead of permanent hires.
Picture this: You own a hot chicken restaurant near Riverwalk outlets. Your joint is gradually becoming the heart of the community, attracting more customers every day.
But suddenly, due to a major food event that you hadn’t considered earlier, you find yourself between a rock and a hard place: The annual Hot Chicken Week is happening in Nashville, and your head chef is scheduled to participate in it. This means they won’t be available to work for that entire week.
So what do you do?
A— Do you hire a full-time chef to compensate for their absence?
OR
B— Do you hire a per diem chef to temporarily replace your star chef while they expand their skill set and gain career-defining experience in Nashville?
Choosing a full-time hire means facing a tough decision: to make room in your budget, would you dare part ways with your beloved star chef while they’re off expanding their skills and networking? It’s a move that could leave a sour taste, despite being somewhat understandable given the financial tightrope small businesses like yours walk on every day.
Enter the hero of our story: the per diem fast-food chef! Tailored for such occasions, they will ensure your fast-food joint’s reputation for the hottest hot chicken in town remains unblemished. Thanks to the per diem employment method, there is no need for permanent payroll expansions or the heartache of saying goodbye to a valued team member.
In this blog, we’ll define per diem, explain what hiring per diem means and how this savvy hiring strategy can be instrumental in helping your small business combat challenges like staffing dilemmas and seasonal rushes.
Meaning of per diem
Per diem is a Latin word with the literal translation of “per day.”
It can mean two different things in different contexts: ‘hiring per diem’ employees and ‘paying per diem’ allowances.
Employers often hire per diem employees when their full-time staff is unavailable due to unexpected events like illness or business travel. Moreover, they also hire per diem staff to address project-specific demands or when existing staff lack the capacity or specialized skills required. Per diem workers provide flexibility, stepping in to seamlessly maintain operations or to contribute unique expertise during peak seasons or for critical projects. They are compensated based on the services they deliver, aligning perfectly with temporary or specialized needs.
Paying per diem, on the other hand, means the daily allowance you provide your full-time employee for their travel, accommodation, and meals when they’re on a business trip.
While this blog specifically explains everything you need to know about hiring per diem employees, you can learn all about paying per diem here.
What is a per diem job?
Per diem jobs are roles where employees are compensated based on the actual hours they work. These employees choose shifts that fit their availability and skills. Their payment is calculated hourly, providing precise compensation for the time they contribute to the job.
Per diem work is flexible, allowing employees to choose when and how much they work. This flexibility also benefits employers, allowing them to easily adjust staffing based on their needs without the commitment of long-term contracts. However, due to not having set, predictable hours like full-time employees, per diem staff can have irregular employment schedules. This can make it difficult for you to accommodate their unique requirements, complicating payroll management and tax compliance.
CoCountant’s payroll services can help you ensure compliance with tax and labor laws, helping you benefit from employing per diem workers to fit your requirements instead of worrying about handling their varied schedules and payment rates.
Additionally, per diem roles can help reduce budget overhead by minimizing the need for permanent staff positions.
Common examples of per diem jobs include:
- Nursing
- Substitute teaching
- Products delivery
- Reporting for broadcast media companies
Tax and labor laws applicable for per diem employment
The following U.S. tax and labor laws are specifically relevant to per diem (or temporary) workers:
Fair Labor Standards Act (FLSA):
Minimum Wage: Per diem workers must be paid at least the federal minimum wage, or a higher minimum if required by state laws.
Overtime: They are entitled to overtime pay at 1.5 times their regular rate for hours worked beyond 40 in a workweek, unless they are exempt.
Internal Revenue Service (IRS) Guidelines:
Employee Classification: It’s crucial to determine whether per diem workers are classified as employees or independent contractors. Misclassification can lead to penalties. This classification affects the degree of control the employer has and the level of independence of the worker.
Tax Withholding and Reporting: For those classified as employees, employers are responsible for withholding income taxes and paying Social Security, Medicare, and unemployment taxes. Wages are reported on Form W-2.
Workers’ Compensation:
Employers must provide workers’ compensation coverage to per diem workers, covering medical expenses and a portion of wage replacement if they are injured while working.
Unemployment Insurance:
Per diem workers may be eligible for unemployment benefits depending on state-specific requirements for time worked and wages earned.
These laws outline the fundamental rights and responsibilities concerning the employment and classification of per diem workers under U.S. federal regulations. For state-specific rules or more nuanced cases, consulting a legal or tax professional is recommended.
When should a company hire per diem?
As the name suggests, per diem employees are only hired for as long as they’re needed. They can be hired for a day or even for an hour, as they are need-based employees and are paid according to the job’s hourly or daily rates.
Per diem workers can be pivotal in maintaining your business’s adaptability and resilience, especially during unexpected events or seasonal peaks. They allow you to scale your workforce up or down efficiently, ensuring you always have the right number of hands on deck without overcommitting financially.
As a small business owner, how do you know when to hire a per diem employee?
- To fill in during the absence of a full-time employee (death, vacation, sickness)
- To offer services on an urgent and need basis
- To fill in during the holiday season when there’s a shortage of working employees
- To assist with a particular project only
- To give additional support during peak business season
- To provide support if an employee resigns unexpectedly
Are per diem employees better than full-time employees?
In any traditional business setup, full-time employees work a certain number of hours daily. These employees are available at scheduled hours, making them incredibly reliable. For example, it’s pretty standard to have full-time employees working 8 to 9 hours daily. This makes them dependable and, most importantly, available for fixed consecutive hours every week.
You might hear this description and pivot toward hiring full-time employees.
But don’t you feel every business is unique and has specific priorities at every stage of its evolution? A full-time employee can be ideal for a large enterprise at any given time, but as a small business owner, you have several budgeting restrictions to consider during challenging consequences.
So, while it’s generally preferable to have a resource on board at all times to cater to your business needs, it is also important to realize that sometimes a need can be met with a temporary resource.
For instance, schools typically pay substitute teachers at a per diem rate, which means they pay by days that substitutes work rather than by actual hours. If a primary teacher is out sick, a substitute teacher may work for one or multiple days, depending on the substitute’s availability and the school’s needs.
Another good example is of travel nurses, who work per diem in the healthcare industry. Travel nurses typically take short-term contracts with hospitals that might need extra employees. They might work with a staffing agency that can help place them or offer them contracts in different hospitals across the country. You can find travel and FIFO nurse career opportunities on job boards, like Jooble.
Benefits of hiring per diem employees for your small business
Per diem employment offers a range of advantages for employers, making it an attractive staffing option in many industries:
Flexibility in staffing: Per diem work allows employers to adjust their workforce based on current needs without the obligation of long-term contracts. This is particularly useful during peak periods or when regular staff are unavailable.
Cost efficiency: Hiring per diem employees can lead to significant cost savings. Employers can avoid the financial commitments associated with full-time employees such as benefits, paid leave, and overtime.
Reduced training costs: Per diem workers are often experienced professionals who require minimal training. This can be especially beneficial in sectors like healthcare, where specialized skills are needed immediately.
Decreased absenteeism: As per diem workers have the flexibility to choose their schedules, they are less likely to miss work unexpectedly. This reliability can help ensure smoother operations and less disruption.
Access to a broad talent pool: Employing per diem staff allows employers to evaluate a worker’s performance without immediate long-term commitments. This can be a strategic advantage when considering candidates for future full-time positions.
Per diem employees and independent contractors — are they the same thing?
Did you know that per diem employees are not the same as independent contractors?
While per diem employees are still considered part of an organization, independent contractors are not. This is crucial information for you because, as a small business owner, you should know whether or not you are paying taxes on behalf of your employees.
So, if you hire an independent contractor, you’ll have to provide IRS documentation, including Form 1099-NEC[1], which can be a hassle for you but not for your accountant.
A small business may be unable to afford a full-time accountant due to budget constraints. The good news is that CoCountant lets you hire a dedicated accountant without the hassle of hourly rates!
The bottom line
So, for your hot chicken restaurant near Riverwalk, hiring a per diem chef means you can continue serving the community’s favorite dishes even when your star chef is showcasing their talents in Nashville.
Whether it’s covering for a chef at a food festival or preparing for the holiday rush, per diem employees ensure that your business remains robust, responsive, and ready for whatever comes next.
Ready to adapt and thrive with per diem staffing but not sure how to integrate per diem employees into your business model?
FAQs
1- Is per diem taxable?
When you hire per diem staff, the compensation they receive is generally taxable as income. Unlike per diem allowances that cover expenses and can often be exempt from taxes, payments to per diem employees for their services are subject to standard tax withholdings and reporting. This means their earnings must be included in their Form W-2 and are subject to income tax withholdings.
2- What is per diem pay?
Per diem pay can mean two different things, depending on the context:
Hiring per diem staff: Sometimes, you might need someone to step in temporarily—for instance, when a regular employee is unavailable. In these cases, you pay per diem wages based on the specific work and hours the per diem employee puts in. It’s a flexible way to manage staffing without long-term commitments.
Providing daily allowances to your employees for business expenses: When your full-time employees travel for business, per diem pay covers daily expenses like meals, transportation, and lodging. This type of per diem ensures that employees are compensated for out-of-pocket expenses incurred while they are working away from their usual workplace.
3- What is per diem rate?
A per diem rate can apply in two distinct scenarios, each tailored to different employment situations:
For per diem employees: When you bring on per diem staff, their pay rate is determined based on the job’s requirements and the amount of time they commit to working. This rate is agreed upon to fairly compensate for the specific work they do during their short-term engagement.
For business travel expenses: Alternatively, for full-time employees traveling on business, the per diem rate refers to the daily allowance allocated for meals, accommodation, and travel expenses. This rate is guided by the General Services Administration (GSA) standards, which update annually on October 1st. These guidelines ensure that employees are reimbursed uniformly across 48 states, including the District of Columbia, based on the location of their business activities.
To verify the current per diem rates for reimbursing travel expenses, you can visit the GSA’s official website. Simply enter the relevant fiscal year, state, city, or zip code to find the specific rates applicable to your employee’s travel destination.
