Travel Expenses and More: Per Diem Meaning in Jobs

The Latin phrase "per diem," which means "per day," serves two purposes in the workplace. It's a way to reimburse employee travel expenses, and it can be a type of employment arrangement. Understanding both meanings of per diem in jobs helps you manage payroll correctly and stay compliant with tax rules. Learn more about how you may encounter per diem in your company and how it enables you to structure your workforce.

Per Diem Meaning in Jobs

The meaning of per diem in jobs splits into two categories. Both uses involve daily rates, but they serve different purposes.

1) Expense Reimbursement: Per diem refers to the daily allowances you pay employees to cover travel expenses like meals, mileage, lodging, and incidental costs

2) Type of Employment: Per diem employees usually work on an as-needed, day-by-day basis. It's a flexible type of employment, but you need to pay attention to wage laws and worker classification

How Per Diem Works in Employment

Per diem employment arrangements let you staff up or down based on your company's daily needs. You call in per diem employees when regular staff can't cover shifts or when demand spikes. These employees usually choose their availability and receive daily or shift rates. They don't have guaranteed hours.

This flexibility can benefit both sides. You get coverage when needed, and employees maintain autonomy over their schedule. However, you still need to track hours worked and ensure compliance with minimum wage requirements. At times, you might also need to calculate overtime pay.

Common Types of Per Diem Jobs

Many industries use per diem working arrangements, especially healthcare. Hospitals and clinics regularly use per diem nurses and technicians to cover staffing gaps. In education, many substitute teachers work on a per diem basis.

Other industries using per diem arrangements include event management and hospitality. This includes catering companies, concert venues, convention centers, hotels, and restaurants. Professional service providers may also use per diem employees. Examples are accounting firms during the busy tax season and law firms on document review projects.

Per Diem vs. Full-Time and Part-Time Employment

Per diem staff occupy a unique spot in your workforce structure. Unlike full-time employees with set schedules and benefits, per diem employees work sporadically. The per diem structure also differs from part-time employment. Part-time employees usually have regular (if reduced) schedules, while per diem employees might work three days one week and none the next. In addition, many per diem employees don't have access to health insurance and retirement plans, though state laws and individual company policies may change this.

Per Diem Pay Rates and Compensation Structure

Setting per diem pay rates requires balancing several factors. You need competitive rates to attract quality employees for irregular schedules, but you also need to control costs. Per diem rates are often higher than equivalent hourly wages to offset the lack of benefits and job security.

You can calculate your per diem rates by analyzing local market rates and researching what competitors pay for similar per diem positions. You also need to ensure legal compliance by tracking actual hours, not just days worked. Even if you have a set daily rate, you still need to pay for overtime if someone works more than 40 hours in a week.

Per Diem for Travel Expenses

Per diem travel pay is the practice of reimbursing employees for business travel expenses using standardized daily rates. The General Services Administration (GSA) sets federal per diem rates(opens in a new tab) for different locations and updates them each fiscal year. Using GSA rates can simplify your employees' expense tracking. They cover lodging, meals, tips, and transportation.

Tax Implications of Per Diem Pay

Your tax obligations for per diem pay depend on which type of per diem you're dealing with. Per diem employment income is taxable like regular wages. You should withhold taxes and report it on W-2s just like any other employee compensation.

Travel per diem follows different rules. Travel per diem reimbursements are non-taxable(opens in a new tab). It requires documentation to prove the business reason for travel and timely expense reporting. Payments exceeding federal per diem rates or lacking proper documentation become taxable wages.

When Do Per Diem Arrangements Make Sense for Small Businesses?

Per diem staffing works best for specific situations and industries with variable demand or seasonal fluctuations. Consider per diem arrangements when you face irregular busy periods, sudden coverage gaps due to sick leave or departures, specialized project expertise, or when you want to test new positions before hiring a permanent employee. The latter should be temporary: You need permanent positions to meet ongoing staffing needs and avoid legal risks.

Pros and Cons of Per Diem Jobs

Per diem employment offers advantages for both employers and employees, but it's not without drawbacks. Here's an overview:

How Employers Track and Pay Per Diem Accurately

Managing per diem employees requires robust HR systems and payroll processing. Start by creating clear policies that distinguish per diem staff from part-time or full-time staff. Document your scheduling procedures and pay calculation methods, so that everyone understands how the system works. You can use modern HR tools, such as digital scheduling platforms and mobile time-tracking systems, to streamline the process. Integrations and automated payroll can further reduce errors.

For travel per diem, establish standardized processes for advance requests and expense documentation. Consider whether it makes more sense for your business to manage travel expenses alongside regular payroll or through accounts payable. Most importantly, track both types of per diem carefully to maintain compliance and efficiency.

Simplify Per Diem Employment with Justworks

Success with either type of per diem depends on clear policies, consistent application, proper documentation, and regular audits. Modern payroll and HR platforms can help you manage both. Justworks' PEO provides multi-state payroll processing, tax compliance support, access to benefits, integrations, and HR tools that handle complex employment arrangements, including per diem workers. Get started with Justworks today.