Per diem, or as the Latin word means, per day, provides employees with a flexible alternative to traditional employment. This lets workers earn on an as-needed basis. This is a win-win situation for both the employees and the employers.
Whether you are a business owner wanting to manage staffing requirements or a professional seeking more control over your schedule, wrapping your head around per diem work meaning opens doors to new opportunities for you.
Today, we will explore what per diem work is, how it differs from other employment categories, and its benefits and limitations, along with other useful details. So, let’s get started right away with it.
What is the Meaning of Per Diem Work?
Any per diem job represents a category of employment where employers, such as you, hire workers according to your daily needs. As we mentioned before, per diem is a Latin term for per day, which refers to the temporary and flexible nature of this work organization. Per diem means on a job application that the demand for workers can fluctuate a lot. This kind of shift is common in sectors, such as:
- Healthcare
- Education
- Construction
- Hospitality
That’s where employees receive a daily rate higher than the per-hour wages of regular workers. However, there is no job security or benefits.
Read Also: 10 Best Payroll Software in India for 2025
Per Diem for Travel Expenses
Per diem for travel expenses represents the daily allowance you provide your employees with to cover work-travel costs. It usually accounts for meals, lodging, and incidental costs. Instead of reimbursing laborers for each expenditure, businesses offer a fixed amount, making expense reporting easier. Here are a few more things to remember.
- Federal laws, such as the GSA in the US, often set the rate.
- This rate varies based on the cost of living in the travel location.
- This approach optimizes accounting and ensures adherence to tax regulations as workers don’t have to provide detailed receipts.
- This makes the reimbursement process more efficient and faster.
How Does Per Diem Work?
Make your workday more productive
Time tracking and work management can help you reach your goals
faster.
The per diem setup works just fine for both travel expenses and flexible staffing needs:
1. For Work
Here’s how it functions for work:
- Payment Structure: Per diem workers receive a fixed daily rate for each day that they work.
- Scheduling & Hours: Per diem employees usually enjoy flexible schedules. Plus, they can also choose when they work. Businesses frequently call them in during peak times, to cover shifts, or for particular projects.
2. For Travel Expenses
To make per diem work for travel expenses for you, here are a few things you need to remember.
- Receiving Per Diem: Workers touring for work might get a per diem allowance to account for daily costs. Businesses either provide this sum as an advance or as a reimbursement post-trip. This depends solely and strictly on the organization’s policy.
- Expense Reporting: It simplifies expense management, as there is no need for detailed receipts for covered expenses. However, if employees incur extra costs or if the expenses exceed the limit, workers must provide detailed reports attached with receipts as per the organization’s guidelines.
Tax Implications On Per Diem Work
Is per diem taxable for both employees and employers? Yes, it is. Here’s a breakdown for you.
- Deductibility: Most per diem payments you make to workers for business travel are tax-deductible, as long as they comply with IRS guidelines. However, in case it exceeds the federal rates, which the IRS or GSA sets, the excess amount might not be deductible.
- Accountable Plan: To ensure that the government doesn’t tax you for per diem payments, we strongly suggest having an accounting plan, meaning all expenses are work-related, your employees must provide a detailed cost report, and must return any excess expense to you.
- Non-Taxable Income: Per diem payments received within the IRS-approved rates and made under an accountable plan are non-taxable income. Workers get this sum as a reimbursement for travel expenses.
- Taxable Situations: If you don’t have an accountable plan, or if the per diem payments you make exceed the federal rates, the difference might be considered taxable. These are subject to income tax and show up on the employees’ W-2 forms.
- Reporting Needs: Your employees must submit an expense report within a reasonable timeframe, let’s say, 2 months, stating the purpose, location, and duration of the trip. Otherwise, the entire per diem can be considered taxable.
Benefits of Per Diem Work
There are many benefits of per diem work for both employees and employers. Here are 5 that we have observed.
- Flexibility: It offers a high level of flexibility, letting workers select availability-based assignments. Thus, it is ideal for all those balancing other commitments.
- Potentially Higher Pay: Since you hire per diem employees for a short term, you might pay them more than your full-time teams to account for the lack of benefits.
- Diverse Work Experiences: Per diem designations frequently let workers gain experience in multiple atmospheres and sectors. This upshifts their professional network and skills.
- Cost Savings: Since per diem teams usually don’t receive benefits, including PTO, healthcare, or retirement plans, employers can save on costs, such as benefits and long-term commitments.
- Scalability: You can scale your workforce up or down fast to respond to fluctuating demands without the administrative workload that comes with hiring full-time employees.
Limitations of Per Diem Work
Before providing or agreeing to per diem work, you must also be aware of its disadvantages for both employees and employers.
- Lack of Benefits: Per diem employees frequently don’t get health insurance, retirement benefits, PTO, or job security, which is a major drawback in comparison to full-time roles.
- Work Inconsistency: The availability of any per diem job is unpredictable, which leads to unstable income. Plus, future employment opportunities are also uncertain.
- Career Growth Limitations: Often, changes in work assignments limit opportunities for long-term career growth and advancement within a single organization.
- Potentially Higher Turnover: Per diem employees are less committed to a single employer. This leads to higher turnover rates and the requirement for constant training and recruitment.
- Less Controlled Schedules: As an employer, you will face scheduling challenges. That’s because per diem teams prioritize their availability. So, they might not be there for you when you need them the most.
- Variable Work Quality: The temporary nature of per diem jobs results in variable degrees of quality and commitment, as employees might not have the same investment in the long-term success of your business.
How Per Diem Rates & Policies Work
These rates vary according to the sector, destination, and particular per diem job needs. Both you and your employees must understand what determines them and the policies that govern their use.
1. Per Diem Work Rates
Here’s how the per-day rates vary for work.
- Role & Industry Variations: Per diem work rates significantly differ according to the sector and the offered position.
- Regional Differences: The location of work also plays a crucial role in deciding the per diem rates. For example, urban territories or areas with a higher cost of living usually provide higher per diem work rates to account for the increased costs.
2. Travel Rates
For example, the travel rates per diem for New York will be $297 for lodging and $74 for meals and incidents. Here’s how it works.
- Federal Rates: Federal standards often determine the daily travel rates, particularly for businesses operating within the US. The GSA sets these rates, which vary by city and time of the year.
- International Locations: The US Department of State issues per diem rates, varying by nation and city.
3. Policies
The federal rates only provide a guideline. The policies regarding per day are totally up to you. However, your employees must understand these particular terms, including how you determine rates, how you issue payments, and the documentation requirements. Here’s what you need to include.
- Advance Vs. Reimbursements: Clarify whether you will provide the per diem in advance or as a reimbursement post-trip.
- Documentation Needs: Some employers may need receipts even if the per-day rate is within the standard, while others may not.
- Exceeding Rates: If your employee’s expenses go over the daily rate, they need to understand whether you will cover the difference or take it out of their pocket.
Read Also: 11 Proven Strategies for Meeting Deadlines in the Workplace
How to Manage Per Diem Work
Effective management of per diem can help maximize its advantages and ensure proper use. Whether for work or travel, doing it strategically makes a major impact.
1. For Work
Here’s how to effectively find and manage your per-day career.
- Industry & Networking Resources: Take advantage of industry connections and job boards, specializing in per diem designations. Many sectors, including healthcare and education, list jobs particular to per diem roles.
- Agency Registrations: Registering yourself with staffing agencies that offer per diem work to multiple businesses, as they can match your skills with openings requiring per diem staffing.
- Freelance Platforms: Discovering gig economy and freelancing platforms might land you a chance at per diem work (if it’s listed on the platform). Such portals can provide flexibility and multiple short-term job opportunities.
- Flexibility: Embrace the variability of your per diem job. You need to prepare yourself for fluctuating locations, hours and adapt to changing work demands.
- Multiple Opportunities: If it’s feasible for you, taking on per diem designations with different employers is a good option to skyrocket your income. Just be careful, though, you might not effectively manage multiple schedules.
- Skill Development: We strongly suggest continuously enhancing your skills and qualifications to improve your visibility for per diem designations and potentially request higher rates.
2. For Travel Expenses
If you are using this for travel expenses, here are a few proven tips for you.
- Plan: Research the per diem rates for your location before booking your tour. This helps you stay within the allotted amount and avoid unnecessary out-of-pocket expenses.
- Budget Wisely: Wisely distribute your per diem budget.
- Utilize Discounts: Leverage special offers and discounts for meals and accommodations. This assists you in staying within per diem boundaries and potentially saving money.
- Maintain Records: Even if your employer doesn’t require expense reports, it’s wise to keep records for personal tracking and defend yourself in case of any discrepancies.
- Use Tools & Apps: Using the best business expense tracking software to manage your per diem funds. The software will categorize costs for you and log your spending, ensuring you stay within budget.
- Review Regularly: To ensure that your per diem limit management is consistent, regularly review your spending habits. Adjusting your budgeting strategies becomes necessary in case you observe overspending or mundane problems.
Simplify Scheduling with DeskTrack
According to what we have read about per diem work, managing the schedule without any tools or apps can get complicated. DeskTrack’s employee scheduling software simplifies making and sharing schedules regardless of how complex they are. Its user-friendly interface ensures that you make any schedule within 30 minutes, saving you a lot of time. Share and update in real-time to ensure that everyone is always aware of the workload. So, whether you are managing remote, in-office, per-day, or fieldwork teams, you are all set with DeskTrack. Try now and realize why it’s the choice of 8000+ businesses worldwide.
Frequently Asked Questions (FAQ)
Q. What Does Per Diem Mean When Working?
Ans. Any per diem job represents a category of employment where employers, such as you, hire workers according to your daily needs. As we mentioned before, per diem is a Latin term for per day, which refers to the temporary and flexible nature of this work organization. Per diem means on a job application that the demand for workers can fluctuate a lot.
Q. Is Per Diem the Same as Salary?
Ans. No, per diem is not the same as salary. However, some employees consider it a type of pay structure. However, instead, they get their wages by the quantity of work done or by the end of the day.
Q. Is Per Diem Paid Monthly?
Ans. No, per diem is truly paid on a day-to-day basis.
Q. What are the Disadvantages of Per Diem?
Ans. Before providing or agreeing to a job on a per-day basis, you also need to know how to account for these limitations.
- Lack of Benefits
- Work Inconsistency
- Career Growth Limitations
- Potentially Higher Turnover
- Less Controlled Schedules
- Variable Work Quality
Q. What is the Difference Between Per Diem & Temporary Work?
Ans. Temporary work may also include long-term assignments. However, on the other hand, any per diem job is truly on a day-to-day basis.
