Per Diem Work Explained: Benefits, Laws & Best Practices

What is per diem work?

Per diem work refers to employment arrangements where individuals are hired on an as needed basis, typically for short periods, without guaranteed hours or long-term commitment. These roles are often paid with a daily allowance or diem payments, rather than a fixed salary. This type of diem employment is commonly used when organisations need flexibility such as covering staff absences, responding to peak demand, or managing special projects.

Unlike full time employees, per diem workers are not tied to a fixed schedule. They may be called in for a single day, a few shifts a week, or intermittently throughout the month. This setup allows both employers and diem employees to agree on shifts without a binding contract for continuous hours worked.

Here's a quick comparison between per diem employment and traditional employment:

Industries commonly utilising per diem workers

Some industries simply can’t run without a bit of extra help on standby. Whether it’s a last-minute absence or a spike in demand, per diem employees fill the gaps quickly and efficiently.

Here’s a quick view of how per diem roles appear across industries:

Why this works well:

• Events are one-off or short-term

• No need to offer same worker benefits as full time employees

• Labour flexibility reduces business travel expenses during mobile events

As demand for flexibility grows, so too does the presence of diem workers across sectors where agility, speed, and cost control are top priorities.

Benefits of per diem work for employers

Not every role needs a long-term hire. Per diem employment gives businesses the breathing room to bring people in only when they’re truly needed.

Flexibility in staffing

Workloads don’t always follow a neat pattern. Diem employees work on an as needed basis, allowing companies to scale their workforce up or down depending on:

• Seasonal demand (e.g. holidays, school terms, peak tourism periods)

• Sudden absences (e.g. sick leave, parental leave)

• Unexpected projects or deadlines

Instead of maintaining a large team of full time employees year-round, employers can use diem workers to fill immediate gaps without overcommitting resources.

Cost-effectiveness

Hiring per diem workers helps reduce fixed business expenses tied to traditional roles. Employers often save money by:

• Avoiding health insurance, retirement plans, and other worker benefits

• Not offering guaranteed hours, paid time off, or same benefits as long-term employees

• Minimising overtime pay by distributing workload strategically

It’s worth noting that while diem rates may be higher on a per-hour basis, the overall cost can be lower when factoring in fewer benefits and tax liabilities.

Access to specialised skills

Some projects require niche expertise often for a short duration. With diem employment, businesses can:

• Bring in specialists for short-term needs

• Avoid committing to roles that aren’t needed full time

• Access professionals who prefer working with multiple employers

For example, federal agencies may hire IT contractors on diem positions to handle cybersecurity reviews or audits without extending full contracts.

Here’s a snapshot of the advantages:

Challenges and considerations

While per diem work is attractive for many reasons, it’s not without its complications. Employers must be ready to manage the unpredictability and compliance risks that come with it.

Inconsistent availability

Unlike full time employment, diem workers can often refuse shifts or work irregular hours. This creates a few challenges:

• Difficulty filling shifts at short notice

• Over-reliance on a small pool of flexible workers

• Scheduling complications, especially in time-sensitive industries

To mitigate this, employers may offer premium pay for urgent or hard-to-fill shifts, but that comes with added business costs.

Training and onboarding

Frequent turnover means employers must train new diem employees regularly. Without a streamlined process, this can impact productivity and quality.

Recommended strategies include:

• Standardised digital onboarding templates

• Quick-reference guides for systems or procedures

• Assigning mentors for first-day walkthroughs

Time invested in proper training leads to smoother operations, even if the diem labor is short-term.

Legal and compliance issues

Employers must follow local labour laws, even for diem jobs. That includes:

• Ensuring compliance with minimum wage and overtime laws

• Distinguishing between independent contractors and diem employees

• Filing correct paperwork for taxable income, including income tax and expense reports

Failure to follow rules from the Internal Revenue Service or other governing bodies like the General Services Administration can result in penalties.

A quick look at the common pitfalls:

Balancing the perks and pitfalls of diem work is essential for employers who want agility without sacrificing compliance or productivity.

Legal and regulatory landscape

While per diem work offers flexibility, it doesn’t exempt employers from legal responsibilities. Understanding local employment and tax rules is essential to avoid costly missteps.

United States regulations

In the U.S., per diem employees are still protected under various labor laws, including:

• Fair Labor Standards Act (FLSA): Sets standards for minimum wage, overtime pay, and recordkeeping for all employees, including those in diem positions.

• State-specific regulations: States may have stricter rules for overtime laws, wage deductions, and rest breaks.

• Misclassification concerns: Treating per diem workers as independent contractors when they should be considered employees can trigger investigations and fines by the Internal Revenue Service (IRS).

Additionally, federal agencies and employers using federal employees must follow hiring protocols defined by the General Services Administration (GSA), especially when dealing with travel expenses, meals and incidental expenses, and diem allowance reimbursements.

United Kingdom regulations

In the UK, diem employment arrangements fall under several key employment law principles:

• Employment status classification: Whether a per diem worker is a “worker,” “employee,” or “contractor” impacts their legal rights, such as paid time off and job security.

• Working Time Regulations 1998: Enforces rules on hours worked, rest breaks, and overtime pay thresholds.

• Equality and worker protections: Even diem labor must be treated fairly, with no discrimination in pay or worker benefits when performing the same tasks as traditional employees.

UK employers must also ensure that per diem employees are enrolled in pension schemes if they meet minimum earnings thresholds under auto-enrolment laws.

Tax implications

Proper handling of diem payments and business travel expenses is critical in both countries. Misreporting can result in penalties for both the employer and the worker.

Employers should always consult with tax professionals or legal advisors to ensure compliance; especially when working with multiple employers, travel-heavy roles, or business trips involving per diem workers.

Best practices for managing per diem workers

A flexible team still needs structure. Managing diem employees effectively comes down to smart systems, clear expectations, and consistent communication.

Clear communication

Per diem work thrives on clarity. Since these workers often juggle multiple employers and operate on an as needed basis, employers must:

• Define job descriptions clearly; no assumptions about responsibilities

• Outline shift expectations, including start times, guaranteed hours (if any), and location

• Communicate rules around refuse shifts, attendance, and overtime pay

• Clarify pay structure; whether based on diem rates, flat daily allowance, or hourly

Document everything in writing. This helps avoid misunderstandings and ensures diem workers understand their rights and duties, especially important when same worker benefits aren’t guaranteed.

Efficient scheduling systems

Coordinating diem labor manually leads to errors and missed shifts. Instead, businesses should:

• Use digital scheduling tools or workforce management software

• Offer mobile access so workers can accept or decline shifts easily

• Automate notifications and reminders for shift changes or last-minute needs

• Track hours worked in real time to ensure labor law compliance

Employers who rely heavily on diem jobs (especially in healthcare or hospitality) should also create a backup pool of available diem employees to cover absences and cancellations.

Feedback and evaluation

Although short-term, diem employees work better when given feedback. Regular evaluation helps maintain quality and build a trusted talent pool.

Good practices include:

• Simple performance scorecards after each assignment

• Quick feedback sessions (in-person or via email)

• Flagging top performers for priority shifts or future diem positions

This not only helps ensure standards but also motivates per diem workers who may lack traditional worker protections or retirement plans.

Here’s a quick overview:

When done well, managing diem employment can be just as smooth (and sometimes more efficient) than traditional staffing models.

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How Shiftbase simplifies managing per diem work

Managing per diem employees requires speed, clarity, and coordination; exactly what Shiftbase is built for. Whether you’re handling rotating schedules, tracking irregular hours, or dealing with sudden staff shortages, Shiftbase gives you the tools to stay in control.

Here’s how Shiftbase supports per diem employment:

• Employee scheduling: Create and adjust shifts in minutes, notify workers instantly, and avoid last-minute scrambling.

• Time tracking: Automatically record hours worked, track late arrivals, and ensure compliance with overtime laws and minimum wage requirements.

• Absence management: Monitor availability, manage time off requests, and quickly fill gaps with qualified diem employees.

With everything in one platform, you can reduce admin time, cut down business expenses, and improve your workforce flexibility without compromising on structure or compliance.

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