Per Diem: A Comprehensive Guide

“Per diem” is a term you may have come across when reviewing travel allowances, freelance work, nursing shifts, or other temporary employment scenarios. The Latin phrase “per diem” literally means “for each day,” but in modern professional settings, it can refer to a daily allowance for expenses or a form of flexible, day-based work. As the business environment continues to shift toward dynamic staffing models, understanding per diem is more important than ever, especially for employers who want to manage budgets effectively and for employees who value schedule flexibility.

This guide offers a comprehensive look at the meaning of per diem, how it compares to other payment and employment structures, and how per diem rates are set—particularly those established by the General Services Administration (GSA) for government-related travel. You’ll also learn about key considerations for employers and employees alike, such as per diem nursing jobs, tax implications, and how software solutions like Shyft’s employee management software can simplify day-to-day operations. By the end, you’ll have all the information you need to determine whether per diem arrangements are right for you or your organization. Remember, however, that any financial or legal decisions should be made in consultation with official guidelines and qualified professionals.

1. What Is Per Diem?

Per diem, in a workplace context, often refers to either a daily allowance (especially for travel, meals, and lodging) or a category of employment where workers are compensated “by the day.” For instance, traveling professionals may receive a per diem rate to cover expenses on business trips. Meanwhile, healthcare facilities or other industries might hire per diem staff who are paid only for days worked, providing them with schedule flexibility and the chance to pick up additional shifts as needed. Companies commonly turn to per diem staff to address labor shortages, seasonal spikes, or specialized tasks without extending long-term commitments.

• Daily Allowance: An amount allocated to cover day-to-day expenses, such as lodging and meals.
• Flexible Employment Status: Workers are typically not full-time employees, giving both employers and individuals greater scheduling freedom.
• Pay-By-Day Structure: Per diem workers are compensated only for the days or shifts they actually work.
• Varied Industries: Common in healthcare, hospitality, construction, and consulting sectors.

Whether you’re asking “What does per diem mean?” or “What is per diem?” the core idea remains the same: it’s a daily arrangement with distinct advantages for both employers and employees. For further clarification, check out Shyft’s Per Diem glossary entry to see how this concept ties into broader workforce scheduling trends.

2. Understanding Per Diem Rates

Per diem rates determine how much an employee or contractor can claim for each day spent working off-site or traveling, without having to produce detailed receipts for every expense. In the United States, the GSA per diem rates apply to federal employees traveling for business, but many private companies also use these figures as guidelines.

• Geographical Differences: Major cities often have higher rates due to elevated living and travel costs.
• Expense Categories: These commonly include lodging, meals, and incidental expenses.
• Annual Updates: GSA per diem rates are typically reviewed and updated each fiscal year (e.g., “per diem rates 2025”).
• Non-Taxable Allowance: If structured correctly, per diem payments can be tax-free for employees.

Employers often set internal per diem policies, referencing GSA guidelines to remain fair and competitive. If you’re ever unsure whether to reimburse employees using per diem rates or actual cost receipts, consult an accountant or a legal advisor to confirm tax compliance. For a deeper dive into expense reimbursements, you can refer to Shyft’s explainer on reimbursable expenses.

3. Benefits of Per Diem Arrangements

Employers and employees alike can benefit from per diem setups. If you run a small business that needs occasional specialized support, or if you’re an individual seeking flexible work, per diem can be a win-win arrangement. But is it always the right choice? Understanding the advantages can help you decide.

• Cost-Effective Staffing: You only pay for the days or shifts you need, which can help manage payroll expenses.
• Flexibility: Employers can adapt rapidly to fluctuating demand, while workers can take on assignments that fit their schedule.
• Diverse Experience: Employees working on a per diem basis may explore multiple industries or specialties.
• Tax Advantages: Properly structured per diem payments may be non-taxable, saving both sides money.

For organizations that rely on varied shifts—like retail, healthcare, or hospitality—using a scheduling tool can help identify when per diem staff are truly needed. If you’re curious about optimizing your staffing arrangements, take a look at Shyft’s employee schedule app guide to learn how cloud-based solutions streamline everything from shift requests to time-off management.

4. Common Industries for Per Diem Work

Although the concept of “per diem” is sometimes discussed primarily in terms of travel allowances, industries of all types utilize day-based employment. Healthcare stands out as a particularly robust market for per diem jobs, given the growing need for supplemental nursing staff who can fill coverage gaps. However, other businesses also frequently adopt per diem staffing to fill short-term demands.

• Healthcare: Per diem nursing jobs, per diem RN jobs, and other medical roles.
• Hospitality: Catering staff, event coordinators, and servers during peak seasons.
• Construction: Skilled labor hired for specific projects or busy building cycles.
• Consultancy: Subject matter experts who step in for short-duration, specialized tasks.

In the nursing sector, per diem roles not only offer higher hourly rates compared to some salaried positions but also let healthcare facilities maintain a flexible workforce. Tools like Shyft’s nurse scheduling software can help hospitals, clinics, and other care settings keep track of hours, overtime, and shift vacancies in real time.

5. Tax Considerations and Compliance

Whenever money changes hands, tax laws come into play. For instance, per diem payments used strictly for business-related travel can be non-taxable in certain cases, as long as the amounts do not exceed federal limits and the worker can prove they were traveling away from their usual tax home.

• Documentation: Employers must maintain clear records of travel dates, destinations, and purposes.
• Excess Payments: Any amount beyond the allowable per diem could be considered taxable income.
• State Variations: Some states follow federal guidelines closely; others may have unique rules.
• Reporting Requirements: Employers may need to fill out specific tax forms (e.g., Form W-2 in the U.S.) if per diem is taxed.

For day-based employees, per diem means you might not receive the same benefits as full-time workers, including certain tax-advantaged plans. Always consult a tax professional or official sources for the latest rules. If you’re curious about ways to manage payroll and keep track of time spent, visit Shyft’s employee timekeeping glossary for more information.

6. Setting Fair Per Diem Policies

Establishing per diem policies calls for careful planning. Not only do you need to consider the going market rates, but you should also factor in local cost-of-living differences, as well as your organization’s overall budget. A balanced policy can reduce employee pushback, especially among traveling staff who rely on these reimbursements for lodging and meals.

• Annual Reviews: Update per diem rates at least once per year to match GSA guidelines or market changes.
• Consistent Communication: Clearly outline per diem rules in employee handbooks or via internal memos.
• Receipt Requirements: Decide if a fixed per diem is adequate or if you’ll require partial receipts.
• Equitable Treatment: Ensure all per diem employees receive consistent rates and reimbursements.

Finally, keep an eye on any state or local rules that might influence your policy, particularly if you employ per diem workers across multiple jurisdictions. For a clearer overview, you might explore Shyft’s state labor laws resource hub to see if specific locations have different guidelines related to per diem pay or reimbursements.

7. Tips for Employers and Employees

Whether you’re an employer looking to implement per diem staffing or an employee eyeing a more flexible schedule, certain best practices can make the arrangement smoother. From technology adoption to effective communication, a few strategic steps can streamline processes on both sides.

• Accurate Scheduling: Use tools like Shyft’s schedule optimization platform to prevent confusion over who’s working when.
• Clear Contracts: Define pay rates, shift expectations, and any fringe benefits upfront.
• Regular Feedback: Conduct periodic check-ins to ensure employees feel supported and informed.
• Plan for Downtime: Per diem staff should have backup gigs or savings to handle gaps in assignments.

Employers might find it beneficial to adopt an integrated approach to employee management. By syncing per diem staffing with full-time schedules, you reduce operational hiccups. Tools like Shyft let you forecast staffing needs and expedite payroll processes so you’re not left scrambling at the last minute. If you haven’t already, consider giving it a try for streamlining shift coordination and day-by-day employee assignments.

8. Potential Drawbacks of Per Diem Work

While per diem can be a flexible and cost-effective solution, it’s not without potential pitfalls. Employees may find that per diem jobs near them come and go with market trends, making it harder to guarantee a consistent paycheck. Meanwhile, employers might spend more time onboarding or training a rotating cast of per diem workers, especially if those individuals also work elsewhere and have limited availability.

• Lack of Benefits: Health insurance, retirement contributions, and paid time off are often not provided.
• Variable Income: Employees may not have a predictable cash flow each month.
• Training Costs: Employers face the burden of recurrent training for new per diem hires.
• Compliance Risks: Misclassification can lead to legal complications if not managed properly.

To mitigate these issues, clear expectations and careful vetting of per diem staff are essential. Some companies even create a “per diem pool” of trusted workers who can be called on short notice. If you’re juggling both full-time and per diem staff, consider building a cohesive schedule that prevents burnout and fosters open communication.

9. Conclusion

Per diem means different things to different people: some see it as a daily travel allowance, while others view it as a dynamic employment structure perfect for shift-based scheduling. In either case, the core benefit is flexibility—both financially and operationally. The rapid expansion of on-demand staffing across healthcare, hospitality, and beyond underscores the relevance of per diem work, especially as businesses strive to adapt to fluctuating demands.

When implemented thoughtfully, per diem arrangements can enhance your organization’s agility, cut costs, and keep employees happier by giving them more control over their schedules. Still, remember that legal and financial guidelines evolve over time. Always verify the most current per diem rates, and consult professional advice for tax and compliance issues. If you’re ready to optimize your per diem or shift-based workforce, consider how a platform like Shyft can simplify everything from scheduling to real-time communication.

FAQ

What does “per diem” mean in a job context?

In a job context, per diem generally refers to employees hired on a day-to-day basis or for specific shifts. Instead of a fixed salary, these workers get paid only for the days they actually work, offering both employers and employees a high degree of flexibility.

What are GSA per diem rates?

GSA per diem rates are daily allowances set by the General Services Administration for federal employees traveling for work. These rates can also serve as guidelines for private companies to calculate reasonable daily expense reimbursements for lodging, meals, and incidentals.

Are per diem payments taxable?

It depends on how the payments are structured and documented. If the amounts fall within federal guidelines and the employee was traveling away from their tax home for work, per diem payments may not be taxable. Anything exceeding federal or company-established limits, however, can be considered taxable income.

How do I set a fair per diem policy for my business?

Start by referencing GSA rates or industry standards and consider geographical cost differences. Communicate these policies clearly in your employee handbook and review them annually to ensure they remain competitive and compliant. Always consult a tax professional or legal advisor for state-specific rules.

Is per diem work only for healthcare professionals?

Not at all. While it’s very common in the healthcare industry—especially for nursing staff—per diem work is also found in hospitality, construction, event planning, and any sector that benefits from flexible, day-based staffing arrangements.

Disclaimer: The information provided in this article is current as of 2025 and is for general educational purposes only. It is not intended as legal or tax advice. Always consult official resources and qualified professionals for the most up-to-date guidance.