Per Diem is the Latin phrase for "per day". Per Diem employees are similar to independent contractor and freelance employees where they work as they are needed by the client or employer and do not have specific or set schedule. Per diem employees also do not generally have a specific set wage or salary.
Businesses may hire a per diem employee for completing a special project. Employers typically pay for a per diem employee based on one full day of work and not necessarily as an hourly or salaried wage. Per diem employees do not have the same specific work schedule as regular employees. They can often set their own schedule as long as the schedule allows for the project to be completed on time.
Per Diem Pay
The business may decide to pay the per diem employee an hourly wage based on the average pay of people in the employee's field and based on the experience level of the per diem employee. For instance, if a business needs a copywriter for a special project, the business may decide to pay the copywriter on a per diem basis, at the national average hourly rate of copywriters who are regular employees. Businesses can also decide to pay the per diem employee a lump sum once the project is complete.
The benefit of per diem employees is the freedom they have to make their own schedules; they can work for multiple clients at one time. The major benefits for employers are that the employer does not have to pay for health or retirement benefits, unemployment insurance for per diem employees or payroll taxes. This helps to keep the employer's overall labor costs down. Employers are also not required to offer per diem employees any paid sick time or vacation time.
Per Diem Employee Taxes
Per diem employees do not usually have state and federal taxes deducted from their pay. This means that when it comes to filing taxes, the employee is responsible for paying all of her state and federal income taxes. Per diem employees should consider paying their estimated taxes every quarter to avoid owing the IRS money at the end of the tax year. Also, since per diem employees are not regular employees, they must pay a self-employment tax. This is the Social Security and Medicare portion of federal taxes for self-employed individuals. The employer pays half of this tax for regular wage earners.