Paying employees on a per diem basis is really just paying them an agreed-upon daily rate. There are certain industries that have used a per diem arrangement for a very long time. It’s not that per diem pay isn’t legal but it does have limitations.
Legally, per diem pay is only good for no more than 8 hours of work and must equal at least minimum wage for time worked. If your employee is working longer than 8 hours, normal overtime rules will apply and must be paid on top of the per diem pay. Unfortunately, if you aren’t paying attention to this, you might be putting your company at risk.
The best use of a per diem rate is merely to provide the employee a guarantee of a certain amount of pay each day, even if they don’t work a full 8 hours every day. That can be helpful for certain positions because it makes it easier to retain employees. But don’t abuse the concept or think this is a way to pay less than you should.
If your employees frequently, or even occasionally, work more than 8 hours in a day you need to develop a different pay arrangement. Also, make sure they are completing a time card so you have proof you’re paying them every cent the law requires.
Bottom line, California works hard to cover any loopholes found in its wage and hour laws. If there’s a chance your per diem employees might work any overtime, just give it up and pay them an hourly wage plus overtime. If it’s important to those employees, you can still guarantee they’ll receive at least a certain amount… California doesn’t care if you overpay them!
About Your Columnist
CJ Westrick is a featured columnist for Women Taking Charge, the official blog of Connected Women of Influence, where she covers all things human resources and managing people in the workplace. CJ Westrick, SPHR, has been in human resources (HR) management for over 20 years and has maintained her SPHR (Senior Professional in Human Resources) national certification since 2002. She started HR Jungle, a human resources consulting firm, in 2006 to provide senior-level HR expertise to businesses without internal HR.