There are quite a few rules and regulations to be aware of when it comes to paying on call employees and hiring staff on a per diem basis. Read on to learn more about how it works.


Not every employee works on an hourly or salaried basis and sometimes your business or industry will require a more complex arrangement – such as employees who come in for the day (such as a substitute teacher) or employees who must be available on the chance that they might need to come in (such as an on call nurse or doctor). When these type of working arrangements are in place, it is important that you understand the legal requirements behind them.


Paying On Call Employees

First of all, it is important to note that the US Fair Labor Standards Act does not require that salaried or “exempt” employees be compensated for on-call duty. So, this discussion only applies to hourly (non-exempt) employees as a general rule.


Under Federal Law, employees must be paid for any time that their employer controls and that benefits the employer. This includes any time that the employee cannot spend as they wish – even if that time is spent not working.


There are different types of “On Call” work and each has their own rules.


1) Employees who aren’t really “off the clock” and can’t use the time for their own purposes.


This could be someone who needs to stay in the office during the lunch hour to cover the phones or be at the front desk to receive enquiries. They are not free to do what they want, so obviously you must pay them for their time. For example, if an employee must stay in the office and cover the phones while eating lunch, they should be paid for that time even if the phones aren’t ringing.


2) Employees who are not at work, not scheduled to be called in, but are on the list of people who could potentially be called in.


In this case, the employee who could potentially be called in will not be able to go out of town or go out for drinks, as there is a possibility that they might have to work during that time. So, although they have personal time you have limited what they can do and therefore they may be entitled to on call compensation.


3) Employees who are scheduled to answer calls after hours.


Although these employees might never get a call, they are required to carry their phone, respond to alerts and be ready to communicate at any time.


There are also many other on-call factors to consider, such as when an employee must live on the employer’s premises, what the “response time” is when the employee is called in, whether the employee must stay within a limited distance of the workplace, how many calls an employee gets while on call, etc.


The second two types of on-call workers listed above are a little more ambiguous. How much should you pay someone for the 50%, 20% or even 10% chance that they might have to come into work or answer the phone? The answer is that it is less about how likely they are to be called in and more about how you restrict their activities while they are on call.


Essentially, it comes down to this: if an employee is called in and has to work, they get paid for the work time. As for the hours spent on call and not actually working, the more restrictions the employer places on the employee during that time the more likely it is that the employee is entitled to be paid.


Tips for Paying On Call Workers

  • If the employee must stay in the actual workplace, they must be paid – as the employer is restricting where they can go.


  • If the employee is at home and the frequency of calls they must answer is such that they cannot use the time at home for their own purposes (such as going to a doctor’s appointment, mowing the lawn or attending a child’s event, for example) then this counts as payable time worked.


  • An employee who is covered by an employment contract or a bargaining agreement which stipulates that they will be paid for being on call is also entitled to compensation. Likewise, if the company establishes a policy paying for time spent on call, the employer is obligated to cover all employees who are included in the policy.


  • Many states have their own standards for on-call time, which are separate from the laws of the federal government, so check out the laws of your specific state. If the state and federal laws conflict, you must adhere to the one that provides the greatest benefit to your employee.


What Does Working “Per Diem” Mean?

Per Diem is Latin for “Per Day.” This type of employment usually occurs within industries that require work to be done 24/7 or at any moment – such as in the healthcare industry for example. Per Diem employees work on an as-needed basis, with a flexible schedule and do not receive benefits.


The main advantage of this is so that the organization can have employees to call upon to cover for other absent employees. For example, a home health agency can keep their patient visits staffed by calling upon one of these “daily” employees if other employees are out. Other industries that hire per diem workers include technology, energy companies and education.


Substitute teachers are a common example of per diem employment. This also happens in the construction industry. A company can hire many construction workers when they are in a time crunch, then let them go when the work is done. This flexibility is an advantage, as you don’t have to keep someone on the payroll when the workload decreases after a big project is done.


Per diem employees have agreed to work a shift for a specified pay rate, but with no guaranteed weekly hours or long term commitment. They receive a flat rate for a shift, which is usually more per shift than a full time employee would earn. The higher rate of pay reflects the fact that they do not have guaranteed hours and they don’t receive benefit packages.


Oftentimes the employer saves on payroll taxes, as the per diem worker isn’t an employee of the company and is employed by a per diem staffing firm or temp agency.


Tips for Working With Per Diem Employees

If your company works with employees on a per diem basis, here are some tips to keep in mind:


  • Choose a reliable staffing agency to work with – they will do the job of recruiting workers, reviewing resumes, interviewing workers, verifying licensure and doing background checks. In industries like healthcare, it can be particularly useful to use a nurse staffing or medical staffing agency.


  • Treat your per diem employees like you would your regular employees. They should subject to the disciplinary process, receive annual reviews and receive regular shifts.


  • Have a policy in place that clearly reflects your expectations regarding any per diem employees. For example, it can state that if they do not pick up any shifts for a certain period of time, it is a voluntary termination.


  • You may want to hire individuals on per diem assignments as a way of trying them out for more permanent work. You’ll get a sense of their performance and their work ethic so you can determine whether or not you would like them to work for you full time.


Per Diem as a Daily Allowance

The term “Per Diem” can also refer to a daily allowance that is paid to employees to cover their lodging, meals, tips, taxis and other expenses when an employee must travel for business. It might also be used to cover other costs such as phone use, laundry, WiFi charges and more.


The per diem allowance is the amount of money that the employee is authorised to spend per day and be reimbursed for while attending any business trips or work-related conferences or events. This can include working for the same company, but at a different location from where the employee usually works. The employee doesn’t have to record all expenses and save their receipts as proof.


The per diem rate for travel is usually set at different amounts depending on the location and the cost of lodging, food and other expenses there. For example, employees traveling to Las Vegas would receive a smaller per diem reimbursement than those traveling to New York City, as the local expenses are lower.


Understanding on call, per diem and other rates of pay is essential to making sure employees are paid fairly even when work gets complicated.