Industries that require consistent staffing, including 24/7 operations or fluctuating work flows that require work on-demand, per diem employees can be-and often are- the answer. What does per diem mean? Literally meaning “daily,” per diem employees work on an as-needed basis. In general, they work less often than full-time employees, have a flexible schedule, and do not receive benefits.

The clear advantage of having per diem employees is the ability to call on one to cover your needs anytime. A hospital, for example, that takes advantage of daily workers can have adequate staffing at all times, even if a high number of employees are out on a single day. Per diem employees make up the reserve tank.

But per diem employees can also be a double-edged sword—this time of employment offers both benefits to employers as well as drawbacks to consider.

Managing Per Diem Employees

Per diem employees’ increased flexibility is a pro for both them and you, the employer. For the most part, per diem arrangements work out fine.

But not always. There are some common problems employers tend to encounter with per diem employees, such as:

Many per diem employees are not looking for full-time employment.

If you’re looking for an employee to “train” into a full-time role, you may want to reconsider spending time and resources doing that with per diem employees. By definition, per diems are typically not in the office on a consistent, regular basis; many choose this type of work because they don’t want the restrictions required by a full-time job.

Employers aren’t exempt from compliance regulations regarding per diem employees.

Employers often assume that hiring per diems lessens their compliance burden. This is simply not true. While you have the flexibility to put per diem employees on your schedule as needed, you must still follow compliance regulations for classification. If your “per diem” employee is consistently scheduled for hours at regular times, they should move to a benefits-eligible, full- or part-time status to avoid compliance issues.

Are you correctly classifying your employees? Download our free guide to make sure you know the differences in FLSA classification types.

Training per diem employees must be done on their schedule.

Unlike training part-time or full-time new hires, who can be expected to follow a training schedule set by the employer, companies must be flexible in training their per diem employees. While your per diem may be able to train and onboard on a traditional 9-5 schedule, if they cannot, you must work around their availability.

How To Manage Your Per Diem Employees (& What You Should Avoid Doing)

The most straightforward plan of action is to end your relationship with the problematic per diem employee. That’s fine, but how you go about doing it matters. Following easy, but critical, guidelines may keep the per diem employee from winning an unemployment claim. To minimize unemployment liability in the long term, there are four golden principles when it comes to managing per diem employees.

What You Should Do With Per Diem Employees

1. Treat per diem employees as if they were regular employees.

Per diem employees should receive annual reviews. They should also be subject to your company’s disciplinary process, like any other employee, if need be. (If you don’t have a disciplinary process outlined in your employee handbook, download this free template to update your handbook offering.)

Your performance management process should include per diem employees as well as regular employees, including annual reviews, documented corrective action processes, and more. That way you’ll have a history of their performance that may prove useful down the road.

2. Document, document, document.

Documentation will be one of your most valuable tools in minimizing unemployment liability with per diem employees.

If and when he or she files a claim for unemployment, you will be prepared and have something to show to the state. Document everything to do with your employees—any last-minute shift cancellations or changes, and keep a calendar of shifts offered to the per diem employee that he or she refused. Additionally, require that per diem employees put their resignation in writing, and have written proof of status change requests when regular employees become per diem employees.

3. Have a policy in place that reflects your expectations regarding per diem employees.

Again, all per diem policies should be documented in your employee handbook. Your written policy should clearly state that it is considered a voluntary termination if a per diem employee does not pick up any shifts for a certain period of time. (Sixty to 90 days generally works.) If your per diem employee decides to stop working and files a claim for unemployment, the burden of proof will rest on their side, and, as long as there are no compelling reasons for voluntarily quitting, they will likely lose the case.

4. Finally, make sure you’re abiding by the true definition of a per diem employee.

One mistake we sometimes see is employers classifying an employee as per diem when he or she is consistently working a full-time or part-time schedule. Sometimes employers do this to avoid offering benefits.

One way to make sure you’re not misclassifying a part- or full-time employee as a per diem employee is to keep an eye on your per diem employees’ hours and make sure they are not regularly scheduled. A good business practice is to do a quarterly review of the hours your per diem employee has put in; if there’s a pattern or consistent schedule, convert them to part-time or benefits-eligible employees.

What To Avoid With Per Diem Employees

Consider the likely scenario of a nurse working per diem, who becomes unreliable and regularly cancels or changes her shifts at the last possible minute. This becomes a major disruption for scheduling, and frustrates both you and her fellow employees, who are forced to cover for her when she’s out.

The easiest and most obvious solution is to simply stop scheduling hours for her. Since per diem employees only come in when needed and work only when scheduled, this would fix the problem, right? Not quite. She can file an unemployment claim and the state would most likely side with her because you have no proof to counter the claim. After all is said and done, your unemployment tax rate will rise. What do you do instead?

But It’s Not All Bad: 3 Pros Of Hiring Per Diem Employees

Hiring Per Diem Employees: Pros & Cons

Pro: Per diem employees allow employers to expand and contract their workforces with little to no notice.

Managing the per diem side of your workforce is simple—if you don’t have work for them you don’t call them in. If you go through cycles of busy/not-busy times, there can be a great cost savings to hiring per diems, who can easily be sent home if there is no work.

Compare this to hourly workers, who earn wages even if you’re overstaffed and they’re not doing work. Even if you send those hourly workers home, in many states, you’re still responsible for providing “show-up pay,” which is a minimum of three hours’ pay in some states. For exempt workers, you are responsible for paying a full day’s work even if you send them home.

Pro: The termination process for per diem employees is less restrictive than for regular employees.

Because they are not hourly or salaried employees and are therefore not benefits-eligible, per diem employees are easier to terminate when necessary. In the midst of COVID-19, for instance, companies that were forced to shut down let per diems go first.

Pro: Per diems can become an excellent source of good employees.

If a per diem employee fits your company’s culture, it is easier to hire them as an employee than to recruit and hire other applicants. It is possible to “test” per diem employees to see if their work ethic, skills, and personality are a good fit for your company before hiring them full-time. If you have a great per diem employee who is flexible, contributes to the team, and performs well, you can go to them first when you need a full-time employee—a strategy that saves you time and money.

Get Help Managing Employees—No Matter Their Classification Type

Having per diem employees doesn’t relieve you of your employment responsibilities, or make things easier with regard to benefits or compliance. That’s why it pays to have foresight about the kinds of situations that could occur—and be ready to manage them.

Partnering with a PEO like Genesis can help you manage all your employees, including those who are per diem. We can also help consolidate the administration of your payroll, manage benefits, and more. For employers who are experiencing issues with terminating per diem workers, we can also provide guidance and help you mitigate risk. Contact us today to learn more about how we can partner with your company.