Understanding Per Diem: A Recruiter's Advantage
Per diem (Latin for “for each day”) is a non-taxable, fixed allowance paid to an employee to cover business-related expenses (like lodging, meals, and incidentals) when they travel or work away from their tax home. For staffing firms, especially in travel healthcare, a compliant per diem structure is a powerful recruiting and compensation tool.
Why Consider Offering Per Diem?
Using per diem strategically allows you to create a more attractive, high-net-pay package for candidates, especially those taking travel assignments. The key benefits are:
- Increased Take-Home Pay: The per diem portion of the compensation is non-taxable, resulting in a significantly higher net weekly paycheck for the employee compared to an all-taxable hourly wage.
- Competitive Edge: It's the industry standard for travel positions. Offering a high, compliant per diem is crucial for competing against other agencies.
- Cost Efficiency for the Agency: While the candidate’s net pay is higher, the agency avoids paying taxes (like FICA) on the per diem portion of the compensation, offering a small payroll tax saving.
When Should You Use Per Diem?
Per diem should only be offered when specific IRS criteria are met. It is *not* a standard benefit and must be handled compliantly:
- The Employee Must Be a Traveler: The candidate's assignment location must be far enough from their **tax home** (permanent residence) to require an overnight stay, typically over 50 miles.
- The Assignment Must Be Temporary: The assignment must be realistically expected to last, and actually does last, **less than one year** in a single location. If an assignment exceeds 12 months, the location becomes the employee's new tax home, and per diem must cease.
- Duplicated Expenses: The candidate must incur and maintain **duplicate expenses** (paying for a home in their tax home while paying for living expenses at the assignment location). If they don't, they are not eligible for the non-taxable per diem.
Recruiter Takeaway
Use per diem as the foundation for your travel compensation strategy. Always ensure candidates meet the IRS 'traveler' definition to maintain compliance and protect both the agency and the employee from tax scrutiny. A compliant per diem is the secret weapon for closing top travel talent.