per diem... 3

[Gymmeh]

I am sure this is covered somewhere on this fora but I can’t find it with the wonderful search tool…

So I have been looking at jobs like crazy, and dabbling in the idea of contracting… but I don’t understand per diem, because the numbers don’t add up unless I am adding wrong.
This is from a job I looked at:

"Full health care with a Pay Scale is $19.00-$24.00 hour DOE. The per diem for this assignment is $116/day for the first 60 days and $81.20/day there after."

How does $19X8hrs = $152 per day but Per diem is $116? or does per deim mean $116 per half day?

How is this pay better then Per/hour?

 

[SomptingGuy]

Misuderstanding per chance?

I read this as $19-$24 per hour, PLUS $116 for the first 60 days (less later).

$116/day isn't much though, unless you are Red Roofing it.

- Steve

 

[NL8]

Per diem: The phrase is Latin for 'per day', and is often used when referring to daily employee expenses or reimbursements.

I would guess that they are offering some compensation for travel expenses and the like possibly. The last company I worked for gave you around a $400 per week per diem when traveling on site for events (production audio). This covered your meals, gas, misc. expenses that may come up while out on the road.

Joe Hasik, CSWP
SW 08 x64, SP 3.0
Dell T3400
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NVIDIA Quadro FX 4600

 

[ewh]

I read it as Steve reads it.
While it doesn't seem like much, the PD is tax free.

Believe it if you need it or leave it if you dare. - [small]Robert Hunter[/small]

 

[KENAT]

Agree with others, Per Diem is your expenses e.g. board & loding. Many contractors work away from home and so incur lodging expenses etc.

Given that the 'per diem' is tax free it's better to have it like that than just a slightly higher hourly rate.

KENAT, probably the least qualified checker you'll ever meet...

 

[cvg]

Not all PD is tax free, only that up to the allowable federal rate...

http://www.irs.gov/newsroom/article/0,,id=164208,00.html

 

[ValveEngineer123]

I agree as well, per diem is on top of your regular salary, and its tax free.

Per diem should cover your living expenses while you are at the work site plus travel back and forth home on weekends. It really depends on how far away the work location is to determine whether the per diem rate is acceptable or not. For example, if you drove 150 miles to the work location on Monday, stayed at a rented apartment during the week and drove home on Friday, $116/day should be enough to cover all your expenses and then some. If, however, you needed to take a return flight from home to work every week and get a rental car, $116/day probably wouldn't be enough (obviously the two scenarios depend on how much rent would be where you are working, cost of the flight...etc.). Why does your per diem decrease to $81/day after 2 months? It should be at least $100/day, if not more.

If your per diem money exceeds your expenses, you are in good shape, otherwise you would need more per diem or risk incurring out of pocket expenses.

The advantages of having a per diem is that usually it ends up covering expenses that you would have spent out of pocket anyways (i.e. gas, food) and the result is you end up saving more of your normal base salary. Downside is it normally means you're away from home (which some people don't mind so much).

Hope this helps

 

[ykee]

Steve - what's red roofing?

 

[zdas04]

Staying in "less expensive" hotels. The Red Roof Inn advertises very reasonable prices.

I've seen the per diem rate change after a fixed period, usually because they will accept short-term stays in a hotel, but if you're going to be there over 2 months you probably should get something with a monthly rate (and do your own laundry). I always thought it was pretty chicken.

David

 

[SomptingGuy]

"Red Roofing": a reference to the lower priced end of the hotel market. Generally clean and adequate. But never opulent. Breakfast consists of weak coffee in a styrofoam cup from reception. No "executive" TV channels.

- Steve

 

[IRstuff]

Had a customer who claimed that his food per diem had to equal his bar bill. Needless to say, his boss wasn't too thrilled about that.

But, yes, per diem is in addition to your salary, and, can come in two basic flavors: "actual" and "normal and customary." If the former, then you'd get reimbursed for actual expenses by turning in receipts, not to exceed the per diem limit, although some will allow variances for any single day so long as the average is under the limit.

If the latter, then you'd simply get the per diem added to your pay, which would clearly be better all around; less paperwork and no "float." However, if your actuals are less than per diem received, the excess is hypothetically taxable, since the correct per diem is supposed to leave you revenue neutral after expenses.

TTFN

FAQ731-376

 

[Gymmeh]

Ahh so thats not bad then

So it really readys
$19-$25 X N hours worked + $115 = Daily pay

That could be very nice... I will have to crunch some number.

Thanks guys!

 

[Zapster]

I thought that per diem was only tax free if you are an employee. I work as a contractor and I claim my per diem as taxable income; however, I do itemize my trip expenses such that they are deductible. Several of the folks that I do contract work for provide per diem; however, they also include the amount on their/my 1099. Perhaps I have a major misunderstanding. Seems like this thread is mixing contract workers with employees. Gymmeh is talking about contracting work where per diem may not be deductible; however, actual trip expenses are deductible.

 

[KENAT]

Zapster, you may be correct thinking about it.

But if you're a contractor thru a job shop then which camp do you fall into?

Wouldn't you be an employee of the job shop and as such the per diem within any applicable limits, is tax free?

By the way, getting an apartment isn't always cheaper than hotel rooms, although just renting a room probably is if you can do the whole room mate thing.

KENAT, probably the least qualified checker you'll ever meet...

 

[ewh]

Zapster brings up a good point. In my situation(s), I was an employee for a contract firm(s), and loosely referred to as a "contractor". My per diem was paid hourly, and, while reported on my pay stub, was not reported on my W2. I did not have to itemize.

Believe it if you need it or leave it if you dare. - [small]Robert Hunter[/small]

 

[Helicopterjunky]

In the old days when there were few real road shoppers
(contractors today) most of these guys got a hourly rate plus actual living and travel expenses. This turned out to be pretty costly. However, back then shoppers were really hired for a specifc duration job, not long term phoney contract employment like today. Job might be two days or four months and once the specified job was done or the money ran out the shopper was gone. Completely at will. The shoppers were responsible for paying their own medical and life insurance. So the shops came up with a way to make it sound better and less costly to the customers. They used an IRS regulation which allows them to split out up to the maximum location specific per diem (per day) rate specified normally for government employees (food plus lodging)
and give that amount tax free in addition to the hourly rate to the contractor. See GSA web site for per diem allowed by location. This per diem should not be shown on year end W-2 from the shop. The IRS stipulation is that the employment has to be temporary (cannot last a day over one year) and you must be working at least 50 miles from your tax home, usually your home address. Of coarse, the shops try to rip off new contractors by telling them they can only split out part of the allowed per diem or only pay perdiem five days a week instead of seven. They also tell them they do not pay one way travel expenses to the job..on and on...... The IRS views per diem to be used by the temporary worker to cover real lodging and food
expenses while working out of town. If you get audited you better have receipts to show your living costs or some of your tax free money can be disallowed. If you stay on the job for one day over a year it can all be disallowed as the employment was not truly temporary. If you stay under the allowed GSA rate you will most likely not get audited unless the shop gets in trouble with the IRS. This is how per diem split works today. Your rate is probably lower than most real shoppers. The shop pays the employer portion of Social Securiy and Medicare. Other than that the shop is just the payroll processing center. The actual employer has no liability for health care, pension or anything else so they love it. If times get rough the contractors were often the first to go out the door but not neccessarily today. Hope this explains how per diem split works today. Good Luck!

 

[Helicopterjunky]

Whoops,
I should have mentioned what I am describing is called a W-2 contractor. There is also a 1099 contractor but that is another story. Basically, a 1099 contractor pays both employer and employee portion of social security and Medicare and everything else. A 1099 contractor gets a much, much higher rate than a W-2 contractor. You don't see many 1099s as the rate required to get someone to show up is much higher.

 

[ewh]

Good information, Helicopterjunky. This is indeed how I remember it working, though when a skillset demand gets high, some shops will negotiate some limited benefits to get the bodies they need.

Believe it if you need it or leave it if you dare. - [small]Robert Hunter[/small]

 

[Gymmeh]

Helocopterjunky
SO their saying the rate drops from $116 to $81.20 after 60 days, Means they would be ripping me off? When in reality I should get the $116 for up to a year?

"The per diem for this assignment is $116/day for the first 60 days and $81.20/day there after."

 

[ewh]

I don't think it's so much you SHOULD get that, so much that the IRS ALLOWS that.

Believe it if you need it or leave it if you dare. - [small]Robert Hunter[/small]