What is per diem income? Per diem is additional income that employees receive on a daily basis based upon some compensable factor. In the case of part-time staff, that compensable factor is lacking benefits.
It is estimated that full benefits make up from15-40% of payroll cost for a fully-benefited employee. If you could give just 10% of that amount to a part-time employee on an hourly basis, you would still save money compared to giving full benefits; but you still give them an added reward.
Why It Is Worthwhile to Reward Part-Time Employees
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Part-time employees often have some extra challenges when it comes to staying motivated in their work. Barriers to success include:
- not earning benefits for themselves, their spouse or dependents.
- often dealing with complex, inconsistent scheduling.
- less time with their colleagues and bosses than full-time workers.
- a general feeling that they aren’t as much “in-the-know” about what is going on with the company and their department.
All these factors can lead to a higher turnover rate which, in turn, can cost you money. When an employee leaves, you then must spend precious resources to recruit new talent, interview several people and then train your new hire – plus, you experience slower productivity until your new employee is up to speed.
Wouldn’t it be easier to simply keep your current part-time employees loyal to your company?
An Example of Paying Part-Time Workers More per Hour
When looking at a salaried worker versus an hourly worker’s income for the same position, you will often see that the hourly rate for a fully-benefited, salaried employee is less than the hourly rate for a part-time employee without benefits. This is evidence that companies know to make up for missing benefits, at least somewhat, with increased hourly pay.
Let’s take an example from PayScale’s compensation data. We’ll research the annual median salary for a secretary with 5-9 years of experience on both an hourly and a salaried basis.
According to an hourly rate chart, a secretary would make $12.03 per hour. If you multiply that number by 2080 (the typical number of hours worked by a full time employee in a calendar year) then you get a yearly salary of $25,022.
If you look at a chart for a salaried secretary with the same number of years of experience, the median salary is $24,468 per year.
The difference between the median annual salary at an hourly rate verses a salaried rate is about $554 a year. While not a large amount, it does represent that some companies may be paying higher hourly rates for hourly or part-time workers. As previously stated, the bump in pay for an hourly, part-time worker is typically not enough to make up for the lacking benefits, just offer a bit more compensation for retention and motivation.
How to Calculate a Per Diem Increase in an Hourly Rate
To apply this information about increased hourly pay, you need to know how much you want to pay as a per diem over and above the hourly rate for part-time workers. This amount will vary on many factors. These factors can include:
- the value of the companies benefits package (if the part-time employee is not eligible).
- the degree of difficulty in recruiting or retaining part-time workers in this job category.
Let’s look at an example of determining per diem pay. If your part-time employees are not eligible for benefits, and your benefits package is typically 25% of your payroll costs, then a part time employee who works in a position that typically pays $15 an hour would cost your organization $18.75. So, the value of the per diem could be as high as $3.75 an hour and your company is still cost neutral. However, if your goal is to save money by hiring part-time workers, or if you typically do not have difficulty hiring for this role on a part-time basis, then you may want to consider a lower per diem.
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