Per Diems and Disguised Overtime
Employers will often use excessive per diems or other forms of “so-called” reimbursements to avoid paying employees overtime compensation. This common practice occurs frequently and prevent employees from receiving all of the overtime wages they are do.
What are “per diems”?
Per diems are intended to reimburse workers for travel time, meals, mileage and gas incurred while performing their regular work activities. However what happens when employees receive per diems—but don’t travel, stay in hotels, or drive long distances? In these situations, employers are required to treat the per diems or additional payments as wages. Why does this matter? Because if the extra income is treated as wages, it must be included in the formula used to determine the correct overtime rate.
What does this mean? Overtime is calculated based on an employees regular rate of pay. The regular rate of pay is based on the total compensation the employee received divided by the total hours that they worked. The more compensation an employee receives the higher his hourly rate will be. If employers are using per diems and reimbursements improperly and these amounts are not being included in the overtime formula, then the employee is receiving less overtime than he or she is owed.
Employers use this practiceto avoid increasing the amount of overtime individuals are owed.
If they improperly exclude money from the overtime calculations, then the employees are not receiving everything they are legally entitled to receive when they work more than 40 hours a week.
If you received a per diem or any other form of additional compensation, please contact us to evaluate whether you might be owed additional money.