Per Diem - Hourly Per Diem Calculation

Hourly Per Diem Calculation

In occupations that pay an hourly wage, per diem is calculated as an hourly rate and paid in addition to the contractor's base pay.

The following example demonstrates the method for calculating hourly per diem rate assuming a 40 hour work week with consecutive weeks onsite:

Standard Lodging: $80/day

Standard Meal: $20/day

Per diem Rate = (lodging + meal) * 7 days / 40 hours

= $100/day * 7 days / 40 hours

= $17.50 / hour

Some contract staffing companies pay contractors an all-inclusive rate in order to avoid the accounting complexity of per diem tax deductions. Thus, assuming a base salary pay of $55/hour for example, then the contractor's all inclusive pay rate is:

Pre-tax Inclusive Rate = Base Rate + (Per diem Rate * Tax Bracket Factor)

= $55/hour + ($17.50/hour * 1.33)

= $78.28/hour

Per diem tax deductions are an effective tool for sheltering the client company from paying the additional costs of per diem out of pocket. Instead of transferring the per diem burden onto the government through a tax deduction, the burden is shifted back to the company, which in turn refuses to pay, which in turn means that the entire burden of per diem and maintaining a temporary second lodging away from home falls entirely on the contractor. Thus, the contractor's pay is reduced to:

Base Rate - Per diem Rate

For example, at a base rate of $55/hour and a per diem rate of $17.50, the contractor's rate becomes:

$55/hour - $17.50/hour = $37.50/hour