What Dentists Should Know About Per Diem Employee Classifications
Employee classification for your dental team can be confusing. Who gets overtime? Who is exempt? What’s the legality of it? You need to know how to classify your employees, but it’s also one of the most litigated topics in California.
The Fair Labor Standards Act (FLSA) was first passed in 1937, but it has been amended a few times since then. While states have wage laws as part of the Labor Code, California has its own wage orders for every industry. So you should check to make sure that your dental practice is compliant for your state.
What Is Per Diem Employee Classification?
From a compliance standpoint, per diem is a method of compensating non-exempt employees. Per diem is essentially “per day,” so your employee receives a flat rate of pay for the entire day of work, regardless of the number of regular hours they worked. The per diem rate does not cover any overtime. If your dental practice is in a state like California, Alaska, Colorado, and Nevada, which have daily overtime requirements, you pay your employees for the overtime incurred on top of the flat daily rate. A comprehensive HR & timekeeping solution, such as HR for Health, has an Overtime Tracking feature that can help.
It’s important to understand the nonexempt employee classification, because it applies to your dental assistants and hygienists as well as your treatment coordinator, financial coordinator, and even your scheduling coordinator. Schedule a consultation to find out how to best assess your employee classifications.
While we recognize that it is best practice to pay per diem to employees, many dental practices accidentally classify these employees as exempt. They think per diem is a salary, which is inaccurate. A salary, per the federal DOL, is at minimum a weekly fixed amount that the employee receives (it can be a monthly salary, but the minimum is that it be by week). Per diem is a compensation method for nonexempt employees, not exempt ones.
Advantages and Disadvantages of Per Diem Employment
You may consider the per diem employee classification a benefit, because it's an easy way to compensate your front-line employees. It may also appear relatively uncomplicated. That may be because your dental practice, like so many others, probably does not handle per diem correctly. Schedule a consultation to find out if you need to reassess your nonexempt employees.
That’s where the disadvantage comes in. We don’t recommend using per diem, because it’s only beneficial to your dental practice if your nonexempt (per diem) team members can fill up their day with a constant flow of patients. If it’s slow, you might send your employee(s) home, but they still get paid the daily rate. Even if you keep the employee all day and give them “busy” work, you still must monitor their meal and rest breaks while tracking their overtime as a nonexempt employee.
Misclassifications of Per Diem Employees
Per diem employee classification is a “best practice” for many dental practices, but that may be because you’re not compliant with how you’re classifying your nonexempt employees like hygienists. If you misclassify your employees, you will need to determine what to do. There are a couple of options you can pursue:
- Correct the error and provide back pay to address the ongoing misclassification.
- Provide the correct classification now, and apply it to new employees as you move forward.
While the second option could save you time and money in the short term, we recommend that you proceed with option one if you want to avoid legal risk.
Per Diem vs. Independent Contractor
Most of your employees will not qualify as independent contractors (ICs) per federal requirements, according to the Borello factors. There are also states, like California, that have their own method for assessing the classification status of an IC. Per diem employees (e.g., hygienists, dental assistants) are NOT ICs, because they are under your control and direction.
How to Manage Per Diem Employees
In some ways, per diem employees are just like any of your other employees. There are some important considerations that you need to remember for per diem employee classification.
- Maintain written policies and procedures specific for per diem employees as part of your employee handbook.
- Make sure every employee in your practice is on the same page regarding schedules, leave, and any issues that could arise.
- Document disciplinary actions.
- Carefully record and keep written documentation of instances where employees call in sick, leave work early, and when they resign.
- Ensure that your per diem employees are taking their required rest breaks and meal breaks
- Keep track of overtime hours worked, including daily overtime if applicable to your state.
If you use per diem employees all the time, you might want to reconsider your per diem employee classification. You can reclassify them as full-time or part-time employees to avoid costly issues.
Why Should Dental Practices Care About Per Diem Employee Classification?
You should care about per diem, because the per diem employee classification and the execution of the tasks associated with these classifications affect your bottom line. You need to be able to adjust the schedules and workflows of your employees depending on how busy you are. If you’re paying them via per diem, you may be paying them to stand around, which is not cost-effective or productive.
Additionally, if you are misclassifying per diem employees as independent contractors or you are not paying per diem employees overtime, you are inadvertently setting yourself up for a lawsuit.
How HR for Health Can Help
Our software can accurately track hours worked, meal breaks, and overtime for per diem employees. If you ever need assistance with performing an analysis of “exempt” classifications, we can help assess whether a position qualifies as an independent contractor. Schedule a consultation today to see how HR for Health can help your practice with per diem employee classification.