Often in the temporary staffing industries, we hear of travelers getting a raise. Not that kind of a raise. Not in wages, but in per diems.
There are many ways an agency can inadvertently treat per diems as wages and this is one of them. Say a traveler has completed a 13 week assignment and decides to extend. If the bill rate is the same, there are some additional funds that otherwise would have gone to start up costs if this was the first assignment for the traveler at the facility/outlet. With this extra cash, the agency can give the traveler a raise for staying on or as a bonus. However, some agencies give the traveler a boost in the per diem for meals or lodging.
The problem with this is twofold: 1) There is no business justification for the increase in per diems when the travel market is steady. Per diems are expense reimbursements and once set, a change in expenses for lodging and meals is necessary to justify the increased per diem. You will see this in resort towns but not those areas that have a steady population. 2) If an employer is paying the per diem by the hour to begin with, raising the hourly per diem is just more evidence to this practice. Yes it saves almost 10c on the dollar in payroll taxes, but there is no business necessity to justify this.
This not only raises the ire of the IRS, but also the Department of Labor (DOL). Read through the provided DOL case linked below. Ignore the low wages and just focus on the per diem “raise” and the evidence it gives the DOL. The company was eventually dinged for the low wages but only because its raise in the per diem showed the real intent of the wage amount.