Per Diem: A Comprehensive Guide to Rates and Reimbursements

For those who frequently travel for business, understanding the term “per diem” is crucial. It refers to the daily compensation employees receive for travel-related expenses.

Key Points:

  • Per diem, derived from Latin meaning “by the day,” denotes a daily allowance for business travel or a daily wage compensation model.
  • The U.S. General Services Administration (GSA) often sets standard per diem rates.
  • Per diem rates cover various expenses such as lodging, meals, transportation, and incidentals.

Understanding Per Diem

Definition: Per diem is a daily allowance given by employers to employees to defray the costs of business trips, encompassing transportation, meals, lodging, and incidental expenses. While it traditionally refers to travel allowances, it can also denote daily wage compensation, especially for temporary or short-term roles.

Payment Methods: Typically, companies use checks or company credit cards to disburse per diem allowances. In the absence of a company card, employees can use personal funds and later get reimbursed.

How Does Per Diem Work?

  • Recipients: Both domestic and international travelers within a company, including contractors and freelancers on off-site projects, may receive per diem.
  • Expenses Covered: It can wholly or partially cover lodging, meals, transportation, and other incidental costs.
  • Calculation: The GSA’s standard federal rates often guide companies in setting their per diem rates. Alternatively, some might use the high-low method, adjusting rates based on a location’s living costs.
  • Disbursement: Typically, employers provide per diem upfront, either as a check or a credit limit on a company card.

Types of Per Diem

  • Government Per Diem: Standard rates set by the U.S. GSA for federal employees, often adopted by private businesses.
  • Corporate Per Diem: Specific allowances companies provide, which may deviate from federal rates.
  • International Per Diem: Adjusted allowances for employees traveling outside the U.S., accounting for regional cost differences.

Per Diem vs. Reimbursement

While per diem is a pre-determined allowance, reimbursements occur post-expense. Companies might not cap reimbursements but can restrict claimable expenses.

Per Diem Jobs

These roles offer daily compensation and often cater to on-demand workers. Examples include substitute teachers and travel nurses. Such jobs offer flexibility but may lack standard benefits like health insurance.

Effective Per Diem Usage

  • Anticipate varying expenses based on travel location.
  • Aim for consistent daily spending.
  • Set aside personal funds for non-work-related activities.
  • Report any unspent per diem on taxes.

Benefits of Per Diem

  • Simplified expense tracking without hoarding receipts.
  • Clarity on allowable spending before trips.
  • Possibility to retain unspent amounts, with tax implications.

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