How to Figure Per Diem

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Per diem resonates deeply with employees and businesses because it is a form of compensation. Businesses use per diem to help cover the costs of employee travel and entertainment, especially for potential new clients. It differs from expenses in that it is allocated to the employee regardless of whether they spend the funds or not. Determining this number takes a few steps.

Work with business managers and human resources representatives to determine the items that should reasonably be consumed on a typical business trip. These include food, housing, travel and other entertainment if potential clients are involved.

Determine a typical amount for each of these items, based on your experience and the feedback of your management team. For your location, $20 per person per meal might be appropriate and $150 per night for a hotel room could also be acceptable. Add all of the allocated funds for one day's per diem.

Examine the area of the world to which your employees may travel. Use a free cost-of-living index website such as Numbeo to determine how expensive the area is. The federal government provides an index for the United States and some free international sites provide indexes for global cities.

Multiply the index by the typical day's per diem for your area. For example, if you determine that per diem in your hometown is $250 and the employee is traveling to New York which is 1.5 times as expensive as your city, the allocation would grow to $375.

Calculate the number of travel days that the employee is using. If there are partial days, divide the number of hours on travel by 24 and multiply by the per diem. Total the per diem amount each day and allocate the funds to an employee.