Work-related travel can be either a perk or a burden depending on the destination and the nature of the work there. Employees who travel may be liable for their own expenses, or they may receive compensation from an employer. Employers who pay for employee travel expenses can reimburse costs, provide employees with expense accounts or offer per diem payments in advance of travel. "Per diem" is Latin for "per day" and comes in the form of a flat rate for each day of travel.
Employers are responsible for setting their own per diem policies in terms of which employees receive payment, and how much they receive. Employers are free to choose between reimbursing employees after their travel and paying per diem in advance -- if they opt to offer compensation for travel at all. In addition, employers can set limits that regulate how much an individual employee can receive in per diem over the course of a year or on a single trip. As with work assignments and other forms of compensation, employers face fines and legal action if they discriminate among workers on the basis of gender, race or religion when they pay out a per diem.
Per Diem Allowances
The U.S. Department of state offers a list of per diem rates, known as per diem allowances, as a guide for employers. These rates vary based on the location to which an employee travels. The per diem allowance lists dollar amounts for food and lodging in each location. States provide their own per diem allowances, which may be higher or lower than federal allowance levels. However, state allowances typically refer to travel within the state, while federal allowances list per diem rates for foreign travel.
The Internal Revenue Service, as well as state departments of taxation, require employers to report per diem pay for tax purposes only when it exceeds the per diem allowance. Employers who offer per diem rates at or below the state and federal allowance levels don't need to report the payment, nor do they need to add it to payroll records. Likewise, workers who receive per diem need not claim it for income tax unless it exceeds the government allowance. However, taxpayers may not write off businesses expenses covered by per diem or reimbursement payments from their employers.
Since per diem payments are intended as a perk for employees who travel, those who receive per diem can use it however they wish. Some of the most common ways to use per diem include paying for hotels, meals, taxis and parking. Employees who exceed their per diem must usually pay the difference of their travel expenses out-of-pocket. On the other hand, those who travel modestly can keep the additional per diem payment they don't spend. Employees can pay for travel costs with per diem cash (or the cash they get for cashing a per diem check) or with a personal credit card, using the per diem to pay off the balance later.
- Arizona State University: Per Diem Reimbursement
- U.S. General Services Administration. "Frequently Asked Questions, Per Diem." Accessed Nov. 25, 2019.
- U.S. General Services Administration. "Federal Travel Regulation, Section 300-3.1," Pages 22 and 71. Accessed Nov. 25, 2019.
- U.S. General Services Administration. "M&IE Breakdown." Accessed Nov. 25, 2019.
- U.S. General Services Administration. "FY 2020 Per Diem Rates for Georgia." Accessed Nov. 29, 2019.
- U.S. General Services Administration. "FY 2020 Per Diem Rates for Illinois." Accessed Nov. 29, 2019.
- U.S. General Services Administration. "Factors Influencing Lodging Rates." Accessed Nov. 25, 2019.
- U.S. General Services Administration. "FY 2020 Per Diem Rates for New York." Accessed Nov. 29, 2019.
- U.S. General Services Administration. "FY 2020 Per Diem Highlights." Accessed Nov. 25, 2019.
- Internal Revenue Service. "Notice 2019-55," Page 3. Accessed Nov. 25, 2019.
- Internal Revenue Service. "Per Diem Payments Frequently Asked Questions," Page 2. Accessed Nov. 25, 2019.
- Internal Revenue Service. "Topic No. 511 Business Travel Expenses." Accessed Nov. 25, 2019.