How Does Contract Per Diem Work?

The term "per diem" is Latin that means "by the day," and a per diem contract is an agreement that stipulates the daily allowance given to you while working away from home. This allowance covers your costs for meals, travel, hotels and other small expenses, and the amount you are given depends both on where you are going and who is footing the bill. Sometimes funds are dispensed for the trip, and sometimes you must pay out of pocket, but keep records for reimbursement. Whatever the amount of your allotted per diem, the basic guidelines generally remain the same across companies and agencies.

Per diem covers your unavoidable expenses while traveling for work. According to your contract, you are afforded a certain amount of money each day to cover your travel, hotel accommodations and meals. The amount of your per diem is a maximum, not a requirement. For example, if you are given a $70 per diem allowance for meals, you cannot spend more than that amount. If you do, you will not be reimbursed for the overage by the agency or institution issuing your per diem.

Incidentals are included in your per diem. These are small expenses that are generally unavoidable when traveling. For example, tips given to bellhops and waiters are considered incidentals, as is transportation between your living accommodations and wherever you go to eat. Incidentals are sometimes categorized with your meal per diem, which forces you to budget appropriately for short travel and tipping.

Because of the varying costs of travel in different geographical areas, your per diem may increase or decrease depending on where you are going. For example, per diem rates issued by the U.S. government, which some businesses use to gauge their own per diem rates, may allow for as much as $295 per day for you to stay in a New York City Hotel. If you are staying in a Detroit hotel, though, you may only be issued $95 per day for your accommodations.

Per diems are not universal. The amount you are issued depends not only on where you are going, but on who is sending you there. The U.S. government sets and regularly adjusts its own per diem standards for federal employees, as do universities and independent businesses for their employees. Before you take on an assignment that includes a per diem, you usually must sign a contract or agreement that specifies your per diem and stipulates that you agree to the terms.