What Is a Per Diem Charge?

by Leah Overton; Updated July 27, 2017
Understanding per diem charges allows you to better budget.

Per Diem charges are used in business. Many companies will give a "per diem" amount for their employees that travel. Per diem interest charges are also seen on mortgage closing statements. Consultants can also charge their clients a per diem amount that pays them for each day of work they do.

Per Diem Given to Traveling Employees

There are two common methods that employers use when paying for their employees business travels. One is to have the employee keep track of all expenditures and receipts during their business trip and reimburse them at the end. This involves a lot of work and accounting. Many companies have switched over to giving employees a "per diem rate" which allows employees a set amount of money to spend per day on their lodging, food and transportation. This allows companies to keep accounting to a minimum.

Per Diem on Mortgage Closing Statements

A per diem charge is often seen on a mortgage closing statement. This amount is calculated by taking the total amount of annual interest divided by 365 to arrive at the amount of interest charged per day or per diem. Per diem interest is charged from the date of closing on the loan until the end of the month when the interest will begin to be included in monthly mortgage payments. For example if a loan closes on March 29, per diem interest will be charged on the mortgage closing statement for three days, March 29, 30 and 31.

Consultants Per Diem Charge

Many business consultants use a per diem charge to bill their clients. A per diem charge is the amount they expect to be paid for one day of work. This allows them to bill daily instead of billing by the hour. This per diem charge takes many factors into account such as: time and materials used for consulting, daily office expenses and often a margin for bad debt. Per diem fees are straight forward which is why they are often used by consultants.

Benefits to Per Diem Charges

Per diem charges when used for business trips and by consultants can be very beneficial. Having a set fee helps a business ensure that their employees aren't charging too much when traveling for business. It also helps to avoid the hassle of accounting necessary when employees turn in receipts to be reimbursed. Consultants use of per diem charges mean that there likely won't be surprises when billing a client. Everything should be included in one flat daily fee that allows everyone to be on the same baseline.

About the Author

Leah Overton has been writing since 1998. She is certified to teach English as a foreign language and taught English in Argentina. Overton holds a Bachelor of Arts in psychology from the University of San Diego and a Master of Business Administration from the University of Colorado.

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