Per diem is Latin, but its meaning couldn’t be simpler. Employees paid per diem receive pay by the day. This is usually the daily stipend given to employees who travel for work. It’s also used when employees on short-term contracts are assigned a daily rate.
Both these scenarios affect payroll, which is why HR professionals need to be aware of regulations that governper diem pay. The good news is, Paycor has collected all the information you need below.
What is Per Diem Pay and what does it cover?
Travelling isn’t cheap. Even when transportation and accommodations are covered, meals, tips and laundry need to be paid for. Accounting in advance for each individual cost is challenging.
Per diems keep things simple. Employees receive a single daily allowance. This gives employees the freedom to prioritize spending on what matters most to them. You won’t be waving goodbye to expense reports, but they won’t need to be quite so detailed.
How is Per Diem Pay Decided?
Per diem pay is usually split into three different categories:
- Accommodations
- Meals
- Incidental Expenses
If accommodations have already been paid, an employee will receive a per diem only for ‘Meals & Incidental Expenses’ (M&IE). Meals can also be split into breakfast, lunch and dinner, with different amounts assigned to each. If an employee is driving, the cost of gas should be reimbursed according to IRS mileage reimbursem*nt rates.
Federal law doesn’t, but states often require that businesses cover employees’ travel expenses. Check local regulations before creating a business travel policy. Many businesses set per diem stipends according to national guidelines. Here’s why: anything below these limits is considered non-taxable by the IRS.
For travel within the contiguous US, rates are issued by the General Services administration. Per diems for other US territories are set by the Department of Defense’s Per Diem Committee. Everywhere else in the world is decided by the Department of State.
Per Diem Rates 2022
Business can choose to follow rates specified by location. These can change according to seasonality, with different rates throughout the year. However, to keep things even simpler, there is also a general per diem rate that can be offered when employees travel to most locations in the US.
In 2022, this rate is $155. For just accommodation, the rate is $96. For only meals and incidental expenses, the rate is $59. In certain locations, known as Non-Standard Areas (NSAs), higher per diem rates apply.
Wherever an employee is travelling, businesses aren’t expected to offer a full per diem on the first and last days of a trip—they can reduce 25% from the standard per diem amount.
Per Diem Employees
Remember, per diem isn’t only used when talking about business travel. It also refers to employees who are paid by the day. Oftentimes these employees are hired on a short-term basis and offered shifts when required. This can offer useful flexibility to both businesses and workers.
When it comes to payroll, identifying who is an employee and who is an independent contractor doesn’t come down to whether someone is paid daily, weekly or monthly. All employees, even if they are paid per diem, get a W-2 and have taxes withheld. Employment rules, like overtime pay and the minimum wage for your state, still apply.
Independent contractors can also be paid per diem, but if they complete 1099 forms, they aren’t counted as employees.
Paycor is not a legal, tax, benefit, accounting or investment advisor. All communication from Paycor should be confirmed by your company’s legal, tax, benefit, accounting or investment advisor before making any decisions.
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FAQs
Per diem reimbursem*nts for travel expenses
How does per diem work for companies? ›
A per diem, from the Latin for “by the day,” is a daily allowance paid to an employee to cover costs incurred while on a business trip. Covered business expenses typically include accommodation, food, and incidental expenses such as fees and tips for services.
When applying for a job what does per diem mean? ›
A per diem job in California is a flexible work arrangement where employers employ individuals on an as-needed basis, often in temporary or part-time roles. Per diem employees do not have a regular schedule. Instead, they work the hours their employers assign them, which can fluctuate.
How do you handle an employee per diem? ›
It's generally up to you to decide how to pay per diem, but there are a few different options: Full upfront payment: You can choose to give employees the full amount of per diem through a company credit card (with a specific limit) or cash before they leave for their trip.
What does $100 a day per diem mean? ›
For example, if an employee is on a business trip and their company provides a per diem rate of $100, it means they are entitled to spend up to $100 per day on expenses related to the trip.
How is per diem paid out? ›
Employees paid per diem receive pay by the day. This is usually the daily stipend given to employees who travel for work. It's also used when employees on short-term contracts are assigned a daily rate.
Do employers have to pay taxes on per diem? ›
Companies may pay employee compensation by check, cash, or the cash value of non-cash payments. Wages are taxable by the federal government and the state of California. However, per diems are generally not considered wages. Therefore, when handled correctly, per diems are not considered taxable wages.
How to calculate per diem pay? ›
To calculate the total per diem, you multiply the number of full days worked by the full day rate and the number of partial days worked by the partial day rate, then add the two results together.
Is a per diem job worth it? ›
You won't get benefits in the traditional sense when you work per diem (such as retirement, paid vacation, and sick days), but there are still plenty of other benefits to be had – including flexible schedules, higher hourly rates, and the ability to diversify your skills and experience.
How many hours a day is per diem? ›
Per diem employees work on an as-needed basis. In other words, these employees work the hours assigned to them, which means the number of hours a per diem employee works can fluctuate. Today, a per diem employee might work six hours, and tomorrow they might work eight hours.
Per diem rates can be tied to daily lodging, meals, miles driven, or incidental expenses. Per diem rates for meals and lodging are based on geographical location. Per diem rates for mileage are set by the IRs; for 2023, the mileage rate is $0.655 per mile, and for 2024, $0.67 per mile.
What is the normal per diem rate? ›
Federal per diem rates consist of a maximum lodging allowance component and a meals and incidental expenses (M&IE) component. Most of CONUS (approximately 2,600 counties) is covered by the standard rate of $166 ($107 lodging, $59 M&IE).
Does per diem show up on W2? ›
Generally, Per diem paid under an accountable plan is not reported as income on line 1 of the employee's W-2. The employee would report both deductible expenses and employer reimbursem*nt (the per diem allowance) on Form 2106, Employee Business Expense.
What is the 300% rule per diem? ›
The law was established to protect Federal employees by fairly reimbursing them for travel expenses. In addition, if a Federal employee cannot find a room within the established per diem rates, the travel policy allows the agency to reimburse the actual hotel charges up to 300 percent of the established per diem rates.
Should per diem be paid through payroll? ›
No, there isn't a problem doing it that way. However, it is best to pay your employees per diem by adding it to their payroll. This way, you'll be able to keep track of your payroll taxes with ease.
How does per diem scheduling work? ›
According to California labor lingo, a per diem employee is an employee who doesn't have a regular schedule but instead works hours as assigned. This category of employee is common in a variety of industries including education and healthcare.
How much should I get paid per diem? ›
Per diem rates in California
| County | Lodging | Meals & Incidentals rate |
|---|
| Lassen County | $98 | $59 |
| Los Angeles County | $182 | $74 |
| Madera County | $139 | $69 |
| Marin County | $189 | $74 |
54 more rowsPer diem is an allowance paid to your employees for lodging, meals, and incidental expenses incurred when travelling. This allowance is in lieu of paying their actual travel expenses.
How do you calculate employee per diem? ›
To calculate the total per diem, you multiply the number of full days worked by the full day rate and the number of partial days worked by the partial day rate, then add the two results together.
