The General Services Administration (GSA) sets the rate recommendations for per diem. The rates are not law; your actual per diem rate may vary depending on your employer and where you’re traveling.
If you’re new to per diem or just curious about how it works, you’re in the right place. This guide will give you everything you need to know about how your employer calculates per diem. We’ll cover what counts as a travel day, taxes, and more.
So whether you’re considering taking a per diem job or just want to learn more, keep reading!
What Is Per Diem?
Per diem is a Latin term that literally means “per day.” In business, per diem is often used to refer to a daily allowance given to employees to cover expenses while traveling for work. Per diem can also be used more broadly to refer to any allowance given on a daily basis, such as an allowance for food or lodging.
What is Business Travel Per Diem?
When an employee travels for business, their employer may give them a per diem allowance to cover food and lodging costs. The allowance amount is typically based on the location of the travel and the length of the stay. For example, an employee traveling for business to New York City may receive a higher per diem allowance than an employee traveling for business to a small town.
Business travel per diem allowances are typically given in addition to the employee’s regular salary or an hourly wage. The allowance covers extra expenses that the employee incurs while traveling, such as the cost of meals not provided by the employer and the price of a hotel room.
What are Per Diem Rates?
Per diem rates are the daily allowances that employers give employees to cover food and lodging costs while traveling for business. The rates are typically based on the location of the travel and the length of the stay. For example, an employee may get $110 per day for food and travel costs for every day of an overnight trip or $55 per day for food and travel costs if they are not staying overnight.
Things to Know About Per Diem Rates
When an employer gives their employees a per diem allowance, there are a few things that the employees should keep in mind:
- The per diem allowance is meant to cover the extra costs of business travel, such as the cost of meals and lodging. It is not meant to cover the cost of transportation or other expenses.
- The per diem allowance is typically given in addition to the employee’s regular salary or hourly wage.
- The per diem amount may vary depending on the location of the travel and the length of the stay.
- The per diem allowance is considered taxable income by the IRS.
- Employees should keep track of their expenses while traveling to accurately report the amount of the per diem allowance they use.
Per diem rates may differ depending on your length of stay and location. Employees should check with their employer to see what the per diem rates are for their business travel.
Types of Per Diem Rates
There are two main types of per diem rates: the federal per diem rate and the non-federal per diem rate.
The federal per diem rate is set by the General Services Administration (GSA) and is used by many employers, including the federal government. The federal per diem rate for a particular location is the maximum amount an employer can reimburse an employee for food and lodging expenses.
The non-federal per diem rate is not set by the GSA and can be used by any employer. Non-federal per diem rates may be higher or lower than the federal per diem rate for a particular location.
Employees should check with their employer to see what type of per diem rate they will get for their business travel.
How Is Per Diem Pay Calculated on Travel Days?
There are a few different ways to calculate per diem. The most common method is to base the per diem on the federal per diem rates set by the General Services Administration (GSA). These rates are updated annually and consider the cost of lodging, meals, and other incidentals.
Another common method is to base the per diem on a percentage of the employee’s regular salary or hourly wage. For example, an employer may give their employees a per diem allowance equaling 50% of their regular salary while traveling for business.
Employees should check with their employer to see how they calculate the per diem pay.
Per Diem Guidelines
When an employer gives their employees a per diem allowance, there are a few guidelines that the employees should follow:
- Employees should keep track of their expenses while traveling so that they can accurately report the amount of the per diem allowance that they have used.
- Employees should only use the per diem allowance for business expenses, such as the cost of meals and lodging. The per diem allowance is not meant to cover the cost of transportation or other personal expenses.
- Employees should check with their employer to see what the per diem rates are for their business travel.
- Employees should keep track of their expenses so that they can accurately report the amount of the per diem allowance that they have used.
Frequently Asked Questions on Per Diem
Here are the most common questions we get about Per Diems.
Are Employers Required to Offer Per Diem?
No, employers are not required to offer per diem payments. Per diem is simply a way for employers to reimburse their employees for business travel expenses in a tax-free and convenient manner.
Is Per Diem Taxable?
No, Per Diem is not taxable. The IRS considers Per Diem a “working condition fringe benefit,” and as such, it is not subject to income or payroll taxes.
Is Per Diem Considered Income?
No, Per Diem is not considered income. Again, Per Diem is a “working condition fringe benefit,” according to the IRS. Therefore it is not subject to income or payroll taxes.
Can You Write Off Per Diem?
Employees cannot write off per diem payments on their taxes. On the other hand, employers can write off Per Diem they pay their employees.
Do You Report Per Diem on a W-2?
No, Per Diem is not reported on a W-2. Since Per Diem is not considered income, employers do not need to report it on their employees’ W-2 forms.
How is Per Diem Calculated for Truck Drivers?
The per diem for truck drivers differs from the per diem for other types of business travel. The IRS has a special set of rules for calculating the per diem for truck drivers. Basically, the per diem for truck drivers is a flat rate, regardless of where they are traveling. For 2022, truck drivers’ current per diem rate is $66 per day.
How to Calculate Per Diem Military
The per diem for military members differs from the per diem for other types of business travel. The Department of Defense (DOD) has a special set of rules for calculating the per diem for military members. For 2022, military members’ current per diem rate ranges from $155 to $800 per day.
Conclusion
Per diem is a way for employers to reimburse their employees for business travel expenses in a tax-free and convenient manner. There are a few guidelines that employees should follow when using per diem, such as keeping track of their expenses and only using the allowance for business expenses. Employers are not required to offer per diem, but it is a popular benefit among employees who travel for work. Looking for corporate lodging to house your employees while they travel? Globeo is the most trusted full-service lodging resource for mobile workforces today. We can find lodging rates to help optimize your employees’ per diems.
