What are Per Diem Expenses?
In simple terms, per diem expenses refer to daily allowances given to employees covering meals, accommodation, and incidental expenses while they travel for business. Rather than reimbursing these expenses individually with detailed receipts, employers often prefer setting a fixed daily amount for simplicity.
Why Use Per Diem Expenses?
Employers typically choose per diem expenses because it streamlines administrative tasks, reduces paperwork, and ensures predictability in budgeting. Employees also benefit, as they avoid keeping track of minor expenses and filing numerous receipts.
How Per Diem Rates are Set
Per diem rates usually depend on the destination and the typical cost of living there. Employers may use established guidelines available from government agencies (e.g., the U.S. General Services Administration) or industry recommendations. Rates may differ according to location, season, or company policy.
Tax and Compliance Considerations
Properly structured per diem expense payments are normally not taxable for employees, provided limits established by the local tax authorities are followed. Employers and employees must clearly understand these limits to ensure compliance.
Ultimately, per diem expenses offer efficiency, reduced overhead, and clear expectations for businesses and their employees.
