![]() For instance, if an employee prefers to stay in a nicer hotel and spend less money on meals (or vice versa), they can do so by balancing their per diem spending. All of these expenses may be considered at least partially tax deductible for the business.Ī per diem policy gives employees some flexibility in their travel accommodations and meals, as they can typically choose to spend their money however they’d like on any covered expense. Occasionally, it will also cover the means of travel itself. ![]() This allowance typically covers lodging, meals and incidental expenses. There are two ways the term “per diem” is used in business: reimbursements and employees.Įditor’s note: Looking for the right payroll service for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.Ī per diem reimbursement is when a business gives a daily stipend or allowance to an employee to cover certain expenses incurred as part of their job. From reimbursements to a type of employee, here is a comprehensive guide to per diem in the workplace. To add to the confusion, the term can be used in multiple ways. While many have heard the Latin phrase “per diem” (which means “by the day”), not everyone has a thorough understanding of what it is and how a per diem is used in business. This article is for business owners who want to understand how to create a per diem policy, set per diem rates and properly handle per diem reimbursements.If a company uses the government’s per diem rates, the employee has no other tax implications, but if the company gives more, the excess amount is taxable income.The federal government sets per diem rates for a company in relation to lodging, food and incidentals.A per diem reimbursement is when a business gives a daily stipend or allowance to an employee to cover expenses, usually during travel.
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