When staff incur travel-related enterprise bills, you may think about masking their prices. You may reimburse staff for bills by giving them per diem pay. What’s per diem pay?
What’s per diem?
Per diem is a each day allowance you give staff to cowl travel-related enterprise bills. Per diem means “for every day.” You give staff a hard and fast amount of cash to cowl each day residing bills, together with lodging, meals, and incidental bills. Per diem will also be restricted to masking simply meals and incidental bills.
Workers recognize per diem as a result of it permits them to journey for enterprise with out spending out of their pockets. Nonetheless, you aren’t required to supply per diem to staff.
What does per diem cowl?
You can not give staff per diem reimbursement to cowl transportation bills or mileage reimbursement. Per diem solely covers three kinds of bills:
- Lodging (e.g., resort)
- Meals
- Incidental bills (e.g., dry cleansing)
Workers obtain full per diem in the event that they want reimbursement for lodging in addition to meals and incidental (M&IE) bills. Let’s say an worker working in Ohio must journey to New York for the weekend. You possibly can present full per diem to cowl the price of lodging, meals, and incidentals.
You may pay staff a lesser per diem fee that solely covers M&IE if they don’t have to pay for lodging. For instance, if an worker stays with household, you’ll solely give them per diem for meals and incidentals.
How does per diem work?
Per diem is an alternative to utilizing an precise expense reimbursement technique. As a substitute of paying staff again the precise quantity they spent on a visit (precise expense), you present the per diem fee.
You may present per diem prematurely earlier than the worker travels for enterprise. Or, you can provide per diem after.
Although you give staff a hard and fast per diem fee as a substitute of precise reimbursement, you continue to want to gather expense studies. The expense studies don’t have to be as detailed as whenever you reimburse staff with the precise expense technique.
Workers are required to file an expense report and provides it to you inside 60 days of utilizing their per diem. The expense report ought to embody the next data:
- Date, time, and place
- Quantity of bills
- Enterprise goal
So, how is per diem paid? Give staff the mounted per diem fee. You do not want to approve or deny an worker’s spending. Generally, staff can hold any unused per diem cash.
Federal per diem charges
Authorities per diem charges change yr to yr relying on IRS Publication 1542. Charges are up to date annually and go into impact on October 1. The Basic Providers Administration (GSA) gives present, previous, and upcoming nationwide per diem charges. The GSA additionally gives charges for particular localities.
There are two other ways you may decide per diem charges. You’ll use the usual per diem fee technique or high-low technique to calculate charges.
Commonplace per diem fee
Use the common or commonplace per diem fee if there isn’t a specified fee for a metropolis.
The 2024 commonplace per diem fee is $166 per day ($107 for lodging and $59 for meals and incidental bills). On the primary and final day of an worker’s journey, you solely must pay 75% of the usual fee.
Try the GSA’s web site for extra details about commonplace charges.
Commonplace fee instance
Say your worker travels to Cameron, Texas for enterprise. As a result of Cameron follows the usual fee, you reimburse your worker $107 for every evening spent in Texas for lodging (2 nights), in addition to $59 per day for meals and incidental bills (3 days).
Your worker spends three days in Texas for the journey. Keep in mind, you solely need to pay the worker 75% of the usual fee on the primary and final day of journey for M&IE. This implies you’ll solely have at some point the place you pay your worker the total quantity for M&IE.
Reimburse your worker $361.50 utilizing the usual fee. Try a breakdown of the per diem bills under.
$107 for lodging X 2 nights = $214
$59 for M&IE X 1 day = $59
$59 X 0.75 X 2 days (first and final day) = $88.50
Whole per diem pay = $361.50 ($214 + $59 + $88.50)
Excessive-low per diem technique
The high-low per diem fee means the per diem fee is greater in sure cities than others. This per diem technique makes use of one fee for high-cost localities and one other for different cities within the Continental United States (CONUS) that aren’t thought of high-cost. Giant cities with a better price of residing have excessive charges (e.g., New York Metropolis).
Charges for the high-low technique change annually. Look out for brand new high-low charges yearly. And since high-low per diem charges are primarily based on the price of residing, lodging charges can change from month to month. In months the place accommodations cost extra, the per diem fee is greater.
The 2024 high-low charges embody:
- $309 per day (together with $74 for M&IE) for high-cost localities
- $214 per day (together with $64 for M&IE) for CONUS cities
Use the speed of $309 per day if an worker is touring to a high-cost space, like New York Metropolis. You may assessment Discover 2023-68 for different cities which are thought of to be high-cost.
If the locality is just not high-cost, use the speed of $214 per day for CONUS cities.
Is per diem taxable?
As an employer, you is likely to be questioning, How does per diem work for taxes? Per diem is just not taxable. Usually, you’ll not withhold payroll taxes on per diem funds.
Per diem is taxable if an worker doesn’t present or leaves data out of an expense report. It’s also taxable if you happen to give the worker a flat quantity. The surplus is taxable if you happen to give an worker above the utmost per diem allowance.
Don’t embody per diem in an worker’s wages on Type W-2. You’ll solely embody per diem in an worker’s wages if the speed exceeds the IRS-approved most charges or the worker doesn’t present an expense report.
Be sure you hold per diem data, like expense studies.
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This text has been up to date from its authentic publication date of October 23, 2017.
This isn’t supposed as authorized recommendation; for extra data, please click on right here.
