When workers incur travel-related enterprise bills, you would possibly contemplate overlaying their prices. You possibly can reimburse workers 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 workers to cowl travel-related enterprise bills. Per diem means “for every day.” You give workers a hard and fast sum of money to cowl each day dwelling bills, together with lodging, meals, and incidental bills. Per diem may also be restricted to overlaying simply meals and incidental bills.
Workers admire per diem as a result of it permits them to journey for enterprise with out spending out of their pockets. Nevertheless, you aren’t required to supply per diem to workers.
What does per diem cowl?
You can not give workers per diem reimbursement to cowl transportation bills or mileage reimbursement. Per diem solely covers three varieties of bills:
- Lodging (e.g., lodge)
- Meals
- Incidental bills (e.g., ideas)
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 may present full per diem to cowl the price of lodging, meals, and incidentals.
You possibly can pay workers 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’d solely give them per diem for meals and incidentals.
How does per diem work?
Per diem is an alternative choice to utilizing an precise expense reimbursement methodology. As an alternative of paying workers again the precise quantity they spent on a visit (precise expense), you present the per diem fee.
You possibly can present per diem upfront earlier than the worker travels for enterprise. Or, you may give per diem after.
Although you give workers a hard and fast per diem fee as a substitute of precise reimbursement, you continue to want to gather expense stories. The expense stories don’t should be as detailed as while you reimburse workers with the precise expense methodology.
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 objective
So, how is per diem paid? Give workers the fastened per diem fee. You do not want to approve or deny an worker’s spending. Usually, workers can preserve 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 alternative ways you may decide per diem charges. You should use the usual per diem fee methodology or high-low methodology to calculate charges.
Commonplace per diem fee
The 2024 normal 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.
Take a look at the GSA’s web site for extra details about normal 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 night time 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. Bear in mind, you solely must 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 sooner or later the place you pay your worker the total quantity for M&IE.
Reimburse your worker $361.50 utilizing the usual fee. Take a look at a breakdown of the per diem bills beneath.
$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
Complete per diem pay = $361.50 ($214 + $59 + $88.50)
Excessive-low per diem methodology
The high-low per diem fee means the per diem fee is larger in sure cities than others. This per diem methodology 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-about high-cost. Giant cities with a better price of dwelling have excessive charges (e.g., New York Metropolis).
Charges for the high-low methodology change annually. Look out for brand spanking new high-low charges yearly. And since high-low per diem charges are primarily based on the price of dwelling, lodging charges can change from month to month. In months the place resorts cost extra, the per diem fee is larger.
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 possibly can evaluate Discover 2023-68 for different cities which are thought-about 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 may 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 for those who give the worker a flat quantity. The surplus is taxable for those who give an worker above the utmost per diem allowance.
Don’t embody per diem in an worker’s wages on Kind 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 preserve per diem data, like expense stories.
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This text has been up to date from its authentic publication date of October 23, 2017.
This isn’t meant as authorized recommendation; for extra data, please click on right here.
