What is Per Diem?
Per Diem is a daily allowance that employers give to employees to cover expenses while traveling for work. This can include meals, lodging, and incidental costs. Instead of submitting every receipt, employees get a fixed daily rate, making expense management simpler for both sides.
Per Diem is commonly used in industries like consulting, construction, sales, and government jobs. It ensures employees aren’t out-of-pocket while working away from their usual workplace.
How Per Diem Works
- Set the Rate – Employers decide on a daily allowance for meals, lodging, and incidentals. Rates often vary by city or region.
- Travel – Employees pay for expenses during work-related trips using the Per Diem.
- Submit Documentation – Some companies may require proof of travel dates but usually not detailed receipts for every expense.
- Payroll Integration – Per Diem is often recorded in the Payroll Register and can affect YTD Tax totals if portions are taxable.
It can be combined with other payroll items such as Regular Hours, Shift Differential Pay, and Standby Pay.
Benefits of Per Diem
- Simplified Expenses – Employees don’t need to track every meal or hotel receipt.
- Predictable Costs – Employers can plan budgets more accurately.
- Flexibility – Employees can choose where to eat or stay, within the allowance.
- Tax Advantages – Non-taxable Per Diem reduces payroll tax burden if it complies with IRS rules.
Limitations & Things to Keep in Mind
- IRS Limits – To remain non-taxable, Per Diem rates should follow IRS guidelines.
- Business-Only Travel – Per Diem is for work trips, not personal travel.
- Documentation – Companies may ask for travel dates or trip confirmation.
- Location Variation – Cities with higher living costs may have higher Per Diem rates.
Tax Considerations
Per Diem payments within IRS-approved limits are usually non-taxable. However, any amount above the standard rate may be considered taxable income and subject to Post-Tax Deductions. Employers and employees should track these amounts carefully to stay compliant.
How to Request and Track Per Diem
- Request – Submit your travel itinerary or trip approval form to the employer.
- Track – Keep a simple log of travel dates and destinations. Most companies don’t require receipts if Per Diem is within limits.
- Payroll Integration – Per Diem payments are recorded in the Payroll Register alongside other earnings and deductions.
Per Diem in Different Industries
- Consulting – Frequent travel requires daily allowances for meals and lodging.
- Construction – Field workers traveling to sites receive Per Diem for meals and incidental costs.
- Sales & Marketing – Traveling employees use Per Diem for client meetings, transportation, and meals.
- Government Jobs – Per Diem rates often follow strict federal guidelines.
Related Internal Terms
- Moving Expense Reimbursement – Per Diem may be part of relocation or travel reimbursement.
- Salary Certificate – Sometimes used for Per Diem verification.
- Union Dues – Payroll deductions continue alongside Per Diem in some companies.
FAQs
Q1: Is Per Diem taxable?
If it’s within IRS-approved rates for business travel, it’s generally non-taxable. Amounts above the limit may be taxable.
Q2: What does Per Diem cover?
Typically meals, lodging, and incidental expenses like tips or local transportation.
Q3: Do I need receipts for Per Diem?
Most companies don’t require detailed receipts, but proof of travel dates may be needed.
Q4: Can I use Per Diem for personal travel?
No, it’s only for business-related trips.
Q5: How is Per Diem calculated?
Employers set a daily rate based on IRS guidelines, location, and type of expenses.
Final Thoughts
Per Diem is an easy way for employees to get reimbursed for work travel without dealing with receipts. It benefits both employees and employers by simplifying expense management and keeping costs predictable.
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