Per diem means “per day”. In payroll it usually means a daily allowance for lodging, meals and incidental expenses when an employee travels for work. The same term is also used for workers who are called in day by day as needed.
| Accountable plan | Nonaccountable plan | |
|---|---|---|
| Business connection | Required | Not required |
| Employee reports trip time, place and purpose | Yes | No |
| Excess returned | Yes, within a reasonable period | No |
| Taxed as wages | No, up to the substantiated amount | Yes, all of it |
| In the regular rate for overtime | No, if it reasonably approximates the expense | Excess over the expense is included |
Set your per diem from the federal rate for each destination and write the plan rules down. A expense reimbursement policy is a good place for them.
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A commercial roofing company sends a three-person crew to a job in another state for three nights. Its written accountable plan pays a daily per diem for meals and incidental expenses at the federal rate for that city, and books lodging directly. In this example the federal meals rate for the city is $68 a day.
Each crew member submits a trip report with dates, the job site address and the purpose of the trip. Under the plan’s rules, the first and last travel days are paid at a reduced partial-day amount, so the per diem stays within the federal rate. None of it is added to wages.
A foreman’s trip is cut short by a day. Because the plan requires returning amounts that were paid for days not traveled, he returns one day’s advance within the next pay cycle, and the plan stays accountable. If the company paid a flat weekly travel bonus with no reporting instead, the whole amount would be wages.
Under the federal rates, the meals and incidental expenses rate for the first and last day of travel is 75% of the full daily rate. Using that rule keeps partial days simple and consistent.
The roofing crew’s trip runs four calendar days, with three nights away. The federal meals and incidental expenses rate for the city in this example is $68 a day.
The first and last days are paid at 75%, or $51 each, and the two full days at $68 each. Each crew member receives $51 + $68 + $68 + $51 = $238 for meals, with lodging booked by the company. The crew members submit trip reports within the week, and none of the $238 is added to wages.
Not when paid under an accountable plan, up to the amount that is substantiated. Under a nonaccountable plan, it is taxable wages.
A plan that pays only for business expenses, requires the employee to substantiate them, and requires amounts above the substantiated expenses to be returned.
A reimbursement that reasonably approximates the expense is not part of the regular rate. Any excess is included.
A worker called in day by day as needed, common in healthcare and staffing, with no guaranteed hours.
Under the federal rates, it is 75% of the full meals and incidental expenses rate for the location.
No. It can be advanced or paid after the trip. If it is advanced, the plan must require any excess to be returned.
Digital HR forms, e-signatures and a digital employee file with expiry reminders, plus announcements by location, department or role.