Do I Have to Pay the Full Per Diem Rate to My Employees?
If you send your employees on a trip for business purposes, you may use per diem rates to help determine how to reimburse them for expenses. The federal government sets per diem rates for business travel to each major city and state in the United States as well as for foreign travel. You don't have to pay the full per diem rate to your employees as long as you pay the same rate for each employee who travels.
Other People Are Reading
-
Maximum Amount
-
The per diem rate is the maximum amount of reimbursement you can make for employee expenses without the reimbursement being taxable to the employee. Thus, you don't have to pay the entire per diem rate -- you can pay less than the per diem rate if your company policy is to do so. If you exceed the per diem rate, your employees must pay taxes on the excess.
Expense Reports
-
Your employees must fill out expense reports showing the reimbursable business expenses they incurred while away from the office. The expense report should include the rate you have agreed to reimburse employees for these expenses and the total reimbursement you owe the employee. If you provide reimbursement to employees without requiring expense reports, the entire reimbursement is considered taxable income even if it is less than the per diem rate.
-
Standard Rate
-
Standard per diem rates vary based on where the employee is traveling to and where he stays for the night. In addition, you don't pay the full per diem rate on the employee's first and last nights of business travel. On these nights, you reimburse the employee at a rate of up to 75 percent of the normal per diem rate for employee travel.
Combined Method
-
Federal per diem rates don't include rates for lodging. However, employers can reimburse employees for both meals and lodging if they wish. You may treat any per diem payment in excess of the maximum meals and incidental expenses rate as a lodging rate; alternatively, you may consider 40 percent of the entire reimbursement as a reimbursement for meals. You may use either method as long as you use the same method for all employees and for each instance of employee travel.
-
