When Is a Per-Diem Required to Be Paid?

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Nail down the specifics of per diem payments before you take a business trip.
Nail down the specifics of per diem payments before you take a business trip. (Image: Stephanie White/Photodisc/Getty Images)

Per diem, which means “per day” in Latin, constitutes a form of payment to cover expenses incurred on business trips. Permissible expenditures for per diem pay include food, lodging and incidental expenses, which include room service, laundry, dry cleaning, tips and fees. The federal government maintains a handful of laws regarding per diem expenses, including a chart of permissible per diem rates.

Laws on Per Diem Pay

According to Chapter 57 of United States code Title 5, Part III, Subpart D, anyone “traveling on official business away from the employee’s designated post of duty, or away from the employee’s home or regular place of business” is entitled to a per diem payment in accordance with the rates set by the Administrator of General Services. The law further stipulates that all per diem rates be established in accordance with the cost of living in each city. An employee who abandons an assignment before completion due to illness or emergency should still receive a per diem for each day spent on assignment. Though no law stipulates exactly how far away from “home” an employee must travel to receive a per diem, tax resources such as Solo W2 suggest 50 miles.

Legal Rates for Per Diem Pay

The United States General Services Administration maintains all permissible per diem payment rates. Employers can pay employees a higher per diem than the federal maximum, though any payment made in excess of these rates constitutes additional salary and is subject to taxation. Rates vary based on local economies throughout the Untied States. For instance, as of 2011, lodging rates and meals/expenses rates for Manchester, Vermont, run $87 and $71 respectively. In Santa Monica, California, legal maximum rates run $180 and $71 respectively.

Per Diem and the Military

The United States military pays a per diem expense to all service members away on military business or temporary assigned duty. The Department of Defense sets these per diem rates, which run at a flat maximum, rather than in coordination with the cost of living in a specific location. As of 2011, the maximum per diem for military employees is $123, which includes $77 for lodging. In 2010, the military maximum per diem ran $116, or $7 less than in 2011.

How Per Diem Works Exactly

United States law stipulates that employers must only pay per diem as a reimbursement. This means that companies pay employees back for money spent during a business trip, provided that amount falls within the permissible legal rates for per diem expenses. Employers generally ask that employees keep all receipts for business-related expenses. Or employers provide employees with company credit cards and check that all charged expenses fall within permissible business expenditures.

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