Person in airport to represent per diem

Per Diem. Per. Diem. Per… what? We’ll say it again: Per Diem. Not Per Diems. If you’ve ever travelled for work or managed a team and had to send someone on a business trip, you’re probably familiar with the term Per Diem. You probably even know what the expression stands for and that it’s something companies often pay their employees.

Simply put, Per Diem refers to the compensation organisations have to pay their employees for business travel expenses. Sounds pretty straightforward, right? Well, the truth is, there’s a bit more to it that you would actually think. There’s a few reasons why you should learn more about Per Diem, especially if you’re dealing with a company’s budget, as it can have tax implications and even provide the organisation with an easier way to control expenses and stay under budget.

What does Per Diem mean?

The term Per Diem comes from Latin and it means “per day”. Like most Latin words, it has no plural, so whenever you refer to it, you should always say “Per Diem”, not “Per Diems”. A quick Google search leads us to Merriam Webster Dictionary’s definition of the term, where it also states that Per Diem can be considered an adverb — meaning “for each day” —, or an adjective — “paid by the day”.

In the business world, Per Diem stands for the daily allowance employees can get to cover their expenses whilst on a work related trip. Expenses such as meals or entertainment are covered by this compensation that the employee receives for each day of the trip, and shouldn’t be submitted as an individual expense. That is to say that, if you were to send a member of your team to meet a client, the amount of Per Diem you would reimburse them would cover all the necessary expenses for the journey, including meals.


Per Diem rates are reimbursed according to specific rates that can vary according to the location the employee is sent to and are likely to differ based on whether the employee travels in his or her home area, away from home or internationally. They are also different according to the destination, as the cost of living in each jurisdiction can also be different. For instance, if you were to have breakfast in Lisbon, it wouldn’t cost you the same as in Zurich or London. The same principle applies for hotels, entertainment and other expenses.

These rates can be set by the organisation, and most jurisdictions allow for this compensation, but it’s important to keep in mind that most governments set their own conditions and maximum amounts of Per Diem rates that can be paid to an employee. Companies have the choice to abide by these amounts or not, but if they choose If they decide to grant higher daily allowances than the government-set rates, the surplus will be counted as taxable income of the employee, so it cannot be considered a non-deductible expense.

The benefits of Per Diem

Let’s be real for a second. Whenever employees travel for work, they’ll spend money. Whether it’s on a cup of coffee because their flight took off at 5AM or on a breakfast that the hotel wouldn’t supply, they’ll have to spend some money.

At the end of their trip, the first thing they will probably do is knock on their manager’s door and ask to be reimbursed for all of those expenses. Unless… they knew they had a right to a Per Diem rate.

Per Diem makes it easier for employees to understand how much they’ll be compensated for their work related trips. On the other end, they won’t have to keep the receipts, submit every individual expense and wait for approval and reimbursements upon return. All of their expenses would be covered by that fixed rate.

By having clearly defined Per Diem rates and policies, companies can easily predict and control their travel-related costs, making it easier to stay under budget.

Having a clearly outlined Per Diem policy will also promote fairness and transparency within the organisation. All employees are held by the same standards, ensuring that there’s no ambiguity, which could lead to potential disagreements. Aside from that, if the organisation sets a Per Diem rate that is not higher than the maximum amount set by local governments, it will not be taxable. This also helps to ensure compliance with local regulations, for both the employer and the employee.

For the organisation, one of the biggest benefits is gaining more control over expenses. Imagine a scenario where you would send an employee on a trip for a two-day conference and, upon return, they would submit expenses for all their meals, accommodation and other extra expenses that you were not even considering.

By having clearly defined Per Diem rates and policies, employees are more aware of the boundaries of what they can spend and companies can easily predict and control their travel-related costs, making it easier to stay under budget.

It’s also easier to manage and report these expenses, since employees will not have to carry all those paper receipts and invoices and won’t have to submit them. This, in turn, reduces the administrative workload of having to check and confirm all of those receipts and create a report for reimbursement.

Per Diem Exceptions

In theory, Per Diem can seem really straightforward. If an employee is out for three days, the organisation should pay them the rate for those three days. But, in reality, there are a few exceptions to this rule.

First off, the Per Diem rate might not be paid in full for the days of arrival and departure. If the trip starts at, say, 3PM, the employee already had breakfast and lunch. That amount should be deducted from the total daily rate. The same happens for the day of departure. If they land at 5PM, dinner should be deducted from that day’s Per Diem rate.

There are some other exceptions that should be taken under consideration, such as the meals that are provided to the employee. The first is breakfast, given that most hotels include breakfast on their daily rates. If that’s the case, the amount should be deducted from the Per Diem rate.

Having a clearly outlined Per Diem policy promotes fairness and transparency within the organisation.

The same goes for other meals that can be provided during this time. If there’s a company lunch or a team building activity where meals are included, that amount should also be taken out of the daily Per Diem. Employees might also go out to dinner with clients during their trip and, in that case, the meal should be expensed separately given that the bill will, most likely, cover everyone’s meals.

All these exceptions can be easily managed within Rydoo’s software. Whenever an employee is submitting their Per Diem for a trip, they can simply tap on the meals that should be deducted and the system will automatically calculate the Per Diem rate for the days of the trip, considering these exceptions. If the employee uses meal vouchers, they can also tap that field within the app and take that amount out of the daily rate.

Setting Per Diem rates

Now that we’ve covered all the important basics regarding Per Diem rates, it’s time to figure out how to set them. For that, you need to understand the specific settings for each jurisdiction.

It can be a hassle to check all the local governments websites and try to figure out what those rates are, especially considering that some countries don’t offer translations for all of their legal documents. Rydoo’s Compliance Centre provides all of this information, from Per Diem rates to local norms and regulations of over 20 countries across 4 continents, and the resources keep on expanding.

On each Per Diem page you’ll find the rates for domestic and abroad business trips, as well as other important norms and regulations to consider when travelling to any of these specific countries.

Keeping track of all of this information might seem like a hassle, but it can be as simple as pressing a few buttons by opting for a digital expense management solution. Rydoo has a specific Per Diem module within its software that allows for calculating Per Diem rates with just a few clicks.

Simply import predefined lists of per diem for specific countries, insert all of the trip’s details — such as destination and date and time of departure and arrival —, and the app will automatically calculate the amount of Per Diem to reimburse. The hotel provided breakfast? No worries, it’s as simple as clicking a button and the amount for that meal will be deducted from the total.

Now that you know how easy it is to set and use Per Diem rates for all business related trips, you can forget all about those mounds of receipts and invoices and allow your employees to make the most out of their trips. All you need to worry about, if you’re an approver or part of the finance team, is what you’ll do with all that extra time you’ll have after managing business trips expenses becomes so easy you could do it with your eyes closed — we wouldn’t advise you to do that, though.