Ever come across the term Per Diem? Maybe your boss mentioned it to you at a specific time, maybe you came across the words whilst browsing your expense management app. You might even know what they are, in theory, but do you actually know what Per Diem is for and how it can benefit you and your business?
Let’s just say this: it can be tricky to figure them out, but we’re here to help. So here’s everything — or, at least, some of it — you need to know about Per Diem.
First things first: what does Per diem mean?
The term “Per diem” comes from Latin — yes, that language you probably came across in high school but never thought it might be useful one day —, and it literally means “per day”. In the business world, the term stands for the daily allowance employees can get from their employers to cover all of their business expenses when on a business trip. It’s that simple.
The most common expenses typically covered by per diem allowances are lodging, meals, and entertainment. Flights or trains to get to your business trip destination are typically excluded, but Uber and Taxi rides might be – depending on the purpose of the journey.
From the corporate point of view, one of the biggest advantages of using “Per diem” is the gain of control over expenses. If your employees have a daily allowance to spend, you can predict in advance your costs regarding their business trip. This is a way of protecting your business from unexpected and unpleasant surprises.
How does Per diem work?
If your company chooses to use Per diem instead of working with actual expense reimbursements, you can’t typically request reimbursement for any expenses during your business trip, as your Per diem should cover these.
If a business trip requires you to stay on the road for over 5 days, you will receive a new allowance for each day.
This means that instead of saving all receipts for record-keeping, employees will get a daily allowance – and that will be the limit that the company allows them to spend on a daily basis. From then on, it is up to them to decide what to do with that sum. It’s a method that prioritises efficiency and simplicity – both for the employee and the employer.
Great, but how do I set a Per diem rate?
It’s important to highlight that most jurisdictions do allow the use of Per Diem, but every jurisdiction has its own regulations and maximum amounts of non-taxable daily allowances. Companies can decide to abide by these maximum amounts, or not. If they decide to grant higher daily allowances than the government-set rates, the surplus is counted as the taxable income of the employee.
Each country has its own regulations when it comes to this type of payment, and they can be really complex to understand. Therefore, you should either consult with your Finance team to learn what’s the appropriate rate for your country or, as an alternative, visit our Compliance Centre where we provide information on the Per diem rates for countries all over the world.
Nevertheless, Per Diems payments normally differ if the trip in question is domestic or international. If you travel to a country where costs are known for being high, such as Sweden or the UK, it’s likely that you’ll get a more generous Per diem rate than for your business trip to Portugal or Russia.
If you want to go into deep detail about Per Diem’s settings in specific countries, you can find some answers on our website regarding :
Do your Per diem payments within the Rydoo app
Now that you know what Per Diem it and how you can benefit from it, it’s time to book a demo with one of our specialists and understand how Rydoo can help you manage your per diem payments.