Daily allowances are paid to employees to cover costs spent while on a business trip and are referred to as per diem, which is Latin for "by the day." Accommodations, meals, and other incidental costs like service fees and tips are frequently paid business expenses.
In contrast to earning a salary that is paid bimonthly, per diem can also refer to a compensation scheme in which an employee is paid for each day worked. Per Diem / Allowance.
Employees who must travel frequently for work benefit from receiving per diem payments. Annual business expenses for lodging, meals, travel, and other costs can mount up on such trips. Different per diem policies are used by different businesses to cover these costs:
- Company credit cards: Some businesses provide their employees with credit cards. While on the job, they use the cards to make direct business payments so they don't have to pay anything out of pocket.
- Full or partial expense coverage: Some employers provide complete expense reimbursement for employees, while others just provide per-diem payments for particular costs, namely housing, food, and incidentals.
- Fixed amounts: An established daily rate is frequently offered to employees by businesses. The per diem is intended to cover only a portion of an employee's expenses.
The term "per diem" can also refer to the daily pay that some employees get. They are paid either by the number of hours worked or by the day. These types of workers typically have temporary or short-term contracts rather than full-time employment. For instance, per diem is paid to substitute instructors and travel nurses.
When an employee travels for work, a company will pay for their daily expenditures so they won't have to pay out of pocket. When an employee does business away from the office, the per diem pays for their meals and lodging. For their anticipated housing, food, and incidental costs when travelling on business, an employee will typically receive per diem compensation.
Employees have several options for receiving their per diem, including a company credit card, an expenditure report, or a check that is delivered to them in advance of the trip. An employee typically receives their per diem compensation following their travel and after submitting an expense report. However, depending on how many days the employee will be travelling, in some circumstances the entire per diem may be handed to them in advance, prior to the trip.
- Easier budgeting. Managers can budget their travel costs with the aid of a per diem fee. Making a clear and reliable budget for each business trip is made simpler by knowing how much they must budget for each employee.
- Less paperwork. Businesses reduce the amount of paperwork required to support business travel expenses when they provide employees with a predetermined per diem. Both the employee and the accountant deal with a little amount of paperwork if the employer chooses to use a check or charge card as the per diem method.
- Smarter spending. Spending less than the allocated amount with their per diem allows employees to keep the difference in their pocket. However, when businesses establish per diem prices, they are not concerned about employees going over budget.