Understanding Per Diem
Per diem is a Latin term that translates to ‘per day’ in English. In the business world, per diem is commonly used to refer to the daily allowance provided to employees for expenses incurred while traveling for work.
How Per Diem Works
Per diem rates are set by employers or government agencies and vary depending on the location and duration of the trip. These rates typically cover expenses such as meals, lodging, and incidental costs.
Benefits of Per Diem
- Streamlined Expense Reporting: Employees do not need to keep track of individual expenses as per diem covers a set daily amount.
- Cost Savings: Employers can control costs by setting per diem rates and avoiding reimbursement for extravagant expenses.
- Time Savings: Employees save time by not having to submit detailed expense reports for reimbursement.
Per Diem vs. Actual Expenses
Some employers opt to reimburse employees for actual expenses instead of providing a per diem allowance. While this method requires more effort in tracking and verifying expenses, employees may benefit from reimbursement for higher costs in expensive cities.
Per Diem Case Study
In a study conducted by a Fortune 500 company, it was found that implementing per diem reduced travel expenses by 15% annually. Employees were motivated to stay within budget limits to maximize their per diem allowance.
Conclusion
Per diem is an effective way for employers to control travel expenses while providing employees with a convenient and predictable allowance for their business trips. Understanding per diem policies and guidelines is important for both employers and employees to ensure compliance and cost savings.
