Per diem is Latin, but its meaning couldn’t be simpler. Employees paid per diem receive pay by the day. This is usually the daily stipend given to employees who travel for work. It’s also used when employees on short-term contracts are assigned a daily rate.
Both these scenarios affect payroll, which is why HR professionals need to be aware of regulations that governper diem pay. The good news is, Paycor has collected all the information you need below.
What is Per Diem Pay and what does it cover?
Travelling isn’t cheap. Even when transportation and accommodations are covered, meals, tips and laundry need to be paid for. Accounting in advance for each individual cost is challenging.
Per diems keep things simple. Employees receive a single daily allowance. This gives employees the freedom to prioritize spending on what matters most to them. You won’t be waving goodbye to expense reports, but they won’t need to be quite so detailed.
How is Per Diem Pay Decided?
Per diem pay is usually split into three different categories:
- Accommodations
- Meals
- Incidental Expenses
If accommodations have already been paid, an employee will receive a per diem only for ‘Meals & Incidental Expenses’ (M&IE). Meals can also be split into breakfast, lunch and dinner, with different amounts assigned to each. If an employee is driving, the cost of gas should be reimbursed according to IRS mileage reimbursem*nt rates.
Federal law doesn’t, but states often require that businesses cover employees’ travel expenses. Check local regulations before creating a business travel policy. Many businesses set per diem stipends according to national guidelines. Here’s why: anything below these limits is considered non-taxable by the IRS.
For travel within the contiguous US, rates are issued by the General Services administration. Per diems for other US territories are set by the Department of Defense’s Per Diem Committee. Everywhere else in the world is decided by the Department of State.
Per Diem Rates 2022
Business can choose to follow rates specified by location. These can change according to seasonality, with different rates throughout the year. However, to keep things even simpler, there is also a general per diem rate that can be offered when employees travel to most locations in the US.
In 2022, this rate is $155. For just accommodation, the rate is $96. For only meals and incidental expenses, the rate is $59. In certain locations, known as Non-Standard Areas (NSAs), higher per diem rates apply.
Wherever an employee is travelling, businesses aren’t expected to offer a full per diem on the first and last days of a trip—they can reduce 25% from the standard per diem amount.
Per Diem Employees
Remember, per diem isn’t only used when talking about business travel. It also refers to employees who are paid by the day. Oftentimes these employees are hired on a short-term basis and offered shifts when required. This can offer useful flexibility to both businesses and workers.
When it comes to payroll, identifying who is an employee and who is an independent contractor doesn’t come down to whether someone is paid daily, weekly or monthly. All employees, even if they are paid per diem, get a W-2 and have taxes withheld. Employment rules, like overtime pay and the minimum wage for your state, still apply.
Independent contractors can also be paid per diem, but if they complete 1099 forms, they aren’t counted as employees.
Paycor is not a legal, tax, benefit, accounting or investment advisor. All communication from Paycor should be confirmed by your company’s legal, tax, benefit, accounting or investment advisor before making any decisions.
How Paycor Helps
Paycor builds HR solutions for leaders. With Paycor, you can modernize every aspect of people management, from the way you recruit, onboard and develop your team, to the way you pay and retain them.
As an enthusiast in payroll management and human resources, let's dive into the detailed concepts embedded within the article on "Per Diem Pay."
Per Diem Pay Overview: Per diem pay refers to the daily payment provided to employees for various expenses incurred during business travels or daily work engagements. It simplifies accounting by offering a flat daily allowance covering expenses like meals, accommodations, incidental costs, and sometimes travel.
Categories in Per Diem Pay:
- Accommodations: Covers lodging expenses. If already covered, employees receive per diem for meals and incidental expenses (M&IE).
- Meals: Divided into breakfast, lunch, and dinner, each with specific allocated amounts.
- Incidental Expenses: Covers miscellaneous costs associated with travel.
Regulations and Determining Per Diem Rates:
- Federal law doesn't mandate per diem rates but advises businesses to comply with local regulations.
- Per diem rates are often set nationally, ensuring non-taxable benefits for employees. Rates vary based on location and can change seasonally.
- Rates for different regions are set by various governmental bodies: General Services Administration for contiguous US, Department of Defense's Per Diem Committee for US territories, and Department of State for international locations.
Per Diem Rates in 2022:
- General Rate: $155 per day
- Accommodation Only: $96 per day
- Meals and Incidental Expenses Only: $59 per day
- Higher rates apply in Non-Standard Areas (NSAs).
- 25% reduction in the standard per diem for the first and last days of a trip.
Per Diem Employees:
- Per diem pay isn't solely for business travel but also applies to short-term, daily-paid employees who work on flexible schedules.
- Employees receiving per diem payments are still subject to employment rules, taxes, W-2 forms, and withholding.
Differentiation between Employees and Independent Contractors:
- Even if paid per diem, employees receive W-2 forms, have taxes withheld, and are subject to employment rules.
- Independent contractors, even if paid per diem, complete 1099 forms and are not considered employees.
Paycor's Role and Services:
- Paycor provides HR solutions covering recruitment, onboarding, team development, payroll, and retention.
- Their tools aim to modernize people management, offering comprehensive solutions for various HR needs.
This breakdown reflects an in-depth understanding of per diem pay, encompassing its categories, regulatory aspects, rates, implications for different employment types, and the role of a company like Paycor in HR management.
