What is per diem?
Per diem is a daily allowance paid to employees to cover work-related expenses incurred during business travel or temporary assignments. The phrase "per diem" originates from Latin, meaning "by the day" (per means "for each" and diem means "day"). This allowance typically covers lodging, meals, and incidental expenses without requiring detailed receipts for each transaction.
The U.S. General Services Administration (GSA) establishes per diem reimbursement rates that federal agencies use to reimburse their employees for subsistence expenses incurred while on official travel within the continental U.S. (CONUS), which includes the 48 contiguous states and the District of Columbia. Private companies often use these GSA rates as benchmarks when setting their own per diem policies.
Related terms: daily allowance, subsistence expenses, travel reimbursement, GSA per diem rates
What expenses does per diem cover?
Per diem allowances cover several categories of work-related travel expenses. The most common costs include meals (breakfast, lunch, dinner, and snacks), lodging (hotel rooms, short-term rentals, or other accommodations), and incidentals such as fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.
Additional expenses that may be covered include transportation to and from your place of work, parking fees, laundry services, room service, and business-related supplies. However, personal items unrelated to work duties (such as toiletries, clothing, and entertainment), leisure activities like sightseeing or personal hobbies, and excessive or unreasonable spending are typically not reimbursed through per diem payments.
How are per diem rates determined?
Per diem rates are set based upon contractor-provided average daily rate (ADR) data of local lodging properties. The properties must be fire-safe and have a FEMA ID number. The ADR is a travel industry metric that divides room sales rental revenue by the number of rooms sold. All rates are evaluated to ensure that they are fair and equitable in the GSA and Office of Management and Budget approval process.
Per diem rates vary depending on several factors, including federal mandates, cost of living variations, and industry standards. Rates are often adjusted to account for differences in the cost of living between various locations. An employee traveling to an expensive city like New York or San Francisco might receive a higher per diem rate than someone traveling to a more affordable location. The GSA reviews and updates both standard and non-standard areas annually.
What is the difference between non-standard areas (NSA) and standard CONUS locations?
Non-standard areas (NSAs) are frequently traveled by the federal community and are reviewed on an annual basis. These areas have specific per diem rates listed on the GSA website because they are destinations where federal employees commonly travel for business purposes.
Standard CONUS locations are less frequently traveled by the federal community and are not specifically listed on the GSA website. If neither the city nor county you are looking for is listed on the GSA per diem rate page, then the standard CONUS rate applies. Approximately 85 percent of counties in the continental United States receive the standard rate.
How does per diem work in practice?
When an employee goes on a business trip, they can claim an allowance for each day they are away. There are three main types of per diem payments: fixed, partial, and out-of-pocket reimbursement.
A fixed per diem rate is a predetermined daily amount provided to cover expenses, calculated based on factors like location, time of year, and industry standards. Fixed rates offer employees the flexibility to spend as they see fit within the given allowance and usually eliminate the need to submit receipts or documentation for each expense. You calculate the total reimbursement by multiplying the per diem rate times the number of days spent on the trip.
Partial per diem payment means covering a portion of daily expenses while the team member is responsible for the rest. Out-of-pocket reimbursement involves employees paying for work-related expenses themselves and submitting receipts to their employer for reimbursement.
Are lodging taxes included in the CONUS per diem rate?
Lodging taxes are not included in the CONUS per diem rate. The Federal Travel Regulation 301-11.27 states that in CONUS, lodging taxes paid by the federal traveler are reimbursable as a miscellaneous travel expense limited to the taxes on reimbursable lodging costs.
For foreign areas, lodging taxes have not been removed from the foreign per diem rates established by the Department of State, and separate claims for lodging taxes incurred in foreign areas are not allowed. Some states and local governments may exempt federal travelers from the payment of taxes.
Are taxes and gratuity included in the Meals and Incidental Expense (M&IE;) rate?
Yes, the meals and incidental expense (M&IE;) rate does include taxes and tips in the rate, so travelers will not be reimbursed separately for those items. The M&IE; rate is designed to cover all meal-related expenses, including applicable taxes and gratuities, as a single daily allowance.
What is the M&IE; reimbursement rate during the first and last travel day?
On the first and last travel day, federal employees are only eligible for 75 percent of the total M&IE; rate for their temporary duty travel location (not the official duty station location). This reduced rate acknowledges that travelers typically spend only part of these days away from their regular duty station.
According to the Federal Travel Regulation, travelers are entitled to 75% of the prescribed meals and incidental expenses for one day travel away from your official station if it is longer than 12 hours.
Can employees combine lodging and M&IE; per diem rates?
For federal employees, the Federal Travel Regulation (FTR) does not make a provision for "mixing and matching" reimbursement rates. The lodging per diem rates are a maximum amount; the traveler only receives actual lodging costs up to that maximum rate. Therefore, there is no "extra" lodging per diem to add to the M&IE; rate.
Likewise, the M&IE; per diem cannot be given up or transferred to lodging costs. Each component of per diem serves a specific purpose and must be used only for its designated expense category.
Do employees need to provide receipts when using per diem?
Receipt requirements depend on the type of reimbursement plan and specific expenses. For any official temporary travel destination, federal employees must provide a receipt to substantiate claimed travel expenses for lodging and receipts for any authorized expenses incurred costing over $75, or a reason acceptable to the agency explaining why they are unable to provide the necessary receipt.
Fixed per diem rates generally eliminate the need for employees to keep track of receipts and submit detailed expense reports for meals and incidental expenses, as these are covered by the predetermined daily allowance. However, lodging expenses typically require documentation regardless of the per diem structure.
What should employees do if there are no hotels available at per diem?
Employees may ask their agency to authorize the actual expense allowance provision. The Federal Travel Regulation (FTR) 301-11.300 through 306 notes that if lodging is not available at your temporary duty location, your agency may authorize or approve the maximum per diem rate of up to 300% of per diem for the location where lodging is obtained.
Employees should ensure they have checked FedRooms to confirm there are no rooms available at per diem in the area where they need to travel before requesting the actual expense allowance.
How does per diem compare to similar compensation concepts?
Per diem is often compared to 3 related compensation concepts:
| Related Term | Key Distinction | Usage Context |
|---|---|---|
| Expense Reimbursement | Reimbursement requires itemized receipts for actual expenses; per diem provides a fixed daily allowance without detailed documentation | Traditional expense reporting with receipt submission |
| Accountable Plan | Accountable plans require business-related expenses to be substantiated with receipts; per diem can operate under accountable or non-accountable plans | IRS-compliant reimbursement structures |
| Non-Accountable Plan | Non-accountable plans do not require receipt submission and excess allowance becomes taxable income; per diem under accountable plans has no such tax implications | Simplified reimbursement without documentation requirements |
Per Diem vs. Expense Reimbursement
Per diem provides a predetermined daily allowance for travel expenses without requiring detailed receipts for each transaction, while traditional expense reimbursement requires employees to submit itemized receipts documenting actual expenses incurred. Per diem simplifies the reporting and approval process by eliminating the administrative burden of tracking every expense.
Per Diem vs. Accountable Plan
An accountable plan is a reimbursement structure where expenses must be business-related, substantiated with receipts, and any excess allowance must be returned within a reasonable timeframe. Per diem can operate within an accountable plan framework, but the fixed daily rate reduces documentation requirements. Any amount paid under a qualifying accountable plan is not recorded as income or reported on a W-2.
Per Diem vs. Non-Accountable Plan
Non-accountable plans do not require employees to submit receipts, and employees can keep any remaining allowance if they spend less than the daily rate. However, amounts paid under non-accountable plans are included as wages on W-2 forms and subject to income tax withholdings, whereas per diem payments under accountable plans are not taxable to the employee.