When per diem is mentioned, the allowance an employee gets for business-related expenses comes to mind. But beyond per diem allowance, you can use a per diem job to temporarily cover shifts and keep operations running smoothly when your business is busier than normal or low on coverage.
In this guide, we’ll discuss everything you need to know about per diem reimbursements, specifically how per diem works and how to use per diem rates to calculate employee reimbursement accurately. In addition, we’ll highlight various labor laws you should be mindful of if your company utilizes per diem allowances.
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Per diem is a Latin phrase meaning “for each day” or “by the day.” So, a per diem allowance is the daily reimbursements a business pays employees to cover business-related expenses. The allowance covers actual expenses employees incur when traveling in domestic or foreign areas.
Your company can adopt one of the following models to cover employee travel expenses:
Company cards: This is a great way to ensure employees never pay for a travel expense out of their pocket. Every expense is paid for directly, deducting money from the company account.
Fixed amount: With this method, you provide employees with a fixed daily rate to cover their business travel expenses.
What Does Per Diem Reimbursement Cover?
Per diem allowance covers lodging, meals, and incidental expenses the employee incurs while on a business trip. Incidental expenses include phone charges, dry cleaning, and tips for services.
Does Per Diem Reimbursement Apply To Mileage?
No, the per diem allowance doesn’t cover mileage. This means that if an employee uses a personal vehicle for a business trip, you must handle mileage reimbursement separately. The Internal Revenue Service (IRS) provides standard mileage reimbursement rates you should use to compensate workers for mileage.
However, to use the standard rates, you must first track employee mileage and create logs that meet the IRS requirements. IRS-compliant logs include the following details:
Total distance covered
Starting and ending location
Starting and ending times
Purpose of the trip
Tracking these details with manual spreadsheets or vehicle odometer readings can be challenging. For example, if an employee forgets to record mileage at the start of the trip, they may resort to guesswork. The best solution is to use an automatic mileage tracker like Timeero.
Track Mileage Accurately with Timeero
Timeero accurately tracks mileage employees cover for business purposes.
Timeero uses motion detection (with GPS precision) and a minimum speed threshold to track per diem employees’ mileage. The employee doesn’t have to lift a finger for the app to track mileage; they only need to clock in and drive.
The Timeero app detects when the vehicle moves and logs miles for drives exceeding the predefined speed threshold. It also records the address of the starting point, auto-classifies trips, and computes total mileage automatically.
This ensures that each mileage log is IRS-compliant and can be used for reimbursement and tax purposes. Timeero computes reimbursement automatically based on IRS rates and employee mileage.
At the end of the pay period, you’ll generate employee mileage reports to compensate employees accurately. The mileage report shows each employee’s total mileage reimbursement and can be exported to your go-to payroll software system to expedite reimbursement.
Per Diem Rates
When calculating employees’ per diem allowance you can use custom or federal government per diem rates. Computing per diem with custom or non-standard rates is straightforward. You only need to multiply the number of days by the agreed rate.
For example, if your company rate is $200 per day, and the employee is on a business trip for five days, then:
Total Per diem allowance equals: $200 * 5 = $1000
Note: With custom rates, you must frequently use government rates as benchmarks, mainly for tax purposes. Remember that any amount paid in excess of the federal government rates is taxable.
Federal Per Diem Rates
The U.S. General Services Administration (GSA) reviews the government per diem rates every fiscal year; new rates take effect on October 1st. The continental U.S. GSA rates apply to government employees in federal agencies, but you can use them for your private business.
The Department of Defense (DOD) sets the rates for non-standard areas such as Hawaii, Alaska, U.S. Territories, and Possessions. On the other hand, the U.S. State Department sets per diem rates for federal employees traveling to foreign countries.
When it comes to business trips within the United States, you can calculate employees' per diem using either the standard or high-low rates.
Standard Per Diem Rate
The standard per diem rate for 2024 is $166 — $107 for lodging and $59 for meals and incidental (M&IE) expenses per day. Remember that you’re only obligated to pay 75% of employee per diem on the first and last day of travel.
Suppose one of your employees is on a five-day business trip to Chandler, Arizona. You’ll reimburse them as follows:
Day 1: 75% of $166 = $124.50
Days 2-4: 3 * $166 = $498
Day 5: 75% of $166 = $124.50
The employee’s total per diem allowance during travel will be:
$124.50 + $498 + $124.50 = $747
High-Low Per Diem Rate
The high-low per diem rate takes into account the cost of living in different cities in the United States. As a result, the per diem rate in some states is higher than others in the Continental United States (CONUS).
Additionally, when hotel charges skyrocket, the CONUS rates are adjusted to reflect the change. Use the GSA.gov rates checker to confirm the rates in your state.
Suppose you use the high-low method to compute the per diem pay for an employee on a five-day business trip to Chandler, Arizona. In 2024, the per diem rate in Chandler, Arizona, is $235; the daily lodging rate is $156, and the total M&IE rate is $79.
You’ll compute the daily allowance as follows:
Day 1: 75% of $235 = $176.50
Days 2-4: 3 * $235 = $705
Day 5: 75% of $235 = $176.50
Total per diem pay will be:
$176.50 + $705 + $176.50 = $1058
Is Per Diem Allowance Taxable Income?
Per diem allowance is taxable when any of the following is true:
The employee doesn’t file an expense report with the employer.
The employee files an expense report but fails to include each expense's date, place, time, amount, and purpose.
The employer reimburses employees a fixed amount and doesn’t require them to file expense reports.
The employer pays an amount in excess of the standard federal rate. The amount paid in excess of the federal standard rate is taxable.
What is a Per Diem Job?
A per diem job is an employment model where employees get daily assignments based on the current demand for their services. Per diem employees don’t follow a regular work schedule like their part-time counterparts. For example, a hospital can schedule a per diem nurse to work eight hours today, six hours tomorrow, and ten hours the day after.
Some common industries that leverage per diem jobs include:
Education — Schools can hire a substitute teacher (s).
Healthcare — Healthcare facilities may hire travel nurses on a per diem basis.
News and Entertainment – Broadcast media companies may hire reporters, photographers, or videographers on a per diem basis.
Delivery Industry — Companies may hire delivery personnel on a per diem basis.
Events Industry – An event organizer may hire per diem employees when there are more guests than usual during meetings or conferences.
Per diem jobs aren’t strictly limited to the industries mentioned above. It fits the bill for businesses of different sizes looking to fill short-term or temporary staffing gaps. Hiring per diem workers can be beneficial for warehouses, sports arenas, entertainment businesses, and more.
How Does Per Diem Work?
Companies offering per diem jobs don’t guarantee employees a set schedule. This is because no federal or state law requires business owners to schedule per diem employees for a specified number of hours per day or week. The only stipulation is that you should pay per diem employees by the day, not by the hour.
Suppose you hire a substitute teacher to stand in for a sick teacher on a per diem basis during the week. The substitute teacher doesn’t have to work the entire day to claim per diem pay. As long as they show up for work, they are entitled to full per diem payments.
For example, the teacher can work eight hours on Monday and three hours on Tuesday, but their earnings will be the same on both days.
This “by the day” remuneration makes per diem jobs disadvantageous to the employer. Since there is no federal or state law requiring employees to work through their assigned shift to get full pay, some per diem employees leverage this loophole to earn more money.
To prevent unscrupulous employees from taking advantage of this legal gray area, companies create per diem policies. For example, you can require employees to cover a certain percentage of the assigned shift to claim full per diem pay.
What is the Difference Between a Per Diem Job and a Part-Time Job?
The main difference between per diem and part-time jobs is that the latter has a schedule with guaranteed hours or assignment quotas. In contrast, per diem jobs don’t have a regular schedule or assignment quota.
Another difference is that part-time employees are paid by the hour, and per diem employees are paid by the day. The more hours a part-time employee works, the more they earn, whereas working more hours in a per diem model doesn’t necessarily translate to better pay.
How Many Hours Can a Per Diem Employee Work?
There is no universal rule — federal or state labor law — stipulating the number of hours an employee can work on a per diem basis. However, if you hire per diem employees, you must create a company policy stating the percentage of scheduled hours they must work to claim a full daily rate.
For example, during the SIMMCO vs per diem employees case, it emerged that the company required employees to work at least 80% of the scheduled workday to get the total per diem rate for the day. You can adopt a similar style or customize your policy to suit the way you operate.
But how will you know an employee met the daily threshold mandated by company policy? The answer is to use an automated GPS time tracker with tools to curb time theft, such as Timeero.
Track Per Diem Employees Time with Timeero
The Timeero app works seamlessly on Android and iOS devices.
Timeero is a GPS time tracker designed to help businesses with per diem employees track time with unwavering accuracy. Take, for example, a healthcare business with travel nurses in rural areas. Timeero’s time tracker shows the exact address where each nurse clocked in or out.
Even when an employee is in remote areas without internet connectivity you won’t lose track of their work hours, thanks to Timeero’s offline mode. The app continues to track time and location without the internet and syncs the employee’s timesheet when they reconnect their device.
With Timeero, you don’t have to worry about time theft, as the app allows you to set geofences around the worksites and restrict employees from clocking in outside the zone. This prevents off-site punching and boosts the accuracy of employees’ timesheets.
Another helpful feature is Timeero’s facial recognition, which takes pictures of employees as they clock in and compares them to their profiles. It notifies the managers in case of a mismatch, prompting them to investigate potential buddy punching cases.
Do Per Diem Employees Qualify For Overtime?
Yes, per diem employees are entitled to overtime. In 2023, the Supreme Court clarified that per diem pay doesn’t satisfy the threshold for the “salary basis” of exempt workers. As a result, per diem employees qualify as non-exempt employees.
The court also affirmed the decision of the Fifth Circuit that per diem employees working more than 40 hours per week are entitled to overtime compensation at a time-and-a-half rate. This means even with a per diem model you must adhere to federal and state overtime rules when the per diem pay varies by the number of hours.
Simplify Overtime Calculation with Timeero
Timeero enables you to accurately track per diem employees’ overtime and double time.
If you have per diem employees working across different states, including California, calculating their overtime manually can be time-consuming and error-prone. Timeero eliminates the hassle, enabling you to automatically compute overtime and double time.
Set custom overtime and double time thresholds to match federal and state requirements. If you are in California, configuring the threshold is as easy as selecting the “use California Overtime Rule” button.
When you track per diem employee time, Timeero computes overtime pay based on the set threshold. Suppose you set the overtime threshold to 8 hours, and the per diem worker works 10 hours. Timeero will multiply 2 hours by one-half times the agreed rate to calculate the employee’s overtime pay.
Whether you have one or hundreds of per diem employees, Timeero calculates their overtime pay without the manager lifting a finger. At the end of the day, simply generate a reimbursement report to provide faster and more accurate employee compensation.
Labor Laws and Per Diem Employee Rights
The Department of Labor has established several laws to protect per diem employees. For instance, employees whose per diem varies with the number of hours worked are entitled to overtime pay once they have worked over 8 hours a day.
However, since per diem employees aren't employed full-time, they aren't eligible for employer benefits. Healthcare, paid time off, or retirement plans may not be offered to per diem workers. But, some per diem workers may still receive benefit packages from certain staffing agencies.
Other Helpful Timeero Features
Beyond time and mileage tracking features, Timeero offers other features that help businesses better manage per diem employees. These features include:
Timeero Scheduling
Timeero’s easy-to-use scheduler enables you to schedule employees with ease. You can click on the day you want to schedule them, add schedule details, select per diem employee, and click publish.
The app notifies the employee instantly and allows them to accept or reject the assigned shift based on availability. The ability to accept or reject shifts helps prevent no-shows and curb absenteeism.
Segmented tracking
Segmented tracking enables you to track the number of hours a field employee, (ex: travel nurse) spends with a patient.
Segmented tracking is helpful for businesses with field per diem employees, such as travel nurses or delivery teams. It helps you track employee movement and calculate the time they spend with each patient or at each drop-off point.
Employees don’t have to clock in and out at every customer location. They only need to clock in once at the start of their shift. Timeero tracks and segments their trip based on the stops they make, providing you with vital details to enhance decision-making.
Suggested Mileage
Using the suggested mileage feature is a good option if you want per diem employees to spend less time driving and more time handling their assigned tasks. The tool will suggest the shortest route to a patient's address.
When travel nurses take the suggested route, they arrive early for each appointment and have more time to deal with each case. Taking shorter routes also saves on fuel and vehicle maintenance costs.
The route replay feature helps ensure employees are taking the suggested route. The tool recreates employee movement while on the clock. With route replay, you can see the route they took or zoom in to see details such as vehicle speed at any point during the trip.
Real-time Location Tracking
Timeero allows you to monitor employees’ real-time location to enforce safety and route adherence. For example, if a travel nurse gets lost, managers can quickly open the “who's working” tab and zoom in on the nurse’s profile to see how far they are from the designated customer location. The manager is then able to guide the nurse to the patient location by navigating the available map.
Leverage Per Diem Allowance And Remain IRS Compliant
Pier diem allowance is one of the methods businesses use to cover employee business travel expenses, such as lodging, meals, and incidental expenses. While per diem rates are fair for most employees, they do not cover mileage reimbursement. For this reason, mileage reimbursement is handled separately.
Mileage must be tracked according to the IRS requirements and calculated accurately for fair reimbursement. Eliminate tedious manual tracking by using the Timeero automatic mileage tracker. Timeero tracks mileage using motion detection (with GPS technology) and calculates reimbursement automatically.
Start a 14-day free trial today to get a first-hand feel for Timeero’s mileage tracking capabilities. No credit card is required: create an account and immediately start tracking mileage. Book a consultation with our customer support agents to discover how to make the most of Timeero’s features.
Per Diem Allowance: FAQs
What Is Per Diem Work?
Per diem work is a type of work where employees don’t follow a regular work schedule and are paid by the day, not by the hour.
Can You Claim Per Diem for Partial Travel Days?
Yes, the federal per diem rules allow you to claim 75% of the total per diem pay for partial travel days, such as the first and last day of travel.
Samson is a mathematician turned content marketer specializing in SaaS and Tech content. He focuses on the practical aspects of software systems while keeping abreast of the industry’s cutting-edge principles to create informative and engaging content. When he’s not writing, Samson spends time playing or watching soccer.
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