Per diem is a daily allowance paid to a traveller instead of reimbursing each meal receipt. The employer pays a fixed amount per day of travel, the traveller keeps the difference or absorbs the excess, and nobody sorts through restaurant receipts. The phrase has other meanings in other trades, per diem nursing shifts among them, and this page is not about those. It is for the owner of a small business who sends people on business travel and wants to know what per diem means as an allowance, what incidentals are, what the federal rate is and how it is paid. The travel expense report tool on this site prices a trip on per diem from the dates.
The definition
A per diem is a fixed daily amount for meals and incidental expenses while traveling away from home on business. It replaces itemised meal receipts: the traveller is paid the daily rate for each travel day and does not have to substantiate what was actually spent on food, only the fact, time, place and business purpose of the travel. Lodging is usually reimbursed separately at actual cost or under a separate lodging rate.
What incidentals are
Incidentals are the small costs of being away that are not meals: fees and tips to porters, baggage carriers, hotel staff and staff on ships. They do not include laundry, phone calls or transport between the hotel and the meeting, which are claimed separately where the policy allows. The federal breakdown sets aside a small part of the daily rate for incidentals so that they are covered without a receipt.
The federal rate and its breakdown
The General Services Administration publishes the rates federal travellers use, and many small businesses adopt them because they are published, defensible and updated. The standard rate for meals and incidental expenses in the continental United States is $68 per day, broken down as breakfast $16, lunch $19, dinner $28 and incidentals $5, with the first and last day of travel paid at $51. Higher-cost localities carry higher rates on the GSA lookup. The GSA page linked below is the source.
How it is paid, and what it settles
The traveller submits the travel dates, the destination and the business purpose; the employer pays the daily rate for each day, at the reduced rate for the first and last days. Under an accountable plan the allowance is not wages provided it does not exceed the federal rate and the travel is substantiated. The meals half of the allowance is subject to the deduction limit under 26 U.S.C. 274(n) when the business works its own tax figures, which is the accountant's arithmetic rather than the traveller's.
Setting it in the policy
The policy says whether the business pays per diem or actual meal cost, which rate table it uses, how partial days are handled and what the traveller must submit. The expense policy builder on this site drafts that section; the travel expense report tool prices a trip on the rate; PerDiemDesk Pro, at $4 per month for the whole team, keeps the claims.
Questions people ask about per diem meaning
What is per diem in plain terms?
A fixed daily allowance for meals and incidentals while traveling on business, paid instead of reimbursing each receipt.
Are incidentals the same as miscellaneous expenses?
No. Incidentals are the tips and fees of being away, covered by a small part of the daily rate. Miscellaneous expenses are a category on the business's own books.
Does per diem cover the hotel?
Not the meals and incidentals rate. Lodging is reimbursed separately, at cost or under a lodging rate, per the policy.