A per diem is a fixed daily allowance an employer pays to cover meals and small incidental costs when an employee travels for work. Instead of collecting every restaurant receipt, the employee receives a set amount per travel day. Whether a per diem is tax-free, and up to what amount, depends on the rules of the country where you employ people. With digital expense reimbursement, you keep travel days, receipts and allowances in one place.
What does a per diem cover?
A per diem covers the extra costs of eating and small expenses that an employee only has because they are travelling for work. It applies to trips such as a client visit in another city, a trade fair abroad or a temporary project on site.
- Breakfast, lunch and dinner during the trip
- Drinks and snacks on the road
- Small incidental costs, such as tips, depending on your policy
Transport and accommodation are usually handled separately: train tickets, flights and hotel bills are reimbursed at actual cost, and mileage with a private car is often paid at a fixed rate per kilometre or mile.
Is a per diem taxable?
A per diem is tax-free in many countries as long as it stays within the limits set by the local tax authority and the trip is genuinely for business. Some countries publish fixed statutory daily rates, sometimes with separate rates for each destination country. Others leave the amount to the employer, as long as it is reasonable compared with the actual costs. Anything above the allowed amount is usually treated as taxable salary. Always check the current rules with the tax authority in the country where the employee is on your payroll.
Per diem or actual costs: which one should you choose?
You can reimburse travel meals with a per diem or by paying the actual costs based on receipts. Both work, as long as your travel policy is clear and the amounts match the costs employees really have.
Reimbursing actual costs
The employee pays and submits every receipt. This is precise, but it means employees have to keep everything and HR has to check every receipt.
Paying a per diem
You set a daily amount in your travel policy. Employees no longer need restaurant receipts, only the travel dates, times and the purpose of the trip. Check with your accountant or payroll provider that the amount stays within the tax-free limit.
Example: a three-day trade fair
An account manager attends a trade fair from Monday to Wednesday and stays two nights in a hotel. Breakfast is included in the hotel bill that the employer pays. The travel policy pays a daily per diem for meals, reduced for any meal the company already pays for. So the per diem for Tuesday and Wednesday is reduced for breakfast. This way no meal is paid for twice.
What are the pros and cons of a per diem?
A per diem makes expense claims simple, but it does not always match the real costs of a trip.
Pros of a per diem
- No restaurant receipts to collect and check
- Everyone gets the same amount, which is clear and fair
- Approval is fast: travel dates and purpose are enough
Cons of a per diem
- In expensive cities the amount may not cover the real costs
- If the amount is above the tax-free limit, part of it becomes taxable
- Meals the company already pays for need to be deducted
How to set up a per diem policy
The easiest way to manage a per diem is a short travel policy that everyone can find. It prevents discussions and one-off agreements per employee.
- Step 1: Define what counts as a business trip and who the policy applies to
- Step 2: Choose a per diem, actual costs or a combination
- Step 3: Agree which details employees submit: dates, departure and return times, destination and purpose
- Step 4: Decide who approves expense claims and the deadline for submitting them
Managing travel expenses in HoorayHR
HoorayHR is all-in-one HR software for SMEs with 10 to 500 employees, which lets you handle expense claims and travel expenses alongside all your other HR processes. Employees scan receipts with our mobile app and submit them straight away. You decide who can view and approve expense claims, and the monthly overview shows everything at a glance. We calculate travel expenses automatically, and through our integrations approved claims go straight to your accounting software.
A clear per diem policy saves a discussion after every trip. Set the rules once, then let submitting and approving run digitally.
Is an employer required to pay a per diem?
In most countries there is no general legal obligation. A per diem can follow from a collective agreement, the employment contract or the company travel policy. Check what applies to your sector and country.
What is the difference between a per diem and an expense claim?
A per diem is a fixed daily amount for meals and small costs, paid without receipts for each meal. An expense claim reimburses the actual costs, based on receipts. Many companies combine both: a per diem for meals and expense claims for hotels and transport.
Do employees need receipts for a per diem?
Not for the meals covered by the per diem. They do need to record the travel dates, departure and return times, destination and purpose of the trip, so the allowance can be justified. Receipts for hotels, tickets and parking still go into the expense claim.
How is a per diem calculated?
A per diem is usually calculated per travel day, often with a lower amount for partial days such as the day of departure and return. Meals the employer already pays for, such as a hotel breakfast, are typically deducted. The exact rates and rules depend on your country and your travel policy.
What is the fastest way to process per diems and expense claims?
The fastest way is an app: employees photograph receipts, enter the trip and submit. A manager or HR then approves digitally, and the approved amounts go to accounting in one go.
Written by
Ramon Glebbeek
Expert in HR
Ramon is a true expert in HR, thanks in part to his many years of experience at HoorayHR. With a passion for writing relevant blog posts and knowledge articles about HR, onboarding, performance management, and more, he offers a unique perspective on challenges and opportunities in the field. As an experienced human resources professional and content writer, Ramon is happy to share tips to help you save time on HR tasks and build a Great Place to Work.
