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Posted by Jim McClaflin, EA, NTPI Fellow, CTRC

The Concept of Per Diem & How it Helps

The Concept of Per Diem & How it Helps

A business may use the term "per diem" to describe a type of work or a method of budgeting certain business expenses. Employers and employees can find many benefits to using both types of per diem programs, including flexibility. It's important to know what the two terms mean so you can understand how they work in your day-to-day role or industry. This article will explore the two definitions of per diem and an information guide.

What does Per Diem mean?

Per diem is a Latin term meaning "by the day." Companies can use this expression to define:

  • A role or position that an employer hires and pays daily

  • The fixed amount of money an employer allocates to an employee per day while on a business trip

What are Per Diem reimbursements?

A per diem reimbursement is when a company reimburses an employee for business expenses incurred while traveling. These may include food and beverages, hotels, transportation, or incidentals.

If an employee has a corporate credit card, they can retrieve their expenses from the card and send an expense report to the company documenting all charges on the card. Employees without a company card often pay their expenses with their resources and are reimbursed by the employer upon returning from a business trip.

Each company may have different guidelines for personal reimbursement. Some companies require an expense report detailing all charges and only reimburse pre-authorized charges. Other companies may automatically reimburse the maximum daily amount allowed for the day without requiring the employee to submit receipts or a report.

Some companies may issue a check to their employees to cover their daily expenses in advance. When the employee returns from a business trip, they ask them to submit an expense report documenting their expenses. In this case, the employee returns the unused advance portion back to the company.

What are per diem travel rates?

A business may have a daily schedule or guidelines for each business expense. Typically, companies divide their daily spend rules into several different categories:

  • Hotels and accommodation

  • Food and drinks

  • Transportation

  • Incidentals, such as service charges and tips

Each per diem category can have its set value. For example, the maximum daily travel fare for food may be $50 per day. If an employee spends $70 per day on meals, the company might decide not to reimburse the additional $10 that exceeded the per diem rate for that category.

What is a per diem job?

Per diem job is a type of role or position in which an employee takes a shift according to their preferences. This can be a contract role or an on-demand position. This type of work is common in the health and education sectors.

Schools usually pay substitute teachers on a per diem basis, which means they pay for substitute workdays rather than actual hours. If the principal officer is ill, the replacement may work one or more days, depending on the availability of the replacement and the needs of the school.

In the healthcare industry, a travel nurse is a per diem role. Travel nurses often have short-term contracts with hospitals that may need additional coverage. They can work with a placement agency that can help them place or offer contracts in different hospitals in the country. They can be hired to work a certain number of shifts during their contract. Hospitals or clinics usually pay for these shifts at a per diem rate, which equates to an average salary above a nurse's regular salary. This may encourage travel nurses to choose shifts in understaffed clinics or rural areas.

Per Diem Benefits

Here are some per diem jobs and expenses benefits:

Per Diem Expense Benefits

Per diem cost guidelines benefit both employer and employee. It can help employers plan employee business expenses, enabling detailed financial planning. Employees can use the guidelines to plan business trips. For example, if an employee knows that the per diem cost guidelines include $120 for a hotel per night, they can use that information to find and book accommodations that cost $120 or less per night.

Per Diem Job Benefits

Having a per diem helps companies fill gaps in coverage, and there are plenty of per diem benefits as well. Some benefits include:

  • Flexible schedule: Per diem workers can work as many shifts as they want and create their schedule, which means it can work well for students or others, balancing their responsibilities outside of work. As a per diem worker has no obligation to the employer at the end of his or her contract, per diem work allows extended rest periods between contracts.

  • Higher pay: Per diem shifts may offer higher pay to encourage employees to work shifts. Facilities sometimes offer bonus payments during holidays or other peak periods.

  • More experience: Per diem jobs can help you develop your skills working in new environments. From time to time, you may use new technologies or interact with new groups of people, allowing you to expand your knowledge base.

  • New Facilities: Per diem jobs also allow you to try new jobs before moving or applying for full-time employment. A daily shift can help you test your new position without compromise.



Jim McClaflin, EA, NTPI Fellow, CTRC
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