The Fair Labor Standards Act (FLSA) does not explicitly state that businesses have to reimburse all employees for business travel. However, refusing to cover these expenses could violate minimum wage or overtime laws. You must use per diem pay if wages after travel expenses go below minimum wage requirements.
Can a company make money off per diem?
Employers can use a per diem rate to reimburse employees for combined lodging and meal costs, or for meal costs alone. The choice is yours.
Who qualifies for per diem rates?
A per diem is money that you get to spend on food and other incidentals (including tips and phone calls). If you are away on travel for more than 12 hours and more than 50 miles from home, then you are eligible for 3/4 per diem. If you are away less than 12 hours, you do not get per diem.
Do you have to pay federal per diem for employees?
You also don’t have to compensate your employees at the federal rate. Take your total per diem amount, and designate 60% for lodging and 40% for meals and incidentals. Regardless of what per diem rates you choose, it’s important to be consistent. So pick a method that works for your business, and stick with it for all employee business travel.
How are per diem rates different for different locations?
The rates vary for different locations. Use the rate for the area where the employee spends the night. You only pay ¾ of the standard rate for the first and last day of employee’s travel. Example: You have an employee, Tim, who works out of town.
Do you have to submit receipts for per diem?
Generally, reimbursement requires employees to submit receipts and expense reports to get their money back. The U.S. General Services Administration sets per diem rates that vary throughout the country. Businesses can choose to pay this amount for each day employees travel for business rather than make them file expenses.
Is the GSA per diem rate taxable income?
The GSA establishes travel policy including per diem rates (but only) for federal employees on official travel away from their local station, or areas of job location, as defined by their agency. Companies tend to use the Federal per diem rate because per diem payments above the Federal rate are taxable income for employees on their W-2 forms.
