Many companies cover trip expenses for business travelers to streamline the travel process and make it more affordable. Calculating per diem for your trips can ensure you document your spending accurately. This guide explains per diem, its categories, and how to calculate it.
What is Per Diem?
Per diem is a daily allowance employers provide to cover costs during business travel. It typically includes expenses for lodging, meals, and incidental items. Employers may work with travel agencies for certain expenditures like flights and hotels, further streamlining the process.
Types of Per Diem Rates
Per diem rates usually fall into two main categories:
- Lodging: Covers expenses for hotels or short-term rentals such as Airbnbs.
- Meals and Incidental Expenses (M&IE): These include the cost of meals, tips, and minor expenses like luggage handling.
Steps to Calculate Per Diem
The calculation process for per diem involves understanding government guidelines and employer policies. Here are the key steps you should follow:
Refer to IRS Guidelines
The U.S. General Services Administration (GSA) sets guidelines for per diem rates that vary based on location and time of year. Companies must follow these guidelines to ensure their per diem policies comply with tax laws.
Understand What’s Excluded
While per diem covers a wide range of expenses, some costs are typically excluded:
- Transportation (e.g., flights, trains, taxis)
- Internet fees during flights
- Printing costs, laundry, and dry cleaning
Discuss these details with your employers to know what will be reimbursed.
Choose Between Standard and High-Low Methods
There are two main methods for calculating per diem:
- Standard Method: Relies on specific rates determined for different locations. If particular rates aren’t available, default values are used.
- High-Low Method: This method uses two rates for high-cost locations and another for low-cost ones, simplifying the tracking process.
Company Policies on Per Diem
Understanding your per diem policies is essential. Some employers may provide a set amount of cash daily, while others might require detailed reimbursement receipts. Familiarize yourself with these policies before embarking on your trip.
Read Your EmpEmplEmployer’sicies
Your company may have specific rules for calculating per diem or guidelines on the method. Ensure you know these details to avoid surprises during or after your trip.
Research Travel Location Costs
Research the cost of living and typical expenses at your destination. This will help you budget your per diem more effectively. Consider lodging, meals, and other incidental costs to avoid overspending.
Practical Tips and Considerations
Here are additional tips to keep in mind when planning for per diem:
Keep Track of Receipts and Records
Even though per diem simplifies the reimbursement process, keeping receipts and maintaining records can still be beneficial. This can assist with any discrepancies and provide transparency.
Adjust for Special Circumstances
Adjustments for exceptional circumstances, such as employer-provided meals or personal travel days, might be needed. Consult with your travel manager or refer to official sources for specific details.
Using Expense Management Solutions
Platforms can significantly simplify the process. Clyr offers automated calculation and streamlined reimbursement processes, saving you valuable time and effort.
Conclusion
Understanding the basics and utilizing tools can streamline the process for better efficiency and accuracy. Whether you use the standard or high-low approach, always ensure compliance with your management guidelines.
