Per diem
A fixed daily amount paid to cover meals and incidental costs while travelling for work, instead of reimbursing each receipt.
In short
- The employee gets the daily rate whatever they actually spend.
- Proof of travel is needed, but individual meal receipts usually are not.
- In Canada, reasonable per diems are generally not taxable. Many employers use the federal government's travel rates as a benchmark.
A per diem, Latin for "per day", is a flat allowance for each day of business travel. It usually covers meals and small incidental costs such as tips, and sometimes lodging. Instead of collecting and checking every meal receipt, the company pays a set amount per day, often with partial amounts for travel days or when a meal is already provided.
Why companies use it
Per diems cut paperwork on both sides. Employees do not need to keep meal receipts, and finance does not need to check each one against policy. Costs become predictable: a four-day trip costs four days of per diem, whatever the employee chooses to eat.
Setting the rate
Rates normally vary by location, since a dinner in Toronto costs more than one in a small town. In Canada, many employers use the meal and incidental rates published by the National Joint Council for federal public servants as a benchmark. In the US, the General Services Administration publishes per diem rates by city.
Tax treatment
In Canada, a reasonable per diem paid for travel away from the employee's usual workplace is generally not taxable. An amount well above reasonable costs can become a taxable benefit. The employee still needs to show the trip took place, typically through travel bookings or a trip record.
Worked example
A three-day conference
A company pays a per diem of $90 a day for meals and incidentals, reduced by $22 when breakfast is included. For a three-day conference where the hotel includes breakfast, the employee receives 3 × ($90 − $22) = $204. They submit their hotel booking as proof of travel but no meal receipts.