What are Per Diem Payments?
Whether you’re new to the workforce or not, you may be wondering what “per diem” means in relation to payments given at your job. In simple terms, per diem is Latin for “per day.” If you’re curious about how per diem is calculated, or would like to know more about your rights and responsibilities as an employee, keep reading. We’ll delve into all of that and more below.
What is per diem and how is it calculated?
Per diem payments are a type of reimbursement that is commonly used by businesses. Rather than being paid a salary or hourly wage, per diem workers are given a set amount of money each day to cover their expenses. Essentially, per diem payments are made to pay for the costs of food, lodging, and other expenses that are incurred while traveling for business purposes.
The amount of per diem pay can vary depending on the cost of living in the area where the employee is traveling. For example, if you are traveling for work in a city with a high cost of living, you may receive a higher per diem rate than an employee who is traveling to a less expensive location. Ultimately, per diem payments are designed to help businesses cover the costs of business travel so that employees can focus on their work.
The calculation of per diem pay can also vary from company to company. Some companies may use a flat rate per day, while others may base the per diem rate on actual expenses incurred by the employee. As a result, it’s important for you as an employee to understand how your company calculates per diem pay before traveling for work.
How does per diem affect tax deductions for employees and employers alike?
When it comes to per diem and taxes, there are a few things that both employees and employers should know. First, per diem payments are not part of your wage. Thus, any per diem allowance that is less or equal to the federal government rate should not be considered taxable income.
Per diem rates are set yearly by the federal government and vary depending on the location of travel. For example, in New York City $258.00 is the per diem rate for a day’s lodging and $76.00 for a day’s worth of meals and other fees, such as tipping and parking.
While per diem payments are not taxable, you must still keep track of your daily expenses and submit itemized receipts to your employer. This helps prove that the per diem payments were necessary to perform your job and helps your payment become non-taxable.
What are some of the common misconceptions about per diem payments?
There are several per diem payment misconceptions that may cause confusion for employers and employees. Per diem payments are meant to cover expenses incurred while traveling for business, but some employers mistakenly believe that per diems can be used for other purposes, such as entertainment.
Second, per diem payments are not considered taxable income. As discussed in the previous section, you will not have to pay taxes on the money you receive as long as they are within the federal per diem rate and you submit an expense report.
Thirdly, many believe that per diem payments are only available to employees who travel for work. However, this is not the case. Per diem payments can also be made to employees who work locally, but have irregular hours or incur additional expenses due to their job.
Additionally, per diem payments are not always paid in cash. In some cases, employers will reimburse employees for actual expenses incurred.
Lastly, a wide-spread common misconception about per diem payments is that they are only available to high-level executives. Again, this is not the case. Per diem payments can be given to any employee who incurs business-related expenses. This includes sales representatives, managers, and even administrative assistants. In fact, businesses are required by law to reimburse employees for business expenses. A failure to do so can result in significant penalties. Thus, if you have any questions about accessing per diem payments, be sure to consult with your employer.
What should employees do if they have questions about their per diem payments or want to dispute an amount that has been withheld from them?
If you have questions about your per diem payment or want to dispute an amount that has been withheld from you, there are a few things you can do. First, you should reach out to your employer and ask for clarification. They may be able to provide more information about why the per diem payment was withheld or help you dispute the amount.
If you are still not satisfied with the response, you can contact the Department of Labor’s Wage and Hour Division. They can help you file a complaint, document your concerns, and investigate the matter further.
Finally, if you believe you have been paid unfairly, you can consult with an attorney to explore your legal options. As companies are required by law to provide per diem payments so you can carry out your job, you can take legal action against your employer for inadequate allowance and other unlawful practices.
Per Diem Payments: Conclusion
Per diem payment is a commonly used term in the business world. However, it is commonly misused and poorly understood. With this guide, you know everything you need to know about per diem payment policies and how to advocate for yourself. However, if you have any questions about your own per diem payments, we encourage you to reach out to your employer for clarification.
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