Is there a single generally accepted concept of per diem payments?

July 30, 2016 10:44 AM

My definition, based on my admittedly limited experience, is that the per diem is paid as a lump sum, either up-front or after the fact, for [per diem amount * days worked] without regard to how much the recipient actually spends. What this company offers is reimbursement for actual expenses up to [per diem amount], with receipts required from the contractor/employee.

Are both of these protocols generally accepted? If so, are they more or less equivalently used, or does one definition predominate? Or is one correct and the other "No, that's a valid thing to do but per diem is not the right name for it."?

Most of the definitions I've found online are very general and don't specifically describe them in a way that would resolve my question.

Wikipedia's definition matches my own, but the article is flagged as having problems. But the salient point in their definition aligns with my understanding of what per diem is meant for, as opposed to the way expense accounts and reporting works. From that article:

Fixed per diem (and per mile) rates eliminate the need for employees to prepare, and employers to scrutinise, a detailed expense report with supporting receipts to document amounts spent while travelling on business. Instead, employers pay employees a standard daily rate without regard to actual expenditure.

To me, the company's way is really just an expense account with a daily limit.

I feel comfortable accepting their concept if it's widely accepted, but I'm also comfortable respectfully pushing back and negotiating the point if it turns out that their concept is a fringe definition. I just haven't had enough experience with this to know how to calibrate my expectations.

Just to add more specifics if they're relevant... local transportation between the job site and hotel does not count against the per diem, but receipts are required. Travel to the destination city and back as well as accommodations are booked and paid for directly by the client. There's no possibility I'll have to use my own money for any job-related expenses that might emerge - the job lead would have a company credit card and can take care of anything that comes up.

posted by under_petticoat_rule to Work & Money (21 answers total)

You're right. They're misusing the term. But it's unimportant that you're right. If they want to get all technical back to you they could say, "Well, per diem is just a fancy way of saying daily. That's how we're using it. Nyah nyah."
posted by mono blanco at 10:54 AM on July 30, 2016 [2 favorites]

Absolutely normal practice, slightly incorrect terminology.
posted by so fucking future at 10:57 AM on July 30, 2016 [16 favorites]

Where I work, they use per diem like this. Employees submit receipts for reimbursement after the fact, and are reimbursed up to a daily amount of $x. Travel and job expenses don't count into this $x. If you only spend $y, you don't get the extra $x-y just because. However, different departments award additional bonuses at the end of the year depending on how well the group stays on/under budget, so there's that.
posted by phunniemee at 10:59 AM on July 30, 2016 [1 favorite]

I also fall into the one correct and the other "No, that's a valid thing to do but per diem is not the right name for it." camp on this one - it's a legitimate method of contracting for expense reimbursement, and I've been on more than one engagement that used it. I would call it something more like "actuals up to a daily maximum" rather than per diem, but that's not really material to negotiating it.
posted by strangely stunted trees at 11:01 AM on July 30, 2016 [4 favorites]

Best answer: The IRS defines per diem as "an allowance paid to your employees for lodging, meals, and incidental expenses incurred when travelling. This allowance is in lieu of paying their actual travel expenses". So no, the company isn't using the term correctly. But the way the company is handling it (expenses paid up to a daily ceiling) is also common, so I'm not sure pushing back on the basis of the incorrect terminology is going to be helpful here.
posted by The Elusive Architeuthis at 11:02 AM on July 30, 2016 [3 favorites]

Uncle Sam does it like this: airfare and lodging- you get the actual cost. For hotels we'll get up to a certain number (Max for Washington, D.C. Might be $149 for example). You also get M&IE - meals and incidental expenses - and there's a rate for each city or region. That might be $49 a day and you get that no questions asked no receipts. So yeah semantics.
posted by fixedgear at 11:13 AM on July 30, 2016

My employer's travel policy (reimbursing specific expenses) explicitly says the reimbursement is not a per diem (though of course there are daily limits on it).
posted by aubilenon at 11:25 AM on July 30, 2016

Response by poster: Good answers so far, but I don't understand why I'm being advised not to negotiate a better deal for myself if their idea of per diem grosses me less than the standard accepted definition would. I didn't say I was planning to dick-punch them and then fart in their elevator on their way out the door. I'm trying to evaluate the strength of a particular negotiating point. They need me more than I need them (which honestly is not at all) so I have some leverage. It's not a semantic argument in practice, it's an "Oh, now that I understand what you mean as per diem, your offer is less than what I thought based on your use of the term, which I am not as excited to accept, let's see what we can do to improve it."
posted by under_petticoat_rule at 12:34 PM on July 30, 2016

Response by poster: More clarity - their offer letter offered a per diem, without any further clarification of their concept of per diem. Either there's a default definition or not. If not, the point is not resolved, and negotiating to agreement is required.
posted by under_petticoat_rule at 12:44 PM on July 30, 2016 [1 favorite]

The company's practice is a very normal variant of a per diem policy. You could try to negotiate if you wanted, but I doubt you're going to get much traction. Unlike a raise or bonus or perk, this is the type of thing usually governed by a policy that applies to many employees. Creating custom exceptions for individual employees is likely going to create a repeated hassle for your boss and multiple admins/bookkeepers. Do you think your boss will be excited about the prospect of sitting in a meeting with their boss and trying to justify why the team's travel line is X% over targets for the next however long you plan to work for them? What you're asking for sounds like it's going to be a giant pinch of grit in the gears, and that's usually a recipe for NOPE. Sure, perhaps you're important enough to the company for them to agree to a giant pain in the ass. However, if you have that kind of leverage, there are probably more friendly and effective ways to apply it. If you want to make more money, why not just negotiate your compensation package, your time off, or other benefits?
posted by ourobouros at 12:56 PM on July 30, 2016 [11 favorites]

Agree that specifically trying to negotiate that they treat your expenses differently from everyone else's is a nonstarter. There's no way a company of any size would allow one person to get reimbursed differently than everyone else. Sure, factor it in to your overall assessment of how good the compensation package is, and look to offset it in another area if you can. But, it isn't reasonable to ask them to apply a special administrative process just for you.
posted by msbubbaclees at 1:17 PM on July 30, 2016 [4 favorites]

i would definitely try to get leverage in another area of compensation. this would have really burned me. i've chosen work before for the sole reason that a (real) per diem was offered and I knew I could live below that and bank the delta. 'per diem' does not mean what they think it means, but that doesn't help you at all.
posted by j_curiouser at 1:43 PM on July 30, 2016

Negotiating on this point would almost be like trying to get a monthly paycheck instead of biweekly because you wanted the two extra weeks of interest. Basically, an accounting nightmare. Feel free to ask them if you want, but unless this is a really small shop with incredibly flexible procedures, you'll likely hear "no."

Also, in my old industry, at least, per diem was generally understood not to be compensation, but rather, reimbursement for travel expenses. So, sure, maybe you could game a fixed per diem by collecting the full amount and eating ramen in your hotel room. But that probably isn't their intention. Just something to keep in mind if you decide to renegotiate, unless your industry has different norms.
posted by cdefgfeadgagfe at 1:50 PM on July 30, 2016 [5 favorites]

Sure you can try to negotiate. It wasn't clear in your first post they offered a per diem in the offer letter. But instead of saying "let's see what we can do to improve it" I'd take the initiative, calculate how much more I would've taken home under the normal definition and ask for that, with a clear justification for my calculations.
posted by mono blanco at 2:21 PM on July 30, 2016 [1 favorite]

More clarity - their offer letter offered a per diem, without any further clarification of their concept of per diem.

If their offer letter mentioned a per diem without clarifying, then yeah, that puts a different complection on things in terms of negotiation. That was cash value to you their offer put on the table.

I agree that the thing to negotiate for is an offsetting increase to your comp - administering your expense reimbursement differently from policy would be a huge pain in the ass for them.
posted by strangely stunted trees at 2:23 PM on July 30, 2016 [2 favorites]

FWIW, there was this kind of confusion at a university I attended, made worse by the fact that some profs allowed students on their funding to take the daily rate without receipts, but that was against standard uni policy.

What is included in per diem also varies - since I was traveling on a grant, my per diem was what they budgeted for for accommodation, food, local transport, etc., all included. You have a better case if they clarified what the per diem would cover in the offer letter.
posted by momus_window at 7:27 PM on July 30, 2016

I think you're the one confused about what a per diem payment is. It's to make travel cost-neutral for you. You shouldn't be making money on it, even if you eat ramen. The flat rate is just to simplify accounting, and is set so that sometimes you'll be over, sometimes under, and that it will even out over the duration.

So, if you were planning on making a profit on it, that's a non-argument. They will not be impressed. If you're unhappy with the pay, ask for more pay.

If I'm reading you wrong, and you just think you deserve a nicer hotel than a Motel 6, well that's perfectly fair to discuss. But that doesn't really relate to whether they require receipts or not.
posted by ctmf at 9:48 PM on July 30, 2016 [1 favorite]

I see your point. I have no idea if this would fly, but as a boss myself, I'd think closely if I received the following:

"When I accepted this offer, it was on the traditional understanding of a per diem paid directly to me at a rate of $X/day to cover inconvenience and incidentals. However unlike the terms of our agreement of a per diem, (company) reimburses actual expenses up to a maximum amount. This impacts my takehome pay by about X% as my typical expenses are $A, which is $B-A less than the per diem, meaning I'm now receiving $B-A less per travel day and about $C annually. This is less than we agreed upon. Would the best option to address this be through the expenses/per diem policy, or in my base pay?"
posted by samthemander at 12:35 AM on July 31, 2016

I am a manager who has to handle travel reimbursemenet. IANYMWHTHTR.

Based on your question and your request for clarification/rejoinder, I'll take a stab at what I think's bugging you, with some possible remedies:

- yes, as others have said, there is a definition of "per diem," but it's commonly misused. In the private sector, at least, I haven't seen many places that will let you go "no receipt" and they'll just pay a full flat rate regardless of your actual expenses. Back in the 80s or so, I remember friends of mine in the USAF talking about banking some cash by finding motels that cost less than their per diem, but that was government and probably went out the window when the government started issuing credit cards. So there is hardly any situation out there where you'll "make money" on an expense account, except in the sense that your company pays for meals you would have eaten one way or the other.*

- I don't know from what you've said if the offer letter defined the per diem amount or not. Regardless of which "definition" (the real one or the commonly misused one) we mean, I'd want to know the amount before I even started trying to negotiate.

I think the possibility for this to be a positive negotiating point in your contract (a fat per diem that lets you routinely come out ahead when you travel) is nil. The IRS just doesn't let businesses pay more for travel expenses than they really cost. This becomes a deduction for the business and tax-free money for the employees, neither of which the IRS likes.

I think your concern is only to find out whether their maximum allowed daily rate, to sidestep the problematic phrase, is adequate to travel in a style you feel is reasonable. To decide this, you'd have to know (a) what the amount they're offering is (not just the term "per diem," a $ amount) and (b) the average costs of lodging, food, taxis, etc. in the areas you expect to travel (and I'd research that, not take their word for it). If it seems stingy, ask for an increase, and while you're at it, clarify what THEY mean by "per diem," to avoid misunderstandings.





*I've actually heard more business owners than you'd imagine, bitching and complaining about the fact that employees get reimbursed for travel meals...
posted by randomkeystrike at 5:43 AM on July 31, 2016

I'll chime in. I've been in consulting and consulting-related endeavors for 20+ years.

Getting a per diem client is AWESOME, because, contra randomkeystrike, you totally CAN pocket money if you're careful. This is super common.

The IRS levels are low (and, not to put too fine a point on it, but this is especially true for professional/consulting/sales travel in expensive cities like DC), but even with that being the case I'd much rather take my day rate for meals & incidentals in (e.g.) Kansas City than have to keep up with receipts for every little thing in order to come out even even when the allowable daily max exceeds the IRS rate.

Both provider and client save time and effort on the transaction, because I don't have to do traditional expenses, and they don't have to keep up with checking my receipts and expense paperwork.

(It's less common (and in fact super rare) for private sector clients to try and impose IRS rates for travel and lodging because, 99% of the time, you can't even GET those rates without a government ID.)

All that said, yeah, if they promised you a "per diem" and then walked it back to "well, we meant we'd reimburse you *up to* the per diem rate", then it's a bit of a bait & switch.
posted by uberchet at 7:49 AM on August 1, 2016

I agree with the consensus here; what your employer is doing is a common reimbursement setup. It's what my employer does, and like yours, my employer calls it a "per diem" even though its a misnomer. And though there's no way on god's green earth that they're going to allow you to count your expenses differently than everybody else in the company, they may agree to bump your base pay if you make a pitch like samthemander recommends.
posted by craven_morhead at 8:08 AM on August 1, 2016 [1 favorite]