Per diem is 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. 2.

Per diem, Latin for "for each day," is a fixed daily allowance paid to employees to cover the costs of lodging, meals, and incidental expenses while traveling for business. As of 2026, many employers use the rates established by the General Services Administration (GSA) as a baseline. For the 2026 fiscal year, the standard daily per diem rate in the United States is $178, which is broken down into $110 for lodging and $68 for meals and incidental expenses (M&IE). These rates are significantly higher in "Non-Standard Areas" with a higher cost of living, such as New York City or Los Angeles. Companies may choose a "fixed-rate" method, where the employee receives the full amount regardless of what they spend, or an "actual expense" method, where they are reimbursed up to the per diem limit based on receipts. Per diem payments are generally non-taxable to the employee as long as they do not exceed the federal rates and the travel has a legitimate business connection.