What Is Per Diem Pay? Rates, Rules, and How It’s Taxed

An employee travels for work and comes back with a stack of meal and hotel receipts, or doesn’t, because the company just pays a flat daily amount instead. That flat amount is per diem, and how it’s set up determines whether it’s tax-free or a payroll headache.

Here’s what per diem pay is, how rates are set, and when it counts as taxable income.

What Is Per Diem Pay?

Per diem, Latin for “per day,” is a fixed daily payment an employer gives an employee to cover travel-related expenses like meals, lodging, and incidentals, instead of reimbursing actual itemized costs. Rather than collecting and processing receipts for every meal and hotel stay, the employee receives a set amount per day of travel, and manages spending within it themselves.

Per diem is most common for employees who travel for work regularly, such as sales reps, consultants, and healthcare or field service workers, but it also shows up outside of travel in a few industries, most notably healthcare, where it can describe a flat daily rate paid to shift workers who fill in on an as-needed basis rather than a regular schedule.

How Per Diem Rates Are Set

The U.S. General Services Administration (GSA) publishes standard per diem rates for lodging and meals and incidental expenses (M&IE) for locations across the country, updated annually. These GSA rates are the benchmark most employers use, whether or not they’re required to, since staying at or under the federal rate is the simplest way to keep per diem payments non-taxable.

Employers aren’t required to use the GSA rate. Many set their own per diem amount based on internal budget and typical travel costs for their industry, but paying above the federal rate has tax consequences covered below.

When Is Per Diem Taxable?

Per diem paid at or below the applicable federal GSA rate, under an accountable plan, is generally not considered taxable income to the employee and isn’t subject to payroll tax withholding. An accountable plan requires that the payment be tied to an actual business expense, that the employee doesn’t need to itemize receipts as long as the amount is at or under the federal rate, and that unused amounts are returned or not paid out as extra compensation.

Per diem paid above the federal rate is only non-taxable up to the federal rate; the excess amount is treated as wages, subject to income tax withholding and payroll taxes like any other pay. Per diem paid without meeting accountable plan rules at all, for example, a flat travel stipend with no expense connection, is fully taxable regardless of the amount.

Setting a Per Diem Policy

A workable per diem policy specifies the rate structure, whether it follows GSA rates or a company-set amount, which roles or travel scenarios qualify, how partial travel days are handled, and how the payment is processed alongside payroll. Employers that mix per diem with regular payroll need a system that can track it correctly without accidentally treating a non-taxable reimbursement as taxable wages, or the reverse.

Netchex processes per diem alongside regular pay, so accountable-plan reimbursements and taxable travel pay are tracked and reported correctly instead of getting lumped together.

Frequently Asked Questions

This guide reflects publicly available product information and independent reviewer data (G2, Capterra, Trustpilot, Yelp, Better Business Bureau, Reddit, Software Advice, GetApp) as of 2026. Feature availability and pricing may vary by plan. Contact each provider for current details.

Disclaimer: Any product roadmap or future plans provided herein are for informational purposes only. They do not represent a commitment to deliver any material, code, feature, or functionality. Plans may change without notification. The development, release and timing of any features or functionality described remain at the sole discretion of Netchex, its affiliates, and partners. Netchex does not give legal, tax, or accounting advice. You are responsible for ensuring your use of Netchex product meets your individual business and compliance requirements.

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