Per diem is a fixed, predetermined amount of money that a company pays employees or contractors to travel to job sites outside their home market.  It’s often used as an alternative to complex expense reports that track actual expenses or in combination with expense reports that are limited to approved expenses reimbursed employees.
 

There is no law or regulation governing the amount or application for per diems, however most companies have adopted the rates paid to federal employees by the GSA as an ad hoc standard.  Federal per diem rates are set each year by the General Services Administration (GSA) for employees who travel to domestic and foreign destinations on official business and those rates are based upon a number of factors including cost of living in that area and the variable price of local lodging.
 

Per diem typically covers the following areas:
 

• Lodging: Overnight stays in hotels, motels, apartments, rental homes, etc.

• Meals: Breakfast, lunch and dinner

• Incidentals: Room service, dry cleaning, tips for food servers and luggage carriers, etc.

Note that per diems generally don’t cover transportation costs to and from each location (e.g., flights, rental cars).  Employers may choose to make these arrangements and pay for everything upfront, or have individuals book their own accommodations and reimburse them later.