Wednesday, January 6, 2010

Per Diem

When organizations send employees on business trips, short term assignments, conferences, or training they typically pay employees what is typically called a per diem allowance.

The purpose of a per diem allowance is to cover expenses incurred by an employee, such as accommodation, meals, personal transportation at the place of the assignment, laundry, phone calls, internet costs, transportation to and from the airport, meals, refreshments, and any other incidental expenses likely to be incurred by the employee while travelling on company business.

When establishing an appropriate per diem allowance, a number of factors have to be considered such as:
•The cost of living in the destination compared to the home location
•The length of travel / flight time in order to allow for an employee to recover from long flights and / or change of time zone
•The level of the employee in the organization

It is good practice to develop a clear, easy to understand, policy on per diem in order that all employees understand how it works and be able to apply the policy consistently and fairly.

Some of the emotive issues that need to be dealt with are:
•Long flights travelling due west can mean extended travel time but only 1 days per diem for example while travelling the same distance due east can result in 2 days per diem
•When an employee is acting in a higher level position that would place them in a higher per diem category
•When does per diem start and end
•How much travel time is reasonable given flight duration and time zone changes
•Can employees extend their trip to take a vacation without impacting their per diem
•Is the per diem cash up front or a reimbursement
•What proof must be provided to substantiate the per diem claim
•If accommodation is provided, how much should the per diem be reduced by

You can use services such as the Salary Purchasing Power Parity Calculator on www.xpatulator.com to calculate equivalent Per Diem rates in each of your required international locations.