With an increase in remote work, flexible scheduling, and project delivery timelines, the demand for per diem services is booming. However, it is important to remember that per diem should not be used as an excuse to allow sloppy or unethical expense reporting.
This is why it’s so critical to invest in a robust expense management system that can help you identify and prevent the common pitfalls of per diem abuse. To do so, start with a per diem policy that sets clear guidelines for employees and provides them with a set daily allowance for travel costs to cover meals, lodging, and incidentals. In addition, it should include specific rates for different locations or categories of travel and take into account factors like cost of living and travel duration.
A well-implemented per diem policy should also allow for easy reimbursements and accurate record keeping by requiring itemized receipts and proof of expenditures, as well as by providing a method for tracking and reviewing expenditures. Additionally, it should require that finance review and approve a report before reimbursing employees for eligible expenses. This way, employees are only reimbursed for what they’ve actually incurred and any unused allowances remain with the company for future use.
To keep track of all this, companies can implement a system that includes time and expense tracking with easy report submission and even offers the option for corporate expense cards. This can help minimize the burden on employees to keep detailed records and receipts and reduce the risk of fraud by eliminating the need for out-of-pocket spending.
Additionally, companies can also establish an accountable plan to ensure that their per diem policies meet IRS guidelines for reimbursing employees for business-related expenses. This means that the non-taxable portions of the per diem allowance are not included in an employee’s taxable income and they only receive their taxable portion when they submit expense reports for reimbursement.
Another way to limit the potential for per diem abuse is to require that a traveler pay for all expenses upfront and then request a reimbursement from the company. This can make it harder for employees to exaggerate or submit fraudulent claims and can send a strong message that the organization is serious about protecting its financial health.