Not many people actually enjoy reconciling business travel expenses. Keeping track of receipts for incidental purchases and meals on the road can tax even the most organised of workplace travellers. For travel managers and finance teams, collating and checking expense claims up takes time and effort that could be better spent on more productive tasks.

 

Per diem pay, a flat rate paid to your travelling employees in lieu of individual expenses can solve some of these paperwork problems. But, is it better than claiming for expenses the traditional way?

Let’s explore more in this blog.

TL:DR

• Per diem pay is a daily allowance for business travel expenses, covering incidental expenses like food and drink.
• It simplifies expense management, provides predictable budgeting, and saves time. 
• Common in industries like construction, engineering, transportation, and consulting, per diem rates are set by HMRC and vary by location and travel duration. 
• Compared to claiming individual expenses, per diem pay saves time for both employees and finance departments, making it generally more efficient.
• Roomex helps manage these expenses efficiently with compliance, security, and flexible accommodation options.

 

What is per diem pay?

Business travel in 2024 is set to outpace 2023 by at least 15.5%. That means the expense claims you deal with are also set to increase. So, how do you manage business travel expenses? Traditionally, there are two ways:

• Your employees pay for incidentals like parking fees or permits, meals, and other expenses on the go. They keep all their receipts, submit an expense claim, then await reimbursement in the next payroll. 
• You pay your employees a flat fee per day a per diem rate for subsistence and incidentals. 

 

Per diem meaning

Per diem, a Latin term meaning “per day,” refers to the daily allowance given to employees for business travel expenses. This allowance covers the cost of necessary meals, as well as incidental expenses that might arise, such as car parking fees or entry tickets. 

By pooling those costs into one specified daily lump sum, per diems simplify the process of managing travel costs for both the employer and the employee.

 

Which industries typically use per diem pay?

Per diem pay is widely used across various industries, but it is particularly prevalent in those where employees are expected to travel domestically, regularly and on a standard budget. Key sectors include:

• Construction: Workers are frequently required at different sites, with multiple ongoing projects to oversee. They usually require standard allowances for their daily expenses.
• Engineering: Engineers on field assignments benefit from predictable daily allowances.
• Transportation: Truck drivers and other logistics personnel use per diem to cover their costs when on the road.
• Consulting: Consultants travelling to client sites often receive per diem pay to manage their subsistence costs efficiently.

 

How to calculate per diem pay

Calculating per diem pay involves several factors:

1. Determine the rate: Per diem expenses rates are set by HMRC or negotiated with HMRC by an individual company. These rates vary by location i.e. whether travel is to the UK or abroad and by the duration of travel. 
2. Number of days: Multiply the per diem rate by the number of days spent on travel.
3. Partial days: Adjust the calculation for partial travel days or specific meals provided.

 

Current per diem rates in the UK

Per diem rates in the UK are set by HMRC. There are different rates depending on the duration of travel, and whether your employees trip is taking them to destinations within the UK or abroad. Here are the current benchmark rates for per diem allowances in the UK, based on HMRC travel expenses guidelines:

 

UK per diem scale rates

Description	Amount (up to)
Breakfast rate	£5
One meal (5-hour) rate	£5
Two meal (10-hour) rate	£10
Late evening meal rate	£15

 

• Breakfast rate: Applies when your workforce traveller leaves home before 6am and incurs a breakfast cost after starting the journey. Note: this rate is for exceptional early starts, not regular early work patterns.
• One meal (5-hour) rate: Applies when the employee has been travelling for at least 5 hours and has bought a meal.
• Two meal (10-hour) rate: Applies when the employee has been travelling for at least 10 hours and has bought one or more meals.
• Late evening meal rate: Applies when your travelling employee works later than usual, finishes after 8pm, and buys a meal before the journey ends. Like the breakfast rate, this is for exceptional late finishes, not regular late work patterns.

 

Per diem rates for travel abroad

For international travel, the per diem rates set by HMRC vary significantly depending on the destination country. There are too many to list here, but the HMRC website provides a comprehensive, country-by-country breakdown.

HMRC guidelines on per diem allowance for travel and subsistence

HMRC uses the scale rates to make it easier for you and your employees to manage business travel expenses. However, to make sure you keep everything above board, there are a few rules and regulations you’ll need to follow. 

• To use benchmark scale rates, the travel must have a business purpose i.e. be in the performance of the employee’s duties or to a temporary place of work. The workforce traveller must be away from their normal place of work or home for more than five or ten hours, depending on the rate applied, and must have incurred a cost on a meal after starting the journey.
• A meal is defined as a combination of food and drink. Employees can claim up to three meal rates in a 24-hour period.
• There is no set benchmark rate for overnight subsistence. Employers and employees need to agree on a reasonable rate if applicable.
• If the cost of a meal (such as breakfast or an evening meal) is reimbursed on an actual basis, the employee cannot claim the scale rate for that meal.

 

Per diem vs. traditional expense claims

The benefits of per diem pay

Simplifies expense management

Because employees receive a fixed daily allowance, it eliminates the need for detailed expense reports and receipts. Your workforce travellers don’t need to maintain a rigorous paper trail when they travel. The administrative tasks for travel managers and finance departments are therefore significantly reduced.

Predictable costs for budgeting

For companies with a very mobile workforce, this is a big win. Per diem allows you to predict trip expenses more accurately, because you know exactly how much you’ll be reimbursing your workforce travellers per day. This predictability helps you budget and plan finances more effectively particularly useful when costing up projects for clients. 

Time-saving for employees and finance departments

Per diem pay saves time for everyone involved. Employees don’t need to track and submit individual receipts, and finance departments can avoid processing numerous expense claims. 

 

So, what are the drawbacks of per diem pay?

Potential mismatches with actual expenses

In some cases, the per diem amount may not fully cover the costs incurred, leading to out-of-pocket expenses for employees. Businesses facing this issue can negotiate bespoke rates with HMRC and include the payments in a P11D form. This is useful if your employees are regularly travelling to expensive destinations and are unable to find meals in budget. 

Restrictions and compliance issues

Per diem rates come with specific rules and conditions. Employees must meet these requirements to qualify for the allowance. Per diem rates become trickier with the rise in employees taking bleisure trips combining business travel with opportunities for personal travel. The HMRC scale rates are specifically for employees travelling solely for the purposes of business. Adding a leisure element can muddy the waters and make it difficult to determine whether meals taken will qualify. 

 

Why use Roomex to manage per diem and travel expenses?

We’re not ones to boast, but if you’re looking for a way to streamline your business travel expenditure and make the whole business of managing business travel easier, then Roomex can definitely deliver the goods. Here’s why:

Compliance

RoomexPay offers structured allowance options that align with company policies and HMRC guidelines. You can stay on top of on-the-road spend and employees don’t need to be left out of pocket. 

Security

All travel bookings can be made on account rather than using a personal or company credit card. This reduces the risk of fraudulent spending and means there’s no need to track employees personal expenditures or manage company credit card transactions.

Flexibility

Roomex provides flexible accommodation options, with over two million workforce-suitable accommodations on our books. Filters allow you to search for the features your employees need. 

Comprehensive analytics: 

You’ll get an overview of your staff travel spend and booking behaviour. This will help you make informed decisions and identify areas where cost savings can be achieved.

 

Wrapping up

Put simply, using per diem pay simplifies business travel expense management. For businesses in industries that require regular, domestic travel, using per diems provides predictable budgeting, and saves time for both employees and finance departments. For workforce travellers, per diem pay makes it easier to track expense claims and reduces administrative burdens. 

 

Tap into RoomexPay to take simple expense management one step further. WIth prepaid cards and comprehensive analytics, Roomex can help save you time and money.