A per diem is a daily amount of money given by a company to an employee to cover transport, subsistence, or other expenses when traveling in a business context.
What Does Per Diem Mean?
Per diem is a Latin expression meaning “for each day” or “by the day.” Though per diem refers to a daily allowance, a company can also give a weekly or monthly allowance to its workers. Per diem may include other expenses such as lodging and food.
How Is Per Diem Calculated?
Per diem is calculated by multiplying the allowance by the number of days of travel. For example, an organization policy allows for a daily meal allowance of $60. For an employee expected to travel for 4 days, the total amount of the allowance will be $340.
Is Per Diem Considered as Income?
In Canada, travel allowances are not considered as income and are therefore not taxable if the following criteria are met:
- The employee is travelling out of the usual place of work and for business purposes;
- The allowance is reasonable;
- The employee is the primary beneficiary of the allowance;
- The allowance is not an additional form of remuneration.