What you Need to Know About Per Diem Expense Reports Now
Do your employees have to travel for business? Does your company offer them per diems? If so, the company is likely looking for the most effective way to manage its per diem expenses. The best way to control them is to use a per diem expense report.
Per Diem Definition
“Per diem” is taken from a Latin phrase that means “for each day.” A per diem allowance is a fixed amount of money given to employees to cover or reimburse them for business expenses.
Per Diem in the UK
Per diem expenses are called “scale rate payments” in the United Kingdom. The company uses scale rate payments to pay or reimburse accommodation, meals, or travel expenses. Each company sets its policy about how it will handle payments. Some firms make payments to cover accommodation and meals only. Other companies pay out funds to cover travel and other expenses.
Advantages of Scale Rate Payments
Scale rate payments (or per diem payments) offer employers and employees several advantages.
Fixed-Rate Makes Planning Easier
The employee receives a set amount for each day of travel, and they can easily budget for each day they will be away from home. The employer knows how much the employee receives in expense money. The company can factor employee travel expense figures into the monthly outlays without receipts or documentation.
Employees Have More Options While Travelling
Employees who need to travel for business know that they have a certain amount that the company will cover. They have the freedom that comes with having choices when away from home. The employee can decide to eat at a more expensive restaurant or take lodgings at a more pricey spot if they wish, knowing exactly how much the company will cover.
Some employees will use the company allowance limits as their guide and never go over these amounts. In either case, the employer will only pay the scale rate to employees. The company always knows how much it will pay employees traveling for business.
Traditional Per Diem Expense Reports and Round Sum Allowances
Traditional per diem expense reporting can be a frustrating experience for employees. For employers, there can be distinct disadvantages. Adding this system often requires much supervision to verify and approve employee expenses. This level of monitoring can be costly for the company.
A traditional tracking system requires employees to record payments they receive from the company for business expenses. The employees must also collect receipts for their expenses and submit them to company management in a per diem expense report.
Once a manager approves the expense report, it goes to the finance department, which issues reimbursement to the employee. More than half of employees wait at least seven days to receive their money from the company, and the entire process can take up to four weeks in some cases.
Round Sum Allowances
Round sum allowances are paid directly to employees. Once the money is received, the employee has complete discretion over how they use the funds.
HMRC treats this money as earnings, subject to PAYE (Pay-As-You-Earn) tax and NI (National Insurance).
Per Diem Payments
Business expenses are exempt from Her Majesty’s Revenue and Customs (HMRC) taxes and National Insurance fees. You can save some pennies if you prove the food allowances or vouchers are for business purposes. This rule covers the cost of meals for employees travelling for business or the cost of food provided on-site for meetings or training sessions.
The national meal allowance rates for domestic business trips are:
- Minimum journey time 5 hours: £5 maximum meal allowance
- Minimum journey time 10 hours: £10 maximum meal allowance
- Minimum journey time 15 hours: £25
Per Diem Expense Rates for UK Employees Travelling Internationally
HM Revenue and Customs published a list of scale rate expenses for travellers visiting foreign countries. The rates are for meal allowances per city on a typical working day (over five hours and under 10 hours) and accommodation.
As long as employees indicate they spent up to the amount of the scale rate expenses on their per diem expense reports, the amount is not considered earnings or taxable. It is a better option than a round sum allowance for travel expenses since UK employees pay tax on them.
Mooncard payment card makes processing per diem expense reports easy and convenient. The employee uses the corporate card and the app’s software takes a photo of the receipt, which is forwarded to your finance department. Employees don’t have to look for receipts or submit them for month-end. To learn more about Mooncard, contact us today to arrange your online demo.