Policy Analysis: Expense Reimbursement vs Per Diem

When it comes to business travel, there are two main ways to reimburse employees for their expenses: expense reimbursement and per diem. Each option has its own advantages and disadvantages, so it is important to understand the differences between them in order to make an informed decision about the best expense management policies for your business.

Expense Reimbursements Explained

Expense reimbursement involves reimbursing employees for the actual costs of their travel expenses, such as accommodation, meals, and other incidentals. This method allows employees to be reimbursed for all of their out-of-pocket expenses while on a business trip.

However, this can be time-consuming for both the employee and employer, as receipts must be collected and reviewed before any reimbursement can take place. Additionally, disputes may arise over how much should be reimbursed for certain items or services. Having a robust expense management software can help streamline this process, however there will still be a significant level of administration required.

Per Diem Explained

Per diem is an allowance given to employees by employers that covers lodging, meals, and incidental expenses during business trips. The ATO offers recommendations for per diem rates based on the location and seasonality of the area being visited. This method eliminates the need for collecting receipts since the amount is predetermined by your businesses per diem policy. It also avoids potential disputes over how much should be reimbursed since everyone knows exactly what they will receive ahead of time, and the responsibility is on the employee to ensure any expenses incurred while on business are fair and reasonable.

Exploring the Advantages and Disadvantages of Expense Reimbursements and Per Diems

One advantage of using expense reimbursement over per diem is that it allows employees to choose where they stay and eat while on a business trip instead of being restricted by your company's rules and policies. On the other hand, using per diem can save employers money since they do not have to pay more than what has been agreed upon in your company's travel policy.

When deciding which method is best for your organisation, it is important to consider both options carefully in order to make an informed decision that best fits your needs. Consider factors such as cost savings versus convenience when making your decision, as well as any potential risks associated with either option, such as disputes over amounts or lack of flexibility with per diems.

No matter which option you decide upon for your organisation's travel policy, it is important that you have a clear understanding of all applicable laws and regulations surrounding both expense reimbursement and per diems in order to ensure compliance with all relevant rules and regulations governing business travel expenses in your state. Additionally, having a clear policy in place outlining expectations regarding employee spending during business trips will help ensure that all parties involved are aware of what is expected from them when travelling for work-related duties.

About TeamBlueSky

TeamBlueSky is a full-service NetSuite Alliance Partner and BPO consulting firm. Our team has extensive experience working with businesses across various industries ranging from small startups to large corporations helping them develop effective policies that meet their specific needs while remaining compliant with applicable laws and regulations governing employee spending during business trips. We also provide outsourced Payroll services for companies using NetSuite and Infinet Cloud as their business management platform. If you are interested in learning more about how we can help streamline your payroll processes, please reach out for an introductory discussion.