How per diem works
A company sets or adopts a daily rate, commonly based on the US General Services Administration's per diem tables that vary by city, and pays that flat amount for each day of qualifying travel regardless of what the employee actually spends. Employees do not need to submit meal or incidental receipts under a per diem policy.
Per diem paid at or below the published federal rate is generally not treated as taxable wages to the employee, while amounts paid above that rate can become taxable and need to run through payroll. Businesses still require a simple log of travel dates and location to support that the per diem relates to actual business travel. Some companies pay a lower internal per diem rate than the published federal maximum to control travel costs, which is allowed as long as the company is consistent, though this does not change the nontaxable treatment as long as the rate paid does not exceed the federal maximum.
Example
An employee travels to a city with a federal per diem rate of $79 for meals and incidentals, for a 4-day business trip. The company pays a flat $316, the $79 rate times 4 days, regardless of actual spending, with no meal receipts required. Because the amount matches the published rate, it is not added to the employee's taxable wages. If the same employee's trip is extended by a day for a client meeting that runs long, an additional day of per diem is added to the reimbursement using the same daily rate.
Per diem in QuickBooks Online vs Xero
Not software-specific: QuickBooks Online and Xero can both pay a per diem amount as a reimbursement line on an expense or bill, but neither tracks the published federal per diem rate by city automatically. Businesses typically reference the GSA per diem table separately when setting the daily rate for a trip.
Related terms
How LedgerBPO handles per diem
We track per diem payments against your policy and the published federal rate where relevant, flag any amount paid above the nontaxable threshold, and code payments to the right expense account. This keeps travel reimbursements consistent across employees and avoids surprises at year end when W-2s are prepared.