Setting Per Diem Rates: 3 of the Best Business Practices

Introduction:

Corporate travel is essential to conducting business, even for small companies and solopreneurs. Potential clients appreciate future partners who make an effort to nurture the relationship. 

The travel also demonstrates the solvency of the company. After all, it takes a healthy budget to pay for employee flights, hotel, and ground transportation. 

Some companies hire corporate travel managers who run their departments. Plus, they receive a budget that covers staff travel costs. Corporate travel costs still average between $949 to  $1,293 per corporate travel day. 

Even prominent companies might ask travelers to pay for their travel expenses upfront. Then, the businesses reimburse them, or staff can claim the costs on their taxes as write-offs.

Since more than one method exists for covering hotel, flight, and ground transportation costs, companies benefit from adopting a policy.

Thus, organizations must establish corporate travel policies and per diem rates.

Understand What Per Diem Is

Per diem is an allowance that entities afford to company business travelers. For example, corporation executives enjoy the best allowances as part of their benefits packages or duties. 

Some might receive daily meal allowances of $75 per meal and $50 for ground transportation. When executives travel, they already know the amount of their per diems.

Companies can do the same for the rest of their team by issuing per diem in the form of cash or credits on corporate credit cards. 

Small businesses and solopreneurs might establish different allowances based on their budgets. 

Per diem acts as a substitute for reimbursable travel expenses. Thus, corporate travel managers and company executives do not receive surprise expenses in reports. 

Organizations benefit from establishing fiscal travel guidelines since the staff has per diem employee rights. Read more here.

Visit the US General Services Administration Online

Visiting the United States General Services Administration online is a great way to better understand per diem and rates. 

The office establishes rates for government workers. Therefore, corporations and other entities use them as thresholds. Then, each private entity can decide to match the rates or alter them as their budgets allow.

The following are three of the best practices when setting per diem rates.

1. Speak with Company Department Stakeholders

After researching the basics of per diem rates, use best practices, such as speaking with company department stakeholders.

Although corporate travel managers run their departments, others establish budgets and quality assurance for them. 

For example, researchers believe that Amazon has a corporate travel budget that sits comfortably in the seven-figure range. 

Once corporate travel managers know the fiscal parameters, they can use software to allocate it accurately. Then, travel managers can inform company travelers and ensure they understand what to expect.

2. Obtain Staff Feedback

In perfect worlds, corporate travelers would receive black company credit cards without limits. However, even Amazon, Deloitte, and Apple have limitations.

Thus, obtain feedback from staff who travel the most annually. The events of 2020 and 2021 caused hotel rates to increase dramatically. Therefore, companies face higher lodging costs.

Some travelers will incur higher meal prices thanks to the supply chain issues of 2020 and 2021 and the inflation of 2022. 

After obtaining feedback, corporate travel managers can compare prices from 2019 to 2020 and 2021. Then, complete the picture by taking a look at 2022. 

The research should help corporate travel managers understand what their companies should expect regarding costs. 

Moreover, if the GSA has increased allowances, it will indicate that organizations will need to do the same. Otherwise, they can find alternative methods to balance costs with employee reimbursements. 

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3. Update the Company’s Corporate Travel Policy

After discussing budgets with company stakeholders and parsing through staff feedback, corporate travel managers can establish the most appropriate rates. 

Then, update the company’s corporate travel policy, which serves as a resource for company travelers.

Keeping the policy updated is an essential function of the corporate travel department. Staff can reference it when putting together their expense reports, and travel managers can use it to keep travelers on the same page with the organization. 

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Conclusion

Using best practices to establish annual per diem rates allows corporate travel managers to take a systematic approach. The GSA offers a great baseline. Then, managers can adjust according to their organizations’ fiscal needs.