Per diem is a daily allowance for expenses incurred that is paid by an employer to its employees. This payment is usually associated with employee travel, and is the standard amount that the employer expects its staff to spend on hotels and meals while on the road. By paying this standard daily amount, the employer can dispense with having to review employee expense reports. Employees can take advantage of a per diem arrangement by deliberately spending less than the per diem amount and then taking payment of the designated per diem amount.
An employer can pay any per diem amount it wants, but there are some standards that are generally followed. For example, employers pay the standard mileage rate published by the Internal Revenue Service each year. Another source of per diem information is the General Services Administration, which regularly publishes a guide that states travel and entertainment reimbursement costs for a large number of cities.