What Does “Per Diem” Mean?

Per Diem

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Per Diem

“Per diem” is a Latin phrase that translates to “per day” or “for each day” in English. In the context of business, finance, and employment, it’s often used to refer to a daily allowance or rate of pay.

For example, employees traveling for work might receive a per diem allowance to cover daily expenses, such as meals, lodging, and incidental expenses. Instead of reimbursing the actual costs, the company might provide a set amount of money per day, which simplifies accounting for both the employee and the employer.

Similarly, per diem can also refer to temporary or contract workers who are paid a daily rate rather than an annual salary or hourly wage.

For example, a consultant might be hired on a per diem basis and be paid a specified amount for each day worked.

Finally, in a medical or healthcare context, per diem can refer to daily patient costs or daily staffing needs.

Example of “Per Diem”

Let’s consider a couple of examples:

  • Travel Expenses: Let’s say a company sends an employee on a business trip. Instead of reimbursing for every meal, hotel, and other incidental costs, the company provides a per diem allowance of $100. This means the employee receives $100 for each day of the trip to cover their meals and incidentals, regardless of whether they actually spend $75 or $125 per day.
  • Temporary Employment: A company hires a consultant on a per diem basis at a rate of $500 per day. This means that for each day the consultant works, they receive $500. If the consultant works 10 days in a month, they would earn $5,000 ($500 * 10 days).

These examples illustrate how “per diem” is used to denote a daily rate or allowance. It simplifies the process by providing a set amount rather than having to calculate costs or pay on a case-by-case basis.

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