When Can Recruiters Offer Contractors Per Diem?

By DEBBIE FLEDDERJOHANN, President of Top Echelon Contracting

Per diem is a factor that can make or break a contract placement.  But before you fulfill a candidate’s request for per diem, it is important that you determine if the placement qualifies based on the rules of the Internal Revenue Service (IRS).

Per diem is a reimbursement allowance paid to an individual for lodging, meals, and incidentals for travel away from home when performing services as an employee.  Employers often prefer to pay a per diem rate to a worker for business travel rather than reimbursing them for the true and actual costs of the expenses they incur.

This is especially common in contract assignments because the employee is often working in a location far from their permanent residence.  This may force them to maintain a second residence during their assignment.

They must maintain two residences during the contract assignment in order to qualify for full per diem.  Apartments and hotels are examples of other residences they may maintain.  They will not qualify for a per diem employment agreement if they are living with a family member or friend during the assignment.

Contrary to a common myth about per diem, it cannot be given if the contractor is permanently relocating their family home.  In this situation, they are only maintaining one residence and therefore not duplicating expenses, so per diem does not apply.

For more information, please see IRS Publication 463 at http://www.irs.gov/pub/irs-pdf/p463.pdf.

From a recruiter’s perspective, the improper use of full per diem can open both the client company and contractor up to IRS scrutiny and audits.  Therefore, be sure to educate both your clients and candidates on the proper application of per diem.
(Editor’s note: This article is for informational purposes only.  It should NOT be construed as legal or tax advice.)

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