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We’re no longer accepting new participants as our focus is on reimbursing existing claims. While we’re unable to provide a specific timeline on when your report will be reimbursed, we’re doing our best to drive donations and keep reimbursements moving forward. If you know anyone who can donate to this campaign please encourage them to enable Personal or Corporate Karma on their Expensify account.
Deep Dive: What are Per Diems and how do they work in Expensify?
Per Diems are a flat rate given based on a time range travelled for business purposes regardless of actual expenses incurred. A Per Diem is only based on the time you are travelling for work: it starts when you leave your home, and ends when you arrive back home.
Per Diems themselves are created to alleviate much of the heavy lifting that Expense Reporting is well known for. Per Diem claims remove the hassle of saving multiple receipts and allow you to instead claim back a simple, pre-determined tax-free allowance, set by either your jurisdiction or company. Let's take a look at a few pros and cons of Per Diems before we move on:
- Per Diems allow simple, pre-set amounts for trips, reducing or removing the need for travelling employees to save purchase receipts. This basically allows for approval without documentation up to an amount the company is willing to save the admin time on - the only approval is vetting the correct Per Diem use.
- It can encourage prudence as employees know their set limits Per Day and are therefore unlikely to incur spend over-and-above this, as this could come at a personal cost, depending on company policy.
- Per Diems grant more predictability when budgeting for travel.
- Global tax-free rates are often set by a State or jurisdiction, alleviating the responsibility for admins to come up with "appropriate" reimbursable amounts.
- Sometimes jurisdiction set amounts can be deemed incorrect or too low. In these cases, it can be difficult to establish a fair and realistic per diem for different costs in different locations and if allowing more than a tax-free amount, adds undue labour for admins teams to split out taxable and tax-free expense reimbursements.
- Set Per Diems might restrict employee choices that could have benefitted the company, i.e. a sales team-member not picking up a full dinner tab or pushing split bill reclamation back onto employees after an individual picks up the tab and each user submits their own Per Diem claims.
- It does not eliminate employee expense fraud and reduced receipt requirements may actually make it easier.
- As a business, you can never be sure that your expenses bill actually matches what employees have had to spend. Because you're reimbursing pre-determined amounts, there may be huge hidden savings you're not taking advantage of.
The last disadvantage here is essentially what systems like Expensify, SmartScan and the Expensify Card are built to solve, by accurately tracking spend down to the penny, but Per Diems have long been the solution prior to technology's influence in this space - and are now commonplace within many countries, predominantly in Europe.
How are Per Diems calculated and setup?
When calculating the reimbursable total of a Per Diem expense, the total typically also depends on three things:
- The destination in which you're travelling and working.
- This is defined by the location of the trip.
Time working away from home:
- The total of which is broken down based on the Subrates configured (i.e. per 8 hours for Part Days, per 24 hours for Full Days etc).
- This is defined by the length of the trip.
- Any expenses which are covered by a Per Diem Subrate configured on the policy (traditionally subsistence expenses: meals & lodging etc, but occasionally also sometimes transport, entertainment etc).
- This is defined by the employee on the trip.
From an accounting perspective, Per Diem expenses typically fall in a single Per Diem account regardless of which rates are used. Expensify allows you to set a Default Per Diem category, so employees never need to worry about this.
So how does Per Diem work in Expensify?
Great question! Check out the Related Articles below for more on how to set these up, and how to create individual Per Diem claims, but let's dive into how this setup works for Expensify.
Per Diem expenses typically need to capture the above three things, and they do so by tracking the start and end times of the travel, the travel destination, the sub-rates applied and the total reimbursement amount.
However, the real challenge of supporting Per Diem for everybody is that there are few standards between jurisdictions which still rely heavily on these for employee expenses. There is no standard set of rates, deductions or incidentals across countries. For example, even in just Nordic countries:
- 🇩🇰The Danes operate a system where your first full day (counted as 24 hours away) contributes to the day rate, and anything less than 24 hours doesn’t qualify for expensing. Every subsequent hour is reimbursed at 1/24th of that amount. In addition you have three separate meal and a lodging rate. (Reference)
- 🇫🇮The Fins offer two day rates (a full day and part day), but have separate rates for days you’re actively travelling. In addition you have two separate meal and no lodging rates. (Reference)
- 🇸🇪The Swedes offer two day rates (a full day and part day). In addition you have two separate meal and no lodging rates. (Reference)
- 🇳🇴The Norwegians offer two day rates (a full day and part day). In addition you have two separate meal and five lodging rates (dependent on the quality/facilities of accommodation). (Reference)
The differences continue to vary between jurisdictions. Wild outliers include the UK, with seven meals and incidentals which count as deductions from the lodging rate, rather than day rates. In Canada, rates change for trips lasting longer than 30 and 120 days, and no European regions agree on whether the destination rates are incurred in the local destination currency or the currency in the country of origin!
Expensify supports all of these regions by allowing full customisation via a blank slate of Destinations and Subrates. Each Destination can have a few, or as many Subrates as you like and these Subrates each have a fully customizable Amount (positive or negative to handle deductions or additions) and Currency.
And to handle the differing "hours" stipulated by all-manner of territories, we clearly split out the trip time so the submitter can quickly and easily see how many sets of full 24 hours they were away for, along with how many hours their beginning and end days accounted for:
What if I can't see Destinations as a field or my Per Diem section looks different?
The new Destination backed Per Diem feature is slowly rolling out to all customers. You might still see the old version, reflected by the screenshot below:
If you'd like to start using the new version right away, send [email protected] a message and ask:
I really want to start using the new version of Per Diem! Please escalate my query and have my domain [DOMAIN NAME] bumped up the list.
Our team will get you on the new version as soon as possible!