You’ve lined up a solid out-of-town project—good margins and strong scope. But when it’s time to staff it, your crews hesitate. Travel means hassle. From hotel costs and meal expenses to unpredictable expenses, nobody wants to dip into their earnings to fulfill their responsibilities.
That’s where per diem becomes a powerful tool to cover costs and attract top talent, win more bids, and protect your profitability.
Per diem is a daily allowance paid to workers traveling for jobs outside their local area. It covers meals, lodging, and incidental expenses. Done right, it offers a win-win:
- Workers receive tax-free reimbursement for travel expenses, increasing their take-home pay.
- Employers avoid payroll taxes on per diem payments, reducing labor costs.
- Projects become easier to staff by offering competitive per-dem rates for out-of-town jobs.
However, per diem only applies if the job site is far enough away from the worker’s tax home, the employer follows General Services Administration rates, and per-diem payment is not paid as a substitute for wages.
Budgeting for per-diem must be done properly to balance competitive compensation and cost control. Here are key steps to manage per-diem expenses effectively:
Know the Rates So You Stay Competitive
Rates vary by city and state. Use the GSA per diem tool below to look up the correct rates for job locations.
U.S. GSA Per Diem Look-Up Tool
Why it matters: Set too low, and workers will walk. Set too high, and you’ll eat into profits.
Lodging vs. Employee Housing
Companies can provide per diem for lodging for short-term projects. For longer-term projects, it may be more cost-effective to provide company-arranged long-term housing.
Think like an owner: What’s cheaper over six months—paying hotel rates or leasing a rental?
Track It or Risk Losing It
- Submit travel logs and job site details.
- Keep records of per diem received, how much it was, and for how long it was paid.
- Ensure per diem is kept separate from wages in payroll.
If it’s not documented, it doesn’t count, which opens the door to penalties and tax issues.
Build it Into Your Bids
Per diem isn’t an afterthought; it’s part of the true cost of working away from home.
If you don’t include it in your estimates, your profit margins will take a hit. If you overpay without a strategy, your budget will become bloated. The goal: accurate, competitive, and lean.
When handled correctly, per diem is a win-win: Workers get financial support while traveling, and employers maintain a cost-effective workforce. By setting competitive rates, tracking expenses, and budgeting wisely, construction companies can use per diem strategically to fuel growth and stay profitable.
