How to Calculate Per Diem: An Insider’s Guide

Business travelers already juggle so much — packed schedules, tight deadlines, unfamiliar cities — that tracking every coffee and meal shouldn’t contribute to the chaos. That’s where “per diem” comes in. This daily allowance simplifies travel expenses by outlining the rules for expensing lodging, meals, and incidentals, usually without the hassle of saving receipts. 

Whether you need to know your spending limits during a quick trip to New York or are sorting out rates for partial travel days, this guide breaks down the steps to calculate per diem.

What Is Per Diem?

Corporate travel budgets have their own lingo, but few terms are as well known as “per diem.” Latin for “by the day,” per diem is a fixed daily allowance employers provide to cover accommodations, dining, and miscellaneous expenses. It simplifies the reimbursement process since it may eliminate the need to submit receipts for every expense.

In the United States, the General Services Administration (GSA) sets per diem rates for most domestic travel, while the Departments of Defense and State handle rates for military and international locations.

Components of Per Diem Rates

Per diem rates simplify expense reimbursement by covering the essentials of business travel. These rates are typically divided into two main components:

Lodging Expenses

This portion of the per diem covers overnight accommodations. Rates vary widely based on location, with high-cost cities like New York or San Francisco offering higher lodging allowances. These rates are adjusted to reflect the local cost of living, making it easier for employees to secure appropriate accommodations.

Meals and Incidental Expenses 

This area covers meal costs and minor travel-related expenses, such as tips or service fees, for entire days spent in a location. For travel days, however, companies often apply a reduced rate, typically reimbursing 75% of the standard amount. This adjustment reflects the partial day’s shorter duration and reduced expenses.

Methods for Calculating Per Diem

Learning how to calculate per diem rates doesn’t have to be like solving a Rubik’s cube. With two main methods to choose from, you can keep things straightforward:

Standard Rate Method

This tried-and-true method uses the General Services Administration’s (GSA) daily expense rates for a specific location. It’s the go-to approach for accuracy, as it tailors per diem to the cost of living in each destination.

High-Low Method

If simplicity is the goal, the high-low method is your friend. This approach assigns fixed rates based on whether a destination is classified as a high-cost or standard-cost area. For 2025, high-cost areas are around $319 per day, while other locations average around $225 per day.

A Simple Guide: How to Calculate Per Diem

Handle per diem like a pro with this easy-to-follow guide. 

Step 1: Find the Right Rates

Start by identifying the per diem rates for your destination. For U.S. locations, visit the GSA website. For international travel, check the Department of State’s per diem tables.

Step 2: Adjust for Partial Travel Days

Most companies reimburse 75% of the standard rate for travel days. Here’s how it works using sample rates:

Example:

Full per diem: $185

Partial day rate: $185 × 0.75 = $138.75

Step 3: Add It Up

Multiply the appropriate daily rate by the trip duration, adjusting for partial travel days.

Example for a 3-day trip:

• Day 1 (partial): $138.75
• Day 2 (full): $185
• Day 3 (partial): $138.75

Total per diem: $462.50

Tools and Resources for Simplifying Per Diem Calculations

As your business grows, so do your travel needs, and calculating per diem can quickly become more time-consuming and complex. But with today’s tools and resources, you can make the process simple. Here’s what can help you save time and effort:

Online Per Diem Calculators

Why crunch numbers manually when you can use a free, user-friendly calculator? Tools like Navan’s online per diem calculator for 2025 let you input your destination to compute allowances instantly. It’s quick, precise, and built to make life easier.

Government Rate Tables

The General Services Administration (GSA) and Department of State websites provide comprehensive per diem rate tables for those who want to double-check official rates. These are updated annually and reflect location-specific costs for lodging and meals.

By combining modern tools like Navan’s calculator with official resources, you can streamline your per diem management. From rate calculations to reporting, the right tools can unlock a smoother process for everyone involved.

Innovations in Per Diem Management: The Future of Travel Expense Tracking

Per diem management is getting a high-tech makeover. Here’s how digital solutions are revolutionizing the process:

• Digital solutions for expense tracking: Expense management tools now automate calculations, track non-per diem expenses, and streamline report submissions, so you can ditch the manual number-crunching and focus on what really matters.
• Streamlining the reimbursement process: Reimbursement is as simple as multiplying the per diem rate by the trip’s duration. This streamlined approach saves time, reduces paperwork, and lightens the workload for employees and accounting teams.
• AI in expense management: AI-powered tools have made per diem management smarter. These tools analyze spending trends, uncover cost-saving opportunities, and offer deeper insights into travel expenses, making the process more efficient and strategic.

By integrating such technology, companies can enhance financial transparency, reduce manual errors, and streamline workflows.

Common Mistakes to Avoid in Per Diem Calculations

Avoid these common mistakes to keep your per diem calculation process easy and accurate:

• Using outdated rates: Always check for the latest per diem rates to avoid over or underpayment.
• Misclassifying high-cost locations: Make high-cost areas like New York or San Francisco correctly classified for higher allowances.
• Neglecting partial-day adjustments: To avoid discrepancies, apply the correct reduced rate (typically 75%) for arrival or departure days.
• Trying to track rates mentally: Don’t set your team up for failure with expectations that they’ll be able to keep track of spend in their head every day.

What Happens to Unused Per Diem?

If a traveler spends less than the allocated per diem rate, some companies allow them to keep the unspent amount. This policy incentivizes employees to be mindful of their expenses.

Not all organizations follow this practice. In some cases, unused funds must be returned to the company. Employees should always review their organization’s policies before making assumptions about leftover allowances.

Knowing how to calculate per diem benefits both businesses and employees. It streamlines reimbursements and encourages mindful spending. From simplified processes to efficient recordkeeping, it’s a valuable tool for efficient travel expense management.

Ready to automate processes with an all-in-one travel and expense management super app? Discover Navan today.