The per diem rate the IRS allows trucking companies to provide to drivers as tax-free earnings — and lets companies use to lower their own tax liabilities — for payments made to drivers for meals and incidentals while they’re on the road jumped significantly on Oct. 1, to $80 per day after remaining flat at $69 per day the past two years. How should your company navigate this change? If your company pays per diem as a flat rate, modifying it based on the IRS change is fairly straightforward – just make sure you do it. For those fleets that facilitate a per diem tax deduction as part of mileage-based pay, a more involved approach is likely required.
And given the 15.9% per diem increase for fiscal year 2025, your fleet might want to do an even deeper dive into the benchmarking and self-reflection pool. Are you paying per diem in the same manner and at a similar rate as companies you compete with for drivers? What are the best practices and trends in per diem pay and do your rates align with the way your drivers are performing? If your company doesn’t pay per diem, would doing so be beneficial to your drivers and your company’s profitability? These are the types of questions your team can explore to ensure you’re using the per diem benefits to their full advantage for your drivers and for the company.
What the data says about per diem
Per diem is important to drivers, and it’s common in professional driver wage packages. Here are a few highlights from NTI’s National Survey of Driver Wages on the prevalence of per diem and how fleets pay it:
- 52.86% of for-hire fleets pay per diem.
- Those companies compensate drivers for per diem in three main ways: as a flat rate, as a tax deduction by including per diem in cents-per-mile pay, and as a percentage of total pay.
- Average flat-rate per diem is $54 dollars per day.
- The average per diem when a company counts it as part of mileage pay is 12.5 cents.
- Of companies that pay per diem based on a percentage of pay, the average percentage is 12.1%.
Facts about per diem and the recent IRS hike
Per diem, from a company and driver perspective, can be somewhat complicated. Here’s a refresher on the basics, in case you need it:
- Paying per diem provides tax benefits for employers and employees.
- For drivers, per diem payments are not taxed as income.
- Companies can deduct per diem payments from their income-tax liability based on the IRS rate. In addition, they don’t pay the employer portion of payroll taxes on those dollars.
Per diem comes with advantages and disadvantages for drivers, so your fleet’s course of action should be to balance what’s advantageous to drivers and what’s advantageous to the company For example, if a company counts per diem as part of a driver’s CPM pay, that reduces the driver’s taxes but also their W2 income – which might be a drawback when the driver applies for a mortgage or other loan and could affect their annual tax refund.
If your fleet hasn’t offered per diem before but is considering it, we recommend making it optional until you’ve had a chance to educate your employees on the benefits and the outcomes they will experience.
Unless approached knowledgeably, per diem can be a mixed bag for companies as well. A wealth of per diem data based on fleet size, average length of haul, and more is available in NTI’s National Survey of Driver Wages. Check it out today. NTI’s team is also here to help walk you through the data, trends, and best practices so you can make informed decisions about your fleet’s use of per diem.
