Are there per diem limits in the private sector?

What is the name of your state? NY

I have a recruiter telling me that he can get me more per diem than other recruiters if I contract through his company. He said, "for example, if your previous agency paid you ~$115, we would probably pay you around $140." I told him the government fixes the rates. It sounds illegal. How is that possible? He said "I don't know the details on how they compute it, or who in my company computes it, but it's quite legal. We give the full amount of per diem possible, and many agencies do not."

Then I read this on the GSA.gov website:

13 How much per diem can I pay a contractor?

GSA establishes per diem rates and related policies for permanent Federal travelers on official travel only, and therefore cannot address your specific inquiry concerning the payment of contractors. If the contractor is on a federal contract, check with the contracting officer to see what is stated in their contract. If they are not on a government contract, we recommend checking the travel regulations of your company.

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On top of that, laypeople are telling me companies choice their own per diem rates. So this conjures up an extreme scenario - say I want to run an agency that contracts workers out. I want top talent, so I offer one heck of a per diem package. I pay the employees enough per diem for them to stay at the most expensive hotel, and dine at the regions most expensive restaurant. And because that deal is so enticing, I can get away with offering crappy wages. And I let them spend their per diem how they wish. They can eat Ramen noodles from a cardboard box and pocket the tax-free income if they want. What's to stop that? There must be an upper limit on how high per diem can be, or everyone would be working out of state and paying nearly taxes on minimum wage.

Per deim rates can be whatever the company wants. However, the deductibility of the amount or the lack of inclusion as income of the amount depend on the limits imposed by law.

tranquility said:

Per deim rates can be whatever the company wants. However, the deductibility of the amount or the lack of inclusion as income of the amount depend on the limits imposed by law.

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Thanks. That's confirms the article I just read on the matter.

Are the figures published on www.gsa.gov the de facto federal limits?

Suppose someone works (and dines) in Santa Monica, but lodges in Culver City. The employer usually doesn't know where the employee lodges, and pays per diem based on the location of the work site. Does the IRS expect the employee recompute per diem using lodging rates for Culver City, and meals and incidentals for wherever the employee eats each day?

jgombos said:

Are the figures published on www.gsa.gov the de facto federal limits?

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To answer my own question, a recruiter told me that the GSA figures are only caps, and still must be substantiated with receipts showing actual expenses. He said the only system that allows TDY workers to not account for actual expenses is the hi-low system, where each region is either deemed to be expensive or inexpensive, and has a per diem of one of two values.