50 Miles = Big Wins: How Staffing Firms Boost Paychecks and Cut Costs

Staffing companies have a huge opportunity to support their contractors and boost their own margins by properly using non-taxable per diem when job sites are at least 50 miles from a worker’s tax home. Per IRS guidelines, when a contractor is considered “away from home,” they can receive per diem payments for meals, lodging, and incidentals - completely tax-free. (Source: IRS Publication 463)

This isn’t a loophole, it’s a long-standing practice that industries like travel nursing, construction, and IT staffing have leaned on for years. According to Revenue Procedure 2011-47 and reaffirmed annually by the GSA’s per diem rate schedules (GSA Per Diem Rates), these reimbursements must meet time, distance, and expense duplication tests to qualify as non-taxable.

Example 1 – Overnight Stay:  A mechanical contractor from Milwaukee is placed on a 12-week job in Green Bay (120 miles away). They rent a hotel and eat out. Instead of paying them $2,400/week in fully taxable wages, the staffing firm pays $1,700 in wages and $700/week in per diem. The contractor saves roughly $200/week on taxes, and the staffing company reduces its payroll tax burden.

Example 2 – Daily Commute: A project manager commutes 75 miles from Chicago to a site in Kenosha, WI each day. Even without overnight stays, she qualifies for per diem meal and mileage reimbursements under an accountable plan, because she’s duplicating expenses and meets the distance test.

Important Note: I’m not an attorney or tax advisor, and this isn’t legal advice. Rules around per diem can be nuanced. Always consult with a qualified CPA or labor attorney to ensure your plan is fully compliant.

To quote one of my mentors Jim Stoynoff, “It’s a win-win-win”. The employee gets to keep more of their take home pay, the staffing company saves on employer payroll taxes, and the client of the staffing company receives a qualified and happy contractor.