Daily Allowance - Definition, Importance & Example
What is Daily Allowance?
Daily allowance is the amount of money that an employee is entitled to on a daily basis. This kind of allowance is not granted in every job. Daily allowance might not always be in the form of money. Daily allowance is the daily amount allowed to employees to spend on food, travel, housing etc. when on official duty.
Importance of Daily Allowance
Employees are paid a monthly salary for their services which they provide to a company during their employment. These are the wages employees earn as a part of their CTC or salary. However, there are scenarios where employees have to travel for official work or be out of office premises on official duty. The additional expenses which employees incur while being on duty are provided by the company. This amount given to employees is known as daily allowance or per diem. It could involve food, accommodation, travel, client relations, gifts etc. allowances.
Daily allowances have an upper limit for each item like food, travel, accommodation, client relations, gifts etc., and can depend on job level, city etc. These allowances are given on actuals or upper limit, whichever is lesser.
Example of Daily Allowance
Consider a salesperson working a city and has to be outdoors in the field to meet clients and retailers. The salesperson has a fixed salary which he or she gets monthly. However, a salesperson might be entitled to a daily allowance that covers his daily travelling and food expenses which are incurred for that particular day. Since these expenses have occurred on duty, hence the company provides these allowances on a daily basis or are reimbursed.
Hence, this concludes the definition of Daily Allowance along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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