All about daily allowances: how are they calculated, paid and reduced?

How is the per diem calculated?

Daily allowances are calculated on the basis of the maximum amounts of daily allowances approved by the Government of the Republic of Lithuania or lower amounts of daily allowances, if specific lower amounts, differentiated according to objective criteria, are provided for in the collective agreement, and if there is no such amount – in the local normative legal act. The amounts of daily allowances determined in the collective agreement or the local normative legal act cannot be less than 50% of the maximum amounts of daily allowances approved by the Government of the Republic of Lithuania.

Before determining the amounts of daily allowances, as provided for in the Labor Code, employees must be informed and undergo the necessary consultations. If the amounts of daily allowances are determined in a local normative legal act, employees must be informed of this in writing (DK Article 25, Paragraph 2).

When can the employer pay lower daily allowances?

The employer may pay lower daily allowances when they are differentiated according to objective criteria in a concluded collective agreement or in a local normative legal act. In a collective agreement or in a local normative legal act, it is possible to establish lower daily allowance amounts of specific sizes differentiated according to objective criteria, but they cannot be less than 50 percent of the maximum amounts of daily allowances approved by the Government of the Republic of Lithuania.

The amount of the daily allowance must be clear

According to Ieva Piličiauskaitė, head of the labor law department and chief labor inspector, the amount of daily allowances should be clear and should not cause any doubts for either the employee or the employer, i.e. that employees must know in advance what daily allowances will be paid during a specific business trip and cannot be assumed by a unilateral decision of the employer due to the specific amount of the daily allowance, when the employee leaves on assigned business trips, as well as the guarantee of equality for employees.

For example, if a collective agreement or local regulatory act states that an employee’s daily allowance is reduced to 50 percent or if daily allowance limits are set, for example, that daily allowance is paid to the employee from 50 to 100 per cent, it is not known how much daily allowance is paid.

Objective criteria for differentiating lower daily allowances

“The objective criteria, according to which the lower daily allowances are differentiated, are established by the employer in the local normative legal act, and by the representatives of the employer and employees in the collective agreement, taking into account individual characteristics commercial and economic activity being carried out, working conditions, geographical space of labor relations, etc.,” emphasizes Darbo, head of the legal department, I. Piličiauskaitė.

It is important to emphasize that the circumstances mentioned in the DK and other legal acts are not regulated and their appreciation is left to entities carrying out economic and commercial activities.

The purpose of the daily allowance paid to the employee

The daily allowance paid to the employee is intended to cover the increase in the employee’s expenses resulting from a business trip, when the employee leaves the permanent place of work for a certain time on behalf of the employer to carry out a task specified by the employer. Thus, the payment of a daily allowance is associated with the increase in the employee’s expenses resulting from leaving the permanent place of work to the duty station, therefore, when determining the criteria for reducing the per diem, the employer must take into account the purpose of the per diem, i.e. the criteria must be related to the conditions of the assignment, which results in lower expenses for the employee during the assignment.

The criteria for differentiating lower daily allowances must be objective and cannot be reduced if:

• the employee does not comply with labor standards (for example, delivery times set by the employer, travel itinerary);
• performs work functions uneconomically (for example, high fuel consumption of the vehicle);
• due to circumstances that do not depend on the employee not completing the task within the specified time (for example, road repair work, traffic jams, etc.);
• the employee has not obeyed the requirements of the employer or his representative, which are against the law;
• the employee commits a violation of labor duties or a violation of traffic rules.

It is true that the employer has the right to initiate a separate investigation due to a possible violation of labor obligations.

When should the per diem be paid?

If the labor agreement or the collective agreement does not provide otherwise, an advance of at least 50% of the daily allowance calculated for the business trip must be paid to the employee no later than the last working day before the beginning of the business trip, and upon return from the business trip, the daily allowance is recalculated and the unpaid part of the daily allowance is paid no later than the day of salary payment.