Here’s one of the smartest plays in staffing — and most firms either don’t know about it, or they’re not using it to its full potential.
If you’re sending contractors out to jobs 50+ miles from home, you might be sitting on a serious opportunity to boost take-home pay, lower your payroll tax burden, and give your firm a competitive edge — all while staying 100% compliant with IRS guidelines.
I’m talking about non-taxable per diem.
And no — this isn’t a loophole. It’s a widely accepted practice used across industries like construction, travel nursing, and IT staffing. The IRS not only knows about it — they’ve spelled out exactly how it works.
Let’s break it down.
What Is the 50-Mile Rule?
According to IRS Publication 463, if a worker is 50 miles or more from their tax home, and the job meets a few key criteria, they may qualify as being “away from home” for tax purposes. That means you, as the staffing firm, can reimburse certain expenses tax-free — and it doesn’t get reported as taxable income.
Here’s what qualifies:
Time: The work is overnight or lasts long enough to require rest.
Distance: The job is typically 50+ miles from the worker’s tax home.
Duplication of Expenses: The worker is incurring additional costs (like lodging, meals, or mileage) that wouldn’t exist if they were working closer to home.
If you structure your compensation packages properly — under what’s called an accountable plan — these per diem payments are completely tax-free.
That means:
The contractor keeps more of their paycheck.
You reduce payroll taxes on those wages.
Your client gets a well-compensated, motivated worker who’s not watching every dollar they’re losing to Uncle Sam.
Why This Strategy Works and Why More Firms Should Be Using It
Let’s call it what it is: a win–win–win.
But here’s the catch — it only works if you know how to apply it correctly. Too many firms either:
Avoid using per diem altogether because it “seems complicated,”
Or worse, they try to use it without understanding the rules, which can land them in hot water with the IRS.
When used correctly, though? It’s a strategic advantage that can dramatically shift your margins and your recruiting power.
Let’s look at two quick examples.
Example 1: The Out-of-Towner
You’re staffing a mechanical contractor from Milwaukee on a 12-week job in Green Bay — about 120 miles away. They’re staying in a hotel, eating out every night, and racking up expenses just to be onsite.
Instead of paying them a flat $2,400/week in fully taxable wages, you structure their compensation like this:
$1,700 in wages
$700 in per diem reimbursements for meals and lodging
That $700? Completely tax-free.
What it means:
The contractor saves roughly $200/week in taxes. That’s $2,400 in their pocket over the course of the job.
You, as the staffing firm, pay less in payroll taxes, because you’re not paying tax on that $700/week.
Everyone wins — and no one is bending the rules.
Example 2: The Long-Distance Commuter
Now let’s say you’ve got a project manager based in Chicago who drives 75 miles each way to a job in Kenosha, WI. She’s not staying overnight, but she’s racking up mileage, lunch expenses, and coffee shop invoices just to keep the wheels turning.
Because she’s duplicating expenses and crossing the 50-mile threshold, she qualifies for per diem under an accountable plan — even without a hotel stay.
The result?
She gets reimbursed for her actual expenses without it being treated as income.
Your payroll tax exposure stays low.
She’s happy, well-fed, and focused on the job — not the gas station receipts.
Here's the Real World Impact
When staffing firms take the time to build compliant per diem structures into their payroll processes, they don’t just save money — they stand out in a crowded market.
Think about it:
You can offer contractors a higher effective take-home pay without actually increasing your wage bill.
You can differentiate your firm by showing candidates you know how to maximize their paycheck.
You can run leaner, more profitable placements — especially on high-travel or remote assignments where margins are tight.
And once contractors realize they’re walking away with more money in their pockets? They stick around.
Important Reminder: Get This Right
One more thing — and it’s important.
This isn’t a DIY project.
The IRS has clear expectations around how per diem must be documented and administered. If you don’t have a compliant accountable plan, or you’re not tracking expenses properly, it can backfire fast.
So don’t guess.
Loop in a qualified CPA or labor attorney, and make sure your payroll partner (hopefully one like Madison Resources) understands how to handle per diem the right way — down to the decimal.
As one of my early mentors, Jim Stoynoff, used to say:
“It’s a win–win–win.”
Contractors take home more.
Firms reduce tax liabilities.
Clients get a reliable professional who wants to be there.
That’s the play. That’s the edge.
That’s how 50 miles becomes a growth strategy. Want to see how this could work in your business? Partner with Madison Resources today and let’s build smarter placements, together.
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About the Author
Nick Andriacchi is the Chief Revenue Officer at Madison Resources, bringing over 30 years of experience in the funding and payroll industry. Before joining Madison, Nick held leadership roles at two other funding companies, where he built a reputation as a trusted advisor and strategic thinker. Widely regarded as a true industry expert, Nick is passionate about helping staffing firms grow through smart funding solutions and operational support.
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