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Employee burnouts are common these days due to the work-from-home scenario. According to a recent report, 44% of employees have serious concerns about their physical, mental, and social health. Therefore, encouraging employees to take paid time off work has become essential, especially during these times. And one of the best ways for employees to recharge themselves and feel motivated is personal travel. It could be that you already have a paid leave policy or support bleisure (business + leisure) travel, but providing your employees with a travel stipend would encourage them to go on personal trips, without worrying about finances. On the other hand, it will help you increase employee engagement and retain talent. In this blog, we will share with you what is travel stipend policy, what to include in a travel stipend policy, its benefits, and tax laws. Read on.
A travel stipend, also called a vacation stipend, is an allotment of funds (generally a fixed amount) to employees that they can use in each calendar year for their personal travel expenses. It does not cover all expenses of the employee’s travel but eases their burden with the contribution of some amount.
A travel stipend policy outlines the rules for employees on how to use the stipend for personal travel expenses. It lays down the process by which the company provides stipend i.e. advance or reimbursement. Also, it suggests if any receipts or photos are required to substantiate the expenses.
No federal or state laws mandate employers to offer a travel stipend to their employees. Therefore, companies can set a travel stipend policy of their own will ( and budget), to enhance employee benefits and employee experience. For instance, a startup may not feel comfortable having a travel stipend policy at all due to its constrained budget.
Apart from employee engagement, there are many benefits of offering travel stipends to employees. Here are some ways how doing so can be beneficial for your company:
There are no rules on what to include or not include in your travel stipend policy. Whether you want to fund the entire transport or just the accommodation, it’s totally up to you and your company’s budget. A few common expenses that a travel stipend policy can cover are:
Apart from this, you’ll also need to define the process of offering travel stipends – Will you add it directly to their paycheck, or will employees have to file an expense reimbursement? Will employees have to provide receipts for each travel expense? Will you offer company credit cards?
In case you are reimbursing travel stipend, you will need to clearly state:
Travel stipends are not regular income and therefore not taxable by the IRS (Internal Revenue Service). It can be taxable if the company goes for a non-accountable plan. In which case, employees will neither have to provide receipts of all travel expenses nor return the unused money. The company may choose to cover the tax implications themselves or pass it on to their employees. But we suggest going with an accountable reimbursement plan which is non-taxable.
Offering travel stipends to your employees talks a lot about your company’s culture. However, creating a travel stipend policy makes sure that all the rules for payments or reimbursement are clear. If you are reimbursing travel stipends, then you can automate the entire process with integrated travel and expense management software such as ITILITE. ITILITE can help employees create expense reports within minutes and get reimbursements on time. To know more, get in touch with our product expert today.