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When employees go on business trips, they spend money on multiple things. They book flights and hotels, commute to the meeting destination, and pay for miscellaneous services like meals and dry cleaning. All these expenses have to be covered by their organization.
However, with such a broad scope of expenditure, business travel expenses can spiral out of control. Therefore, your company needs a predefined Business Travel Allowance plan to forecast upcoming travel costs and avoid unnecessary spending.
For this, you must create detailed guidelines regarding the type of expenses you will reimburse and the limit that each employee is allowed based on the trip destination, duration, and employee designation.
Here is a complete guide to help you understand the nitty-gritty of creating a comprehensive business travel allowance plan for your organization.
This guide covers:
Business Travel Allowance is the amount of money a company permits their employee to spend on transportation, accommodation, subsistence, and incidental expenditure during corporate travel.
Companies may choose to provide the employees with a fixed amount of money before their trip or set a limit on which they can reclaim the expenses after they return. The allowance terms are included in a company’s travel policy.
Setting a business travel allowance is a coherent way to manage travel expenses because it allows companies to create a realistic budget and ensure employees don’t overspend. Moreover, it increases the ROI for each trip by eliminating unnecessary travel expenditures.
The specific guidelines about the expenses covered by a business travel allowance plan may vary from company to company. Some companies might only cover costs incurred for work-related purposes like meetings or seminars. Meanwhile, others might also reimburse Bleisure expenses to a certain extent.
However, most allowance plans include the following expense categories:
These expenses include the money employees spend traveling to the business trip destination. Employees can claim airfare, cab fare, train ticket charges, etc. Alternatively, if they are traveling by personal vehicle, they can claim fuel, parking charges, and other expenses per the US mileage reimbursement policy.
These expenses include employees’ costs of making commercial stay arrangements during their business trips— charges for hotel rooms, resorts, and lodges. Companies reimburse employees for accommodation expenses according to the predefined budget limit based on the trip type, duration, and the employee’s designation.
These expenses include costs other than the primary charges that employees incur while availing of services during their business trips- tips to the hotel staff, laundry, and newspaper charges. Companies may set a per diem limit or reimburse incidental expenses after employees return to the office.
Subsistence Expenses, also known as meal or per diem allowance, are the costs employees incur on daily necessities during their business trips. Under this category, employees get reimbursed for food, drinks, and other essential refreshments.
Travel insurance can help you remain stress-free in emergencies like accidents, casualties, and theft. Therefore, some travel allowance plans cover the cost of the business travel insurance policy purchased for business trips.
Personal Expenses include the money employees spend on non-work-related goods and services during corporate travel. For instance, gifts purchased for friends, family, and colleagues are personal expenses. Companies do not reimburse personal expenses; therefore, the employees must bear them out of pocket.
Consort Expenses are the costs employees must incur if they take their friends or family on their business trips. Companies don’t reimburse the money employees spend on booking flights and hotels or any other expense they incur for their companions.
Employees incur shuttle or commute expenses while traveling from home to the workplace. According to IRS guidelines, companies don’t have to reimburse regular commute expenses as they don’t qualify as corporate travel expenses.
The Fair Labour Standards Act has no provisions mandating employers to reimburse corporate travel expenses. Therefore, no federal law in the US requires reimbursement.
However, the costs incurred on corporate travel have a business purpose and are tax-deductible. So, companies can offset these expenses with ease. Moreover, expecting employees to bear all the costs while traveling for work will cause frustration and hamper employee retention rates.
Hence, compensating for travel expenses is in the company’s best interest.
Per Diem (or per day) refers to a fixed amount of money companies permit employees to spend on meals, accommodation, and other expenses each day on their business trip. Companies may offer per diems through corporate credit cards, partial or complete coverage, or fixed rates.
According to IRS guidelines, companies can determine the per diem rate according to their policy or the GSA guidelines. Setting a per diem limit for employees can help make reimbursement policies more straightforward. Moreover, it allows employees to make budgetary adjustments according to their comfort.
In cases where estimating travel expenses in advance is challenging, companies reimburse employees after they return from their business trips. For all such post-trip reimbursements, employees must collect all their expense receipts and submit them to the finance department as proof. After that, the finance department validates their claims and reimburses all the policy-compliant expenses.
Alternatively, some companies invest in corporate travel and expense management software that supports mobile expense reporting allowing employees to file expenses in real-time during their business trips. The software also compiles the claims into an expense report that the finance department can approve, making post-trip reimbursements faster and smoother.
Optimizing business travel allowance can help enhance employee satisfaction and increase expense policy compliance. Therefore, organizations must take all the necessary steps to ensure their business travel allowance program covers all reasonable transportation, accommodation, and incidental expenses.
This complete guide to business travel allowance can help you create granular expense policies. However, policy implementation requires the aid of technology.
You can invest in integrated travel and expense management software like ITILITE. The ITILITE platform allows you to configure the ins and outs of your expense policy and provides digital audit trails for total visibility on expense approvals. Moreover, the mobile expense reporting feature makes expense filing seamless for your employees.
You can experience all these features and more with our free demo by clicking on the button below.