Business travel allowance is there to cover expenses incurred by staff during corporate trips. Typically, this reimbursement is made to cover the cost of hotel rooms, meals, and transportation, although may provide additional provisions for longer business trips or where employees are required to entertain clients.
But what exactly is travel allowance and what does the law state about it? In this article we will answer these questions and many more.
What is travel allowance?
Travel allowance is a payment made to an employee to cover accommodation, food, drink or incidental expenses they incur when they travel away from their home in the course of their work duties.
Are business travel allowances a legal requirement?
In some countries, companies have a legal responsibility to provide an adequate system for reimbursing employee travel expenses. The mechanics of how businesses handle travel allowances will vary from country to country, as will the implications for organisations’ tax returns.
In the UK, however, there is no legal requirement for businesses to pay for their employees travel costs. Generally, however, the costs incurred on corporate trips have a legitimate business purpose and are therefore tax-deductible by the company. As businesses can often offset these expenses, it’s in their best interests to offer reasonable travel-related expenses. Expecting employees to pay out of pocket on top of travel time they put in outside their usual work is a sure-fire way to damage staff retention rates.
What does business travel allowance usually cover?
While what constitutes a travel allowance will vary from business to business, workers will often find their covered travel costs will typically include:
- Transportation expenses for additional travel outside employees’ regular commute. This can encompass airfares, taxi or local transportation costs, car hire, motorway tolls, parking fees, and standard mileage rates when staff use their personal vehicles.
- A meal allowance for food and drink consumed on the business trip. Usually, this will cover breakfast and dinner when there has been an overnight travel.
- Accommodation provisions for where the employee is expected to stay in a hotel or other equivalent establishment during the course of their trip.
- Cover for incidental expenses such as tips and gratuities.
- Entertainment expenses for cases where workers are required to pay for business meals or drinks with clients.
- Travel insurance policies purchased for the business trip.
- Costs for medical considerations such as vaccinations for international travel.
- Provisions for dry cleaning or other laundry services when employees are required to stay away from their usual work location for extended periods.
What is a flat travel allowance?
Rather than reimbursing individual workers for their receipts and purchases, some companies prefer to pay a flat amount to staff that they can spend per day. This practice is known as flat rate travel allowance and aims to make travel expenses more straightforward for all parties involved.
Flat rate travel expenses give staff the flexibility to make arrangements to their comfort level, and companies often find it a more cost-effective way to set travel budgets.
How can companies manage their procedures for business travel allowances?
Companies will typically find that workers use their business travel allowance in different ways. Some will prefer to spend more on a higher standard of accommodation, while others might prefer to splash out on room service to avoid walking alone at night. Either way, it’s important for businesses to have procedures in place to deal with the travel expenses of their employees. Thees might include:
Have a clear and detailed travel allowance policy
Standardising the amount staff can claim in a policy document can help simplify matters. This document needs to outline what is considered an expense and what isn’t as well as detailing maximum rated that employees can claim.
It’s also important to set clear guidelines and establish a reasonable period of time to complete the filing of travel expenses on return.
Have a clear and transparent approval process for expenses
Establishing a transparent approval process is another great tool for managing staff business travel allowances and ensuring management green lights significant expenses pre-departure or as soon as feasibly possible.
Have a system of support for employees dealing with travel expenses when they return
After returning from a business trip, staff may feel a little overwhelmed dealing with reintegrating themselves to the workplace whilst dealing with the aftereffects of their trip. One way businesses can help is by supporting employees with their expense reimbursement. After navigating hectic itineraries and missing time with loved ones, nothing makes workers more disgruntled than having to wade through a complicated travel reimbursement process.
Provide staff with a company credit card to charge expenses directly… if you trust them
Some companies offer staff a company credit card to use to simplify reimbursing travel expenses for corporate trips. Employees will then need to demonstrate on their expense claims that all costs incurred were for business purposes and part of agreed travel allowances. Any excess amounts outside the company’s policy would be paid out of pocket by the employee.
What is a realistic business travel allowance?
The answer to this question will vary according to a range of factors. The destination is perhaps the most critical. Business trips to foreign countries will inevitably have a higher cost than domestic travel.
From lodging expenses to the average price of an evening meal, on the whole, the cost of a business trip will vary based on:
- The location of the trip. Major cities are often more expensive than smaller towns.
- The local economy. Prices for things like meals, transportation, and accommodation will vary from location to location based on the local economy.
- Exchange rates. If the trip is to a foreign country, employees will often have to purchase goods in a foreign currency, the value of which will fluctuate based on current exchange rates.
Business trips are a part of the modern workplace, but costs incurred can be high.
We hope you have enjoyed our guide to travel allowances. For more useful workplace-based information, check out the rest of our website.