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 organizations' tax returns.Generally, the costs incurred on corporate trips have a legitimate business purpose and are therefore tax-deductible. As businesses can often offset these expenses, it's in their best interests to not quibble over reasonable travel-related expenses. Expecting employees to pay out of pocket on top of travel time they put in outside their usual work hours is a sure-fire way to damage staff retention rates.In the United States, most companies will have what is known as an accountable plan for their employee's travel expenses. An accountable plan follows guidance from the Internal Revenue Services (IRS), enabling employees to obtain reimbursement for business costs without submitting these payments as part of their annual income tax return.What is a per diem allowance?
Rather than reimbursing individual receipts and purchases, some companies and organizations prefer to set travelers a flat amount they can spend per day. This practice is known more commonly as a per diem rate and aims to make travel expenses more straightforward for all parties involved. Per diem rates give business travelers the flexibility to make arrangements to their comfort level, and companies may also find it a more cost-effective way to set travel budgets.However, setting a per diem rate for your travelers can be challenging, especially if their business trips take them to various destinations. For domestic travel within the continental United States (CONUS), organizations can use this handy M&IE calculator from the U.S. general services administration (GSA).How can companies standardize their procedures for business travel allowances?
Companies will typically find that travelers 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.Standardizing the amount can help simplify matters, but the corporate travel policy is essential to keep travel spending compliant. This document needs to outline what will and won't receive reimbursement before staff rack up expenses and guide team members through claiming their travel costs.Establishing a transparent approval process is another excellent tool for standardizing business travel allowances and ensuring management green lights significant expenses pre-departure. Using a system like TravelPerk can help businesses streamline their travel booking process by plugging in corporate travel policies and enabling automated approvals.Where can you define your business travel expense policy?
The definition of business-related travel expenses will vary from one company to the next. It is vital to have documentation in place that makes allowances clear to employees before they depart.Every company that engages in corporate travel should work to maintain a clear and updated travel policy. This document will outline the rules regarding corporate travel, including how employees should treat business travel allowances. The company travel policy will define, for example, the difference between a business and a personal expense.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.But even corporate trips within the CONUS will vary wildly in their actual costs. From lodging expenses to the average price of an evening meal, on the whole, a round trip to a major hub like New York will cost more than a business trip to a smaller city. The nature of the employer's business can also affect allowances. Lawyers, for example, might need a higher budget for entertaining clients than someone working in another sector.Other factors that might influence travel costs can be the seniority and preferences of the traveler. For example, organizations might set aside separate travel budgets for their CEOs and other executive travelers. These extended policies could include allocations for first or business-class air travel or more generous meal expenses for top-tier personnel.Ensuring a comfortable yet cost-effective business trip can be challenging. Setting a clear corporate travel policy can help assist employees in selecting arrangements for their corporate journeys. Having clear boundaries can also simplify submitting receipts and business expense reimbursement.By combining a solid travel policy with an online booking tool like TravelPerk, businesses can streamline the booking process for their business travelers while achieving new records of compliance. Please speak to our team today to see how TravelPerk can help you establish a clear corporate travel policy, generate more detailed expense reports, and save on your annual travel spend.
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