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Traveling Expenses: A Guide for Managers

When your employees travel for business, reimbursing them for those expenses is common practice. It makes the traveling expenses and time worthwhile for your employees. Offering travel expense reimbursements adds value for your employees and helps boost employee morale. Learn more about reimbursing your employees for travel expenses, including best practices and ways to pay for the costs.

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What is a travel expense?

Traveling expenses are any of the costs an employee incurs as part of travel for business. This might include traveling to a client’s location, attending a conference or visiting a different branch of the company.

It includes the costs directly related to the business trip, but it doesn’t include any personal activities that don’t relate to business. For example, if the employee extends the trip a few extra days, the costs for the additional time wouldn’t be considered a valid trip expense for reimbursement purposes.

Common traveling expenses

Different organizations may cover different travel expenses, depending on the extent of the business trip and the duties of the employees. Generally, a company will cover transportation, housing and food, but some companies offer more extensive benefits, such as gym memberships, entertainment allowances and free flights for visiting family members. Some employees may be eligible for more expensive housing and services based on their seniority or other factors. Common traveling expenses in business include:

  • Flights
  • Cabs
  • Rental cars
  • Mileage allowance if the employee uses a personal vehicle
  • Tolls
  • Hotels or other lodging options
  • Meals
  • Gas
  • Wi-Fi charges

Best practices for traveling expenses in business

When creating a plan for covering travel expenses at your business, you should be aware of the current trends and expectations when it comes to benefits and accommodation on business trips. Your methods for paying for employee travel expenses should be as efficient as possible to ensure the business trip goes smoothly.

If your employees travel frequently, you should use standardized practices that are easy for employees to understand and complete. Follow these best practices for handling traveling expenses in business:

  • Track expenses
  • Set policy expectations
  • Be fair and consistent
  • Determine a schedule

Track expenses

Keep detailed records of your employees’ travel expenses while on business trips to determine how much you should budget for company travel. Consider how much they can afford to spend on a single trip or over a period of time, and itemize how much money can be used for different categories, such as entertainment or food.

If you plan to reimburse employees for any of their expenses, be sure to keep a file of itemized receipts to validate and pay out their purchases.

Set policy expectations

Be clear with your employees about their spending limits on business trips and what benefits they’re eligible for. Make sure they’re aware of how to redeem their travel expenses.

If they need to keep track of receipts or fill out a purchase order, make that information easily accessible to avoid any confusion during the trip. Clarify when certain items aren’t covered under your company’s travel policy, so employees have reasonable expectations.

Be fair and consistent

Enforce company travel policies fairly and consistently. Once you set expectations about what an employee can take as a travel expense, you should uphold that standard for each employee.

Requiring everyone to follow the same procedures is an important ethical practice in business. This allows you to keep anyone from taking advantage of a generous system or seeking benefits from favoritism.

Determine a schedule

Establish expectations for employees submitting reimbursement claims and your company paying the reimbursements. You can determine your deadline for submitting reimbursements. It’s typically expected that they would be submitted no more than 60 days after travel, but you might determine a different timeline that works for your business.

Set a regular schedule for when travel expenses can be reimbursed or paid out. If you offer a stipend for a long-term trip, be clear about how frequently the employee will receive additional funds. Employees shouldn’t be expected to cover large travel expenses up-front, so paying for these expenses in a timely manner is important for maintaining morale and showing that you value their time and work.

The good, the bad and the ugly of travel expenses

Offering various expense reimbursements, including traveling charges, comes with pros and cons to consider. Some pros of travel reimbursements include:

  • Employee satisfaction: Employees who travel regularly appreciate having those expenses covered by the company. Having employees who feel valued can improve employee retention.
  • Recruiting: Companies with a generous policy on covering traveling expenses can be more attractive to job seekers and attract talented applicants to positions that require travel.
  • Tax benefits: Since reimbursing employees for travel is considered a business expense, you can claim it on your business taxes. The tax deduction makes it advantageous for you, as well as your employees.

There are also some drawbacks to offering travel reimbursements. Those include:

  • Employee misconduct: Some people may attempt to take advantage of vague policies by spending beyond the limits or submitting unapproved expenses for reimbursement.
  • Complex management: Because there are so many types of travel expenses, arranging for travel funds to be distributed properly requires organization and attention to detail. Maintaining oversight and being firm about company policies on business trips can help make sure your travel budget is being used appropriately to boost productivity and show appreciation to employees.

Ways to pay for travel expenses

Once you decide on your budget range for business travel expenses, you can choose from several methods to pay for your employees’ costs when they travel for business. Some of the common ways companies pay for travel expenses are:

  • Company credit cards: Companies often have credit cards that are designated for company expenses, such as travel. This method is often used when one team or department shares a travel budget and all use the same card to pay for travel costs.
  • Cash reimbursements: For smaller expenses, such as meals, companies may reimburse employees for various purchases made while traveling. This method requires careful documentation and is usually done by collecting employee receipts.
  • Per diem: A per diem is a set amount per day that an employee can spend while traveling. This can often be limited to certain categories, such as cabs or food, but can sometimes be used for other purposes depending on company policy.

Traveling expenses FAQs

The answers to these frequently asked questions about managing travel expenses at work will help you understand more about travel expense reimbursement.

Who is responsible for approving travel expense reimbursements?

Managers typically need to approve reimbursements for traveling charges for their employees. The manager best understands the scope of the trip and can determine whether the claimed expenses are valid. Reimbursements might also need to be approved by a member of the HR or finance team. Determine the most logical option for your company and include this in your policy.

What travel expenses can I claim if I am self-employed?

Self-employed people and entrepreneurs can usually claim the same types of travel expenses on their taxes as any other type of employee. This includes expenses, such as lodging, transportation and meals. If you’re self-employed, be sure to research local tax law to see what types of expenses are tax-exempt.

Are traveling expenses taxable?

When you reimburse your employees for a business travel expense, it’s often not taxed, especially if it’s for a short trip. This includes reimbursements for meals, accommodations and transportation. However, some longer-term travel situations or reimbursements for travel to a different work location than normal can be considered taxable income. Consult with a lawyer or tax professional if you’re unsure whether the trip expense reimbursement should be taxed or not.

Are you required to reimburse employees for travel expenses?

There isn’t a federal law mandating travel expense reimbursement for employees. State laws can vary, so check with your state to determine whether there are requirements for travel expense reimbursements.

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