A business travel allowance is a sum of money provided by an employer to an employee to cover the costs of travelling for work-related purposes, such as lodging, transportation, meals, etc. This allowance aims to help employees manage their expenses while on a business trip and ensure they can focus on their work without financial concerns.
The amount of the allowance and the expenses it covers vary depending on the employer's policies and the specifics of the business trip. There are also many other aspects to consider before determining the amount and what the allowance will be used for.
Continue reading to find out all you need about a business travel allowance and how you can determine one for your employees.
Are business travel allowances a legal requirement?
No, business travel allowances are not a legal requirement in most countries. However, paying expenses incurred during business travel is common in many companies, and the specific terms and conditions surrounding such allowances may be outlined in employment contracts or company policies.
In most cases, the expenses incurred on business trips are deductible from taxable income because they serve a legitimate business purpose. Due to this, it is often a good idea for businesses to offer business travel allowances because they will be able to offset the costs, and it won’t affect their budget too much.
However, if you’re unsure about whether your business should offer travel allowances for any corporate trips, it is a good idea you do some research beforehand. The country you are currently working in may have it as a legal obligation, and therefore you should check local regulations for more information.
What is a realistic business travel allowance?
There is no straightforward answer to this question, and that’s because the business travel allowance amount can depend on various factors. The number one factor is the location of the business trip. For example, if you’re travelling domestically instead of internationally, you may not need as much money.
However, this isn’t the only factor that needs to be considered. The length of the trip will significantly affect the business travel allowance. You won’t need the same amount of money for a weekend trip compared to a month-long trip. The purpose of the trip will also influence how much money you receive. For example, if it’s to work in the company’s corporate office in another country, you may not need to receive as much money compared to if you were meeting up with potential clients and you need to woo them with fancy dinners.
Therefore, we can’t tell you exactly how much you should receive when you travel without knowing the trip's specifics. However, with TrustedStays, you can save money by finding the most cost-effective and relevant places to stay.
What can a business travel allowance be used for?
As we’ve mentioned, the money in the business travel allowance will be used for different things based on the nature of the trip. However, there are some basics that you will typically find covered when you go travelling for business:
- Transportation expenses which doesn’t include how much you spend on your usual daily commute. This will include things such as paying for flights domestically or internationally and even taxis or trains when you need to travel far from your hotel to your destination each day.
- You should receive an allowance covering all your food and drink during the business trip. If the trip is overnight, many companies will only provide you with money for breakfast and dinner, so you will need to cover lunch.
- Payment for your accommodation for the trip. This will only be necessary if the trip is overnight.
- Extra money for entertaining clients with dinners or drinks if this matches the purpose of the business trip.
- Dry cleaning expenses if your trip is for an extended amount of time and you won’t be able to take enough clothes with you.
What is a per diem allowance?
Some businesses and organisations prefer to set a daily spending limit for travellers rather than reimbursing them for individual purchases and receipts. The goal of this form of business travel allowance, which is more commonly referred to as a per diem rate, is to simplify travel expenses for all parties involved.
Companies may also find that per diem rates are a more cost-effective way to set travel budgets because they give business travellers the flexibility to make arrangements according to their comfort level.
How companies can manage their procedures for business travel allowances
Since there are many factors to consider when determining the budget for business travel allowances, you will have to go through a carefully thought-out procedure to determine each trip's cost and how employees use their budget.
Here are some tips that can help:
- Put together a strategic approval process that will ensure every level of the company is happy with the business travel allowance budget that has been put in place.
- Write a travel allowance policy that outlines what factors affect the price of each trip and how much you’re willing to administer to the budget based on these factors.
- If employees have been away for a while and living off of a business travel allowance, put a system in place that will help them reintegrate into everyday life when they return.
- Instead of putting together a budget, provide your employee with a company credit card that they can charge when they are away. Only do this if you trust that they won’t make unnecessary purchases.
Business travel allowances are beneficial in helping employees adjust to a new environment when they are away, as well as impressing potential clients. However, there are a lot of strategies and thought processes involved in determining the amount for each allowance.
As a business, you want to keep costs as low as possible to improve your bottom line. With the help of TrustedStays, you can ensure you have the best accommodation possible for corporate travel while receiving the most competitive price. Search for a hotel or property today and determine your business travel allowance.
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