Travel Reimbursement: Understanding The Process And Policy

how does travel reimbursement work

Travel reimbursement is when employers pay employees back for expenses incurred while travelling for business. Travel expenses are any costs incurred by an employee through travelling on work-related activities away from their usual place of work. This includes costs directly related to the business trip, such as transportation, food and accommodation, but does not include personal expenses. Most businesses will have a travel reimbursement policy in place which outlines the procedures and rules regarding travel expense reimbursement.

Characteristics Values
Who pays for travel expenses? Employers generally pay for travel expenses when an employee is travelling for work.
When are travel expenses paid? Travel expenses may be covered at the time of the trip or reimbursed later.
What are common travel expenses? Mileage allowance, transportation costs, meals, lodging, laundry, business calls, etc.
What is a travel reimbursement policy? A policy that outlines which travel expenses are covered and not covered, how employees report expenses, and how quickly they are reimbursed.
What are the benefits of travel reimbursement? Improved employee morale and satisfaction, better recruitment, and tax benefits for the company.
What are the drawbacks of travel reimbursement? Potential employee misconduct and complex management of expenses.
How can travel expenses be paid? Company credit cards, cash reimbursements, per diem allowances, etc.

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What expenses are covered

Travel expenses are costs incurred by employees when travelling for work-related activities, away from their usual place of work. These expenses are reimbursed by the company when the employee makes a claim. Travel expenses must be associated with a business reason and are incurred for the purpose of carrying out work for the organisation.

There are several types of travel expenses that are covered by companies. These include:

Transportation

  • Air fares (domestic or international)
  • Car or vehicle rental
  • Taxi or minicab fares
  • Mileage allowance or fuel costs for use of own vehicle
  • Ferry or boat travel
  • Highway or waterway tolls
  • Cycle or scooter hire (electric or manual)
  • Mileage allowance for use of own bicycle
  • Transportation costs for getting from a train station or airport to your hotel or to get from your hotel to your work or meeting location
  • The cost of travel by bus, car, train, or plane from your home to your business destination

Accommodation

  • Hotels, lodgings, serviced apartments or short-term accommodation rentals
  • Nightly allowance for staying with a friend or relative

Food

  • Subsistence allowance (for food and drink away from home)
  • Meals that are not for entertainment purposes

Other

  • Laundry and dry cleaning
  • Tips for services that are related to acceptable expenses
  • Business calls during the trip as well as business communications through faxes and other communication devices
  • The shipping of baggage or display or sample material from your permanent workplace to your temporary workplace
  • Rental costs for equipment such as computers or trailers
  • Operating and maintaining a house trailer as part of the business trip
  • Transport to and from a business meal
  • Hiring of a public stenographer
  • Payment for computer rental fees related to the trip
  • The shipment of luggage and display materials used for business presentations

It is important to note that travel expenses do not include personal expenses or regular commuting costs. Additionally, only ordinary and necessary travel expenses are deductible, while expenses that are deemed unreasonable, lavish, or extravagant are not. Companies may also set spending limits for different categories of expenses.

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What expenses are excluded

When it comes to travel reimbursement, there are certain expenses that are typically excluded. These are costs that are deemed personal or unrelated to an employee's job duties, and businesses will usually outline these exclusions in their travel reimbursement policies. Here are some common examples of expenses that are generally not reimbursed:

  • Alcoholic beverages with meals
  • Upgrades, such as first-class seats or luxury hotel rooms
  • Entertainment activities that aren't business-related, like movies or shows
  • Personal negligence expenses, such as fines or penalties
  • Expenses for companions, including children, spouses, or partners
  • Optional amenities or services, such as valet parking when reasonable alternatives are available
  • Expenses related to personal preference or convenience, such as room service

It's important to note that each company's travel reimbursement policy may vary, and some businesses may have different criteria for what they consider reimbursable. Employees should carefully review their company's reimbursement guidelines to understand what expenses are covered and what is excluded. Additionally, employees should keep detailed records of their expenses and provide proper documentation to support their reimbursement claims.

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How employees report expenses

Employees reporting their expenses is a crucial step in an effective expense management system. It helps keep track of employee spending and ensures staff are only reimbursed for expenses incurred on behalf of the company.

There are several ways employees can report expenses:

  • Expense reports: Employees submit expense reports to their employer, usually the finance team, who then review and approve the request for reimbursement. This can be done electronically or through a paper form. Expense reports include a list of expenses incurred, as well as the date, amount, and purpose of each expense.
  • Using a company credit card: Some companies provide employees with a company credit card to cover their travel expenses.
  • Pre-paid cards: Some businesses may provide employees with a pre-paid card to cover their expenses.
  • Allowances: Employers may provide employees with an allowance to cover their travel expenses.

Regardless of the method used, it is important for employees to keep a written record of all their travel expenses, including the date and amount. It is also a good idea to keep receipts for all expenses, as these will be required when submitting an expense report or for tax purposes.

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How quickly employees are reimbursed

The speed at which employees are reimbursed for travel expenses can vary depending on company policy and local laws. In general, it is common practice for employees to be reimbursed for business-related travel expenses, and this can be done through different methods such as company credit cards, cash reimbursements, or per diem allowances.

It is important to note that there is no federal law in the US mandating travel expense reimbursement for employees, and state laws may vary. However, reimbursing employees for travel expenses is beneficial for both the company and the employees. It adds value for employees, boosts morale, and improves employee retention. From the company's perspective, it can be a attractive factor for job seekers and a tax benefit.

To ensure a smooth reimbursement process, companies should establish clear and consistent policies. Employees should be well-informed about their spending limits, eligible benefits, and the procedure for redeeming their travel expenses. This includes instructions for keeping track of receipts and filling out any necessary forms or purchase orders.

Most businesses strive to reimburse employees as soon as possible. However, reviewing receipts and paperwork takes time. It is common for reimbursement to occur within one week of submitting the necessary paperwork, but each company may have its own timeline. For example, a company might set a deadline for submitting reimbursements within 60 days after travel and then provide a regular schedule for processing the payments.

Employees should be made aware of the expected timeframe for reimbursement so that they can plan accordingly. It is important for companies to handle reimbursement in a timely manner to show that they value their employees' time and work.

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Employee responsibilities

Employees must understand their company's travel reimbursement policy and adhere to its rules and procedures. This includes being aware of the types of travel expenses the company covers and those it doesn't. For example, some companies may not reimburse alcoholic beverages with meals, upgrades like first-class seats, or activities that aren't business-related.

Employees should also be mindful of any spending limits set by the company. For instance, there may be a cap on the amount they can spend per meal or per day. It is the employee's responsibility to keep track of their expenses and ensure they do not exceed these limits.

To receive reimbursement, employees typically need to submit a travel reimbursement form along with their travel receipts. They may be required to fill out a digital form or use a physical form provided by the company. This form usually includes spaces for the employee's name, title, travel dates, expenses, and signature. It is important for employees to save all business-related receipts and provide a detailed breakdown of their expenses.

Additionally, employees should be aware of the time frame for reimbursement. Companies typically strive to reimburse employees as soon as possible, but it is helpful for employees to know the expected timeframe to manage their finances effectively.

It is also the employee's responsibility to understand the process for redeeming their travel expenses. This may include keeping track of receipts, filling out purchase orders, or following other specified procedures outlined by the company. Being aware of these procedures beforehand can help avoid confusion during the trip.

Frequently asked questions

A travel expense is any cost incurred by an employee while travelling for work-related activities away from their usual place of work. This includes costs directly related to the business trip, such as transportation, meals, and accommodation, but does not include personal expenses.

A travel reimbursement is when a company pays employees back for expenses they incur while travelling for business. Most businesses have a travel reimbursement policy that outlines which expenses are covered and which are not, as well as the procedures for claiming reimbursement.

To claim reimbursement for travel expenses, employees typically need to submit a travel reimbursement form along with their travel receipts. It is important to keep detailed records of all travel expenses, including receipts and mileage, to substantiate the claim.

Yes, companies usually set spending limits for different categories of expenses, such as meals, transportation, and accommodation. It is important to be clear about these limits and any other restrictions before incurring expenses.

In most cases, reimbursements for ordinary and necessary travel expenses for temporary travel are not taxable. However, if the work at the temporary location is expected to last longer than a year, or if the reimbursement is for travel to a different work location, it may be considered taxable income. It is important to check with a tax professional to determine the tax treatment of travel reimbursements.

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