Meal Allowance: Understanding Foreign Travel Expenses

A meal allowance is an employer-provided stipend reserved strictly for food when employees are on business travel. In the US, the Internal Revenue Service (IRS) allows for a 50% deduction on meals for business travel. The standard meal allowance for business travellers in 2021 was about $55/day. The General Services Administration (GSA) redefines this number for business travel within the continental United States. The GSA divides the total daily meal allowance into three meals: breakfast, lunch, and dinner. The First and Last Days of Travel are also eligible for a 75% meal allowance.

The Department of Labor has issued a Notice to announce the annual updated dollar amount H-2A employers may charge workers for providing meals. The Notice also includes a reminder of the continuing obligation of H-2A and H-2B employers to pay certain lodging and travel-related expenses workers incur while travelling to and from H-2A and H-2B employment.

The U.S. Department of State sets the rates for foreign travel. International travellers are normally reimbursed at the applicable Meals and Incidental Expenses (M&IE) rate of the U.S. Department of State without receipts, or at actual cost with receipts, if funds are available and exceptional circumstances warrant a higher rate.

Meal Allowance Rates

What to Include in Your Meal Allowance Policy

A meal allowance policy should begin by explaining what a meal allowance is and when employees are entitled to it. It should also specify the amounts that employees are allowed to spend, which can vary depending on the destination and the trip duration. It should also cover:

• How employees will cover meals while travelling
• What to do if employees are taking others out to eat
• Exceptions to the rule
• The reimbursement process

How to Calculate Meal Allowance Costs

The General Services Administration (GSA) defines the standard meal allowance rate for business travellers in the continental United States. The rate varies depending on the location, with higher rates for destinations with a high cost of living or that are in their peak season. The GSA divides the total daily meal allowance into three meals: breakfast, lunch and dinner.

The first and last days of travel are usually reimbursed at 75% of the standard rate. Special considerations may also apply, such as dietary needs or the type of work being performed.

Reporting Meal Allowances to the IRS

In the US, per diem allowances are regulated by the IRS. Meal stipends do not need to be reported to the IRS unless they exceed the federal standards or if employees do not submit an expense report.

Meal Allowance for Different Destinations

United States

In the United States, the Internal Revenue Service (IRS) allows a 50% deduction on meals for business travel. This applies to both domestic and international trips. The IRS defines business travel as travel "away from home" for business purposes, which is generally considered to be outside of the city limits. The meal expenses must be "ordinary and necessary", which means they are "common and accepted" and "helpful and appropriate" for your work. The cost of the meal must not be "lavish or extravagant". The standard meal allowance is based on what federal workers are allowed to charge for meals while travelling and is revised each year.

United Kingdom

The UK's HMRC sets out regulations for "subsistence expenses".

Other Destinations

The US Department of State sets the rates for foreign travel meal allowances. The rate is based on the destination and can be found on the State Department's website. The rate includes meals and incidental expenses.

Special Considerations

Special dietary requirements, such as religious or medical needs, may require a higher meal allowance. The type of work may also be a factor – manual labour, for example, may require a higher calorie intake.

Reporting to the IRS

Meal allowances are not considered taxable income and do not need to be reported to the IRS, unless they exceed federal standards or are not submitted with a detailed expense report.

Meal Allowance for Different Trip Durations

One-day trips

For one-day business trips, employees are entitled to a 75% meal allowance. This is because the first and last days of travel are eligible for a 75% meal allowance.

Overnight stays

For overnight stays, employees are entitled to a 100% meal allowance. This is because the first and last days of travel are eligible for a 75% meal allowance, but the days in between are eligible for a 100% meal allowance.

Extended stays

For extended stays, employees are entitled to a 100% meal allowance for each day of the trip.

Special circumstances

There are some special circumstances in which employees may be entitled to a higher meal allowance. For example, if employees have special dietary requirements, the company may choose to increase the meal allowance to accommodate this. Similarly, if the nature of the work is physically demanding, the company may choose to increase the meal allowance to ensure that employees can access the nutrition and calories they need to perform their jobs effectively.

Calculating meal allowance costs

The General Services Administration (GSA) defines the standard meal allowance for business travellers in the continental United States. This amount varies depending on the location and is typically updated annually. In 2021, the standard meal allowance was around $55 per day. This amount is typically divided into three meals: breakfast, lunch, and dinner.

Reporting meal allowances to the IRS

In the US, employees do not have to report meal allowances to the IRS if they are within the federal standards. However, if employees do not submit an expense report within 60 days of their trip, they may have to pay taxes on their meal allowances.

Meal Allowance for Different Seniorities

Senior Management

Senior managers are often required to travel for business purposes, and their meal allowances should reflect their seniority and the importance of their role. When creating a meal allowance policy, it is important to consider the unique needs and preferences of senior managers.

Senior managers may have special dietary requirements or preferences that need to be accommodated, and their meal allowance should be adjusted accordingly. They may also be more likely to entertain clients or prospective customers, so their meal allowance should be flexible enough to cover these expenses.

Middle Management

Middle managers often travel for business, but their meal allowances may be slightly lower than those of senior managers. They may still have some flexibility to entertain clients, but their allowance will likely be more modest.

Entry-Level Employees

Entry-level employees who travel for business may have the lowest meal allowance. Their allowance should cover basic meal expenses, and they may need to seek approval for any additional expenses.

Exceptions and Special Circumstances

There may be exceptions to the standard meal allowance rates for employees at all levels. For example, employees with special dietary requirements due to medical, religious, or moral reasons may require a higher meal allowance to accommodate their needs.

Employees travelling to areas with a high cost of living may also require a higher meal allowance to cover their expenses. It is important to review and adjust meal allowance rates regularly to ensure they are appropriate for the destination and current market conditions.

Reimbursement Process

Regardless of seniority, it is important to have a clear and consistent process for reimbursing meal expenses. Employees should be provided with guidelines on how to submit expense reports and receipts, and there should be a clear deadline for reimbursement requests.

Compliance with Tax Regulations

When setting meal allowance rates, it is crucial to comply with applicable tax regulations, such as those outlined by the IRS in the United States. These regulations may impact how meal allowances are taxed and reported, so it is important to stay informed and seek professional advice if needed.

Meal Allowance for Special Dietary Requirements

When creating a meal allowance policy, it is important to consider employees' special dietary requirements. Here are some key points to keep in mind:

Understanding Special Dietary Needs

It is the employer's responsibility to accommodate employees' special dietary needs, whether for medical, religious, or moral reasons. This includes dietary restrictions such as gluten-free, vegan, kosher, or other specific dietary needs.

Adjusting Allowance Amounts

The meal allowance policy should be flexible and allow for adjustments to accommodate special dietary needs. If gluten-free, vegan, or kosher options are typically more expensive, the allowance amount should be increased accordingly to ensure employees can purchase suitable meals.

Communication and Approval Process

Employees should be encouraged to communicate any special dietary needs to the relevant person or department, such as HR or the travel department, to ensure their needs are accommodated. A clear approval process should be outlined in the policy, specifying who employees should contact and what information they need to provide.

Reimbursement Process

The reimbursement process should also take into account special dietary needs. Employees should be allowed to submit itemized receipts for their meals, and the policy should specify that reimbursement amounts may be adjusted to cover the cost of special dietary requirements.

Exceptions and Flexibility

The meal allowance policy should include some flexibility to accommodate unexpected situations or exceptions. For example, if an employee is unable to find suitable meals due to their dietary needs, they may need to request a higher reimbursement amount or seek alternative solutions, such as cooking their own meals.

Tax Implications

When reporting meal allowances to the IRS, it is important to consider any tax implications, especially if the reimbursement amounts are adjusted for special dietary needs. Ensure you are familiar with the IRS guidelines and seek professional advice if needed to ensure compliance.

By following these guidelines, employers can create a meal allowance policy that accommodates employees' special dietary requirements while ensuring fair and reasonable reimbursement. It is important to communicate the policy clearly to employees and allow for flexibility, as every situation is unique.

Frequently asked questions