Taking a business trip is often part of the job. You may even enjoy the trip, but that doesn’t make it a vacation. Business travel is considered work time. And when thinking about the business travel compensation and reimbursement you’re owed, you should understand what you’re entitled to.
Responsibility for Reimbursing Business Travel Expenses
When employers think about business travel compensation, they typically begin by putting reimbursement guidelines in place so employees know exactly what they can (and cannot) expense. Business travel expenses can fly out of control in a hurry, and employers typically use these policies to identify how the expenses you incur while traveling for business will be managed and paid for.
Typically, business travel expenses incurred by you, the employee, will be reimbursed by your employer. The employer may require you to estimate the expected cost prior to your business trip or event so they can pre-approve the various anticipated expenses in advance against their travel budget.
Business travel policies will typically specify limits for reimbursement and list your company’s preferred vendors. Preferred vendors typically include airlines (e.g., JetBlue), car rental companies (e.g., Avis), and hotels (e.g., Marriott). Employers will often negotiate rates with preferred vendors to obtain the best rates for business travel, especially if business travel is a large corporate expense.
Some companies require employees that travel on business to utilize a contracted travel agency for making travel arrangements. Travel agencies typically offer their business clients pre-negotiated and preferred rates, helping organizations manage their business travel budgets.
Travel expenses are usually restricted to business-related travel. If you plan to extend your stay in the city in which you are visiting for pleasure, you can expect to pay for that portion of the trip on your own.
Some employers do make an exception to this business travel policy if you are able to extend your trip without increasing total cost. For example, if your return flight is pushed to a Saturday instead of a Friday, you might see the total cost of airfare decrease. That flight cost reduction may offset the incremental cost of an extra day of lodging. In this instance, your employer may be willing to cover the extended trip. It all comes down to how it is worded within your corporate travel policy.
Unpacking Business Travel Categories
Business travel expenses typically fall under three categories: transportation, lodging, and meals. As an employee, you are entitled to business travel compensation in each of these three areas, and you should keep track of your business travel expenses and receipts for use in the business travel reimbursement process.
Airfare costs will often be the largest of your transportation travel expenses. In urban areas, your employer may suggest you swap airfare expenses for rail travel, as a train trip can often be a less expensive alternative to air travel. Your employer’s business travel policy should include guidelines for how you should handle and pay for extras (such as seat upgrades or baggage fees), as well as flight changes (which incur change fees).
Your transportation expenses can also include rental car fees, limos, taxies, ride shares, and subway fares. In the instance of car rentals, your employer’s travel policy should include what car types and sizes are approved to rent, as well as the types of insurance that should be selected as an add-on. Regardless of the type of transportation you leverage, you will want to keep track of all receipts and tips, which you can submit for business travel compensation and reimbursement.
In instances where you drive your own car to a business meeting or event, you will typically be reimbursed at a flat mileage rate, plus tolls. For 2019, the Internal Revenue Service (IRS) has set the standard mileage deductible rates for the use of a car (or vans, pickups, or panel trucks) at 58 cents per mile for business miles driven. While most companies use the IRS mileage reimbursement rate as stated, you will want to confirm with your business travel compensation policy to confirm you’re your employers is in alignment with the IRS deduction.
Parking is also considered a transportation expense, regardless of whether you drive your own car or rent one during your business trip, and can be submitted for business travel reimbursement.
You will often incur lodging expenses at hotels when your business travel is for consecutive days in a location substantially far away from home. The “distance away” needed to qualify for a night’s stay will vary by company. For instance, if you are traveling from Boston, Massachusetts to Portland, Maine for business, that is less than a 2-hour drive. Your employer’s travel policy should clarify whether a hotel stay would meet with approval, or whether you should make the trip home on the same day after work is concluded without incurring the added expense of a hotel stay.
Many businesses will allow you to have their own hotel room when traveling. However, some employers still require employees to share a room with a same-gendered coworker to save on business travel expenses. Guidelines for booking your hotel stay, including policies like these, should appear in your organization’s formal business travel policy document.
When traveling, you will typically be reimbursed for meal expenses for breakfast, lunch, and dinner. However, your employer may place a daily limit on meal expenses, or set a per diem meal expense allocation. Your meal expenses can also be classified as entertainment expenses if your employer allows you to entertain customers or suppliers by taking them out to lunch or dinner.
Your company will probably also have rules in regard to the extent to which alcohol is a reimbursable expense. These guidelines would be outlined in your corporate business travel compensation policy.
Other Business Travel Considerations
- Rewards points – when it comes to rewards points associated with air travel or hotel stays, most employers will allow you to keep those reward points. A minority of employers will require you to grant the rewards points to the company. If you travel frequently for work, consider signing up for free air, train, hotel, and rental car loyalty programs so you can accumulate points for later use.
- Insurance – many employers provide their employees with business travel accident insurance, which covers the employee from any injury obtained during business travel. Your employer’s policy should be outlined in your employee benefits or business travel reimbursement guidelines.
- Tax deductions – if you want to check if your business travel expenses are tax deductible, you can view rules within the IRS Topic Number 511. However, consider that when the employer is reimbursing travel expenses, they are typically not also tax deductible by the employee.
- Travel pay – in the United States, Fair Labor Standards Act (FLSA) regulations require employers to pay for travel time in some circumstances. Generally, time spent traveling is compensable, unless it is normal home-to-work commute time, or when travel requires an overnight stay and the time spent traveling as a passenger falls outside of your normal work hours. When pay is required, the time spent traveling is considered hours worked and must be included when determining overtime pay obligations.
To learn more about you company’s business travel expense program, first determine if your company has a formal business travel compensation policy. Ask for it from the Human Resources department or the Finance department. And travel safe!