Sending employees out of town for business trips is an excellent way to expand your company. There’s potential for a significant return on your investment, enough so that business travel is a trillion-dollar industry.
With your focus on the ROI instead of the out-of-pocket expense, it’s time to plan the meal costs associated with each trip. You might already have this included in your corporate travel policy, but, as the saying goes, times, they are a-changing. What paid for a decent dinner a few years ago won’t even buy a Mcdonald’s meal today.
Satisfied employees who feel valued are more likely to go out and represent your company better. Show your appreciation for their hard work by giving them by following these five tips as you develop your meal allowance policy.
1. Check the Minimum Federal Guidelines and Tax Laws
The U.S. General Services Administration (GSA) establishes baseline corporate M&IE policies for business travel. These vary by zip code and fiscal year and are adjusted annually on October 1. You can find the rates your business must adhere to (at a minimum) at the GSA Per Diem Rates website.
These established rates are reimbursable to the business by the IRS. Because your company deducts the expense, the average per diems aren’t taxable to the employee. However, it becomes taxable if you don’t receive an expense report or it’s filled out incompletely.
Additionally, if you don’t use per diems or pay your employees more than the federal rate, you must let them know that the excess is considered taxable income.
2. List What the Meal Allowance Policy Includes
Seasoned business travelers know what to expect with an allowance, but new employees need a breakdown. Having a clearly established explanation of what the meal allowance covers also saves you from problems later.
If an employee has questions about why they weren’t reimbursed for something or your account is audited, you’ll need to show what is and isn’t included in the meal allowance policy.
Most businesses use a per diem to make filing reports and taxes more streamlined. You don’t have to deal with verifying receipts, filling out reports for each receipt, and reimbursing your travelers upon return. You give them a pre-determined amount, and they spend it on covered expenses.
Per diem rates for M&IEs include:
- Room service
- Laundry and laundry-related services
- Fees and tips for those who provide said services
Consider adjusting the allowance to slightly more than the GSA-approved amount, as long as you remind travelers that the extra amount could be taxable to them. This gives them more freedom in choosing their dining experiences.
Use these same expenses under a meal allowance policy, whether it’s reimbursable, a per diem, or paid for by company credit cards. It makes this process easier for everyone, including your accountant.
3. List What the Meal Policy Does Not Include
This part sounds like common sense, but it could help prevent confusion. For instance, if your company decides not to cover room service or tipping as part of the per diem, list that in your policy. Then, make it clear to the employee before they leave.
Alcoholic beverages are also a muddy issue. State your company’s policy on reimbursement or per diem coverage for these drinks and how they are reimbursed for the traveler.
4. Include a Business Meeting Section
When your traveler is hosting a meal for one of your clients or vendors, the typical rules may not apply. Consider adjusting the policies to include pricier meals at upscale venues and adding alcoholic beverages (within reason) to your business meeting policy.
However, explain what “business purpose” means and how employees should go about the approval process for these meetings beforehand. Include a section about what is and isn’t covered here, as well.
5. Create an Approval Workflow
Finally, end with a section on how to get meal allowances approved. This workflow should show the traveler when they can spend their allowance without question and when they need to have the expense approved.
This is more common for lodging and transportation than it is with meals. For example, some businesses use specific vendors to book their hotels, rental cars, and airfare.
But if you have certain restaurants that you don’t work with due to competition or other factors, include them on the “uncovered without approval” part of this list.
Clarify how to get approval, who to contact, and how early the request needs to be documented. The easier the workflow is to understand, the fewer questions you’ll have when meal allowance approval is needed.
Developing your meal allowance policy can be as simple as using the GSA guidelines or as complicated as you need it to be for your business. The key is to lay the policies out clearly for your travelers to reference.
With these five tips, you’ll have a well-established explanation of the meal plan allowance and later save yourself and your employees the headache of confusion.