When business as usual involves reporting to the same location every day, employee travel isn’t a subject that may come up very often. When it does, whether it is a short trip a mile away or overnight travel, it raises questions.
What exactly is an employer required to pay for? What about travel time for hourly employees?
Sending your employees anywhere offsite, no matter the distance or time spent, will incur expenses. In terms of tangible items purchased, or paid services, if you do not provide a corporate credit card, these will be out-of-pocket for your employees who travel. While some of these expenses may be tax-deductible for employees if their employers do not reimburse them, there are many limitations to what they can actually deduct at tax time. Keep in mind that some states, like California, require that companies reimburse all out-of-pocket expenses incurred while doing business (with reasonable limits) offsite. If employees are traveling on behalf of your company, a best practice is to simply reimburse them for what they have spent while doing so.
Some examples of common travel expenses are:
- Airline and train tickets (including change fees if company plans prompt a change to travel plans), baggage fees, and tips up to a certain percentage
- Car rental fees (if your company requires your employees to purchase the rental insurance, this is also a reimbursable expense) and gas
- Taxi or bus/shuttle fares
- Parking fees
- Hotel accommodations and wi-fi charges
- Dry cleaning expenses for trips of a certain length
- Mileage (if employee’s personal car is used)
- It is recommended that mileage be reimbursed at the standard IRS rate (54.5 cents a mile for 2018) or, if a company desires to do so, at actual cost
An accountable travel expense policy where employees submit actual expenses for reimbursement versus a flat “travel stipend” amount is recommended to avoid your employees having additional income added to their W2s.
What if employees spend money during their off time? Are there any expenses I am not required to reimburse?
There are limits. There is no law that requires you to pay for spa treatments, concert tickets, extravagant meals or other expenditures that occur during downtime on a business trip. A comprehensive Business Travel Policy will assist your employees’ understanding about what is and is not reimbursable. Non-reimbursable expenses may include:
- Upgrades to flight seating or charges for in-flight entertainment systems
- Travel change fees if not due to business reasons
- Parking tickets or tickets for moving violations
- Meal costs over a reasonable limit
- Employers should consider geographic location cost differences when determining what a reasonable limit may be. Dinner out in large cities, for example, will likely be more expensive as a rule than it would be in other parts of the country.
- Charges for alcohol
- General sightseeing and shopping expenses
- If an airline loses an employee’s luggage, you may want to consider reimbursing for reasonable replacement of clothing and toiletries purchased for purposes of completing the business trip
- Room upgrades, in-room movie rentals and honor bar charges
- Room service if not one of the standard daily meals. (The cost of ordering a pizza via room service three hours after dinner may not be reimbursable unless required work projects dictate a later night)
- Charges for treatments in hotel spas or fitness classes
- If the hotel where the employee is staying has required “resort fees” that are automatically added to the bill, these should, as a rule, be part of what is reimbursed
Business travel policies should not only outline what is, and is not, reimbursable and how to submit expenses. If the company has a preferred hotel group, airline or travel agency that should be used, this information should also be included in a travel policy, as well as any documentation/explanation required for going outside of the preferred vendors. If there are different tiers of travel expenses allowed based on title and/or job level (i.e. executives may fly first class for long trips) these details should be listed in the policy as well and applied consistently.
As another best practice: Submitted expenses should have a quick turnaround for approvals and processing and be reimbursed in a reasonable amount of time.
What about pay for travel time for hourly employees?
Non-exempt employee travel is tricky as the wage rules vary by state.
From a Department of Labor (Federal) standpoint, compensable hours for non-exempt employees while traveling as a passenger (in a plane, bus, train, car, boat) are generally only those that fall during regular work hours. If the employee, on the other hand, is required to do the driving, this would be considered compensable time.
In California, however, all travel time (whether the employee is a passenger or active driver) is compensable less an employee’s regular commute time. Please note that actual in-the-air or on-the-road travel time can be paid at state or local minimum wage unless actual work is being performed during that time (i.e. an employee answers emails and/or works on a presentation while on a flight.)
Any meetings or required activities outside of work hours are generally considered compensable – state and federally – at local overtime rates.
Important to note: Even while offsite, any state or federal meal/ rest period and overtime rules still apply and non-exempt employees should carefully track their time while traveling. If employees travel out of state, check wage and hour laws for days spent at that location. More than likely those are the laws that should be followed.
As for shorter day trips – regular commuting, errands, travel to a local conference, it comes down to employer control and state law.
- If George, an hourly employee is asked to stop and pick up supplies or refreshments on the way in to work, George may be owed for all or part of that time.
- If you require hourly employees to take a company-provided shuttle to work, that time spent in the shuttle may be considered work time.
- If Jenny reports to her regular work location in the morning and leaves for a conference at 10 a.m., finishes the conference at 2 p.m. and returns to work, the time spent traveling to and from the conference may be compensable in all states as it occurs during work hours. Alternatively, If she leaves the conference at 5 p.m. and goes straight home, if the time it takes for Jenny to get home is longer than her usual commute you may owe travel time for the difference.
- This works similarly if employees need to travel to multiple clients or locations throughout the day.
As travel is a sometimes necessary cost of doing business and remaining competitive in the market, developing a Business Travel Policy is essential to keep control of those costs and guide employees on how best to manage their travel plans and expenditures.
A close eye on wage and hour laws will also assist in ensuring your hourly employees who travel are paid appropriately as well. The following sites provide additional guidance: IRS & Mileage Rates; California Travel Wage Requirements; and Department of Labor Fact Sheet: Travel Pay.
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