Implementing A Business Travel Expense Policy

Employee travel expenses are one of the highest costs within any organisation. According to an infographic from Certify, industry data suggests that 445 million business trips take place annually and amount up to USD251B each year.

Without a proper travel expense framework and policy in place, managing employees’ travel spend becomes a hassle. When employees are allowed to book their own business travels, organisations may miss out on corporate travel perks and significant costs. In fact, employees may also end up submitting fraudulent travel claims. A 2016 Expense Fraud Infographic showed that expense fraud committed by employees was estimated to cost US organisations more tha
USD2.8B annually.

Business travel expenses are determined by individual employees’ choices, from the airline they select and the hotels they stay in to the restaurants that they dine in. Without clear travel policy guidelines, employees are likely to make less cost-conscious decisions. Here are some guidelines to help organisations implement a business travel expense policy.

DEFINE THE TYPE OF TRAVEL EXPENSES THAT ARE ELIGIBLE FOR REIMBURSEMENT
Clear definitions of the types of travel expenses that are eligible for reimbursement ensures that employees are aware of items that are claimable. Common travel expenses that are eligible for reimbursement are airfares, accommodation, transportation to and fro the airport to hotel as well as to the meeting venue, and meals. While these are fairly broad categories, the expense must have a clear business character. In other words, it should be related to something that the employee needs in order to do their job. For example, taking a cab in order to reach a client’s office for a sales pitch or having breakfast or lunch prior to a client meeting.

UNDERSTAND THE COST OF LIVING FOR EACH TRAVEL LOCATION
Understanding the cost of living of each country will help HR in setting a fair claim limit for the different types of expenses depending on where the employee had to travel for business reasons. For example, accommodation costs in Japan will be higher compared to India given the varying cost of living. Hence, reimbursement limits should take these factors into account. For organisations who are unsure of where to get the data from, Statista publishes statistics on the daily cost for business travel in Asia Pacific across the years.

SET POLICIES AND GUIDELINES FOR EACH TYPE OF TRAVEL EXPENSES AND REIMBURSEMENT
Have in place policies and guidelines for each type of travel expenses and reimbursement to prevent employees from overclaiming. It is also important to be clear on the type of expenses that are reimbursable and set limits where applicable. Organisations should also consider the types of payments that employees can use when making a business expense such as expense advances, payment with company card, out-of-pocket payment and petty cash.

DETERMINE WHETHER THERE ARE STATUTORY REQUIREMENTS ON BUSINESS TRAVEL EXPENSES
Certain countries may have statutory requirements when an employee travels for business purposes, such as an entry permit or visa applications. HR needs to be familiar with these entry and administration requirements and ensure that these documents are properly recorded for accounting, compliance, audit and tax purposes.

DOCUMENT THE BUSINESS TRAVEL EXPENSE POLICY
Once HR has consolidated all the necessary information and clarified on the respective country’s statutory requirements, it is essential to document the business travel expense policies. The policy should provide clear guidance on how employees are expected to manage the organisation’s money when travelling for business purposes. In essence, it needs to be fair, consistent and clearly-documented to ensure that all employees are aligned when it comes to using the organisation’s funds for business travels

COMMUNICATE TO EMPLOYEES
The detailed policies and guidelines can be shared with employees via the employee handbook or employee self-service portal. It is also crucial to organise communication sessions with employees to ensure that the policies are clearly articulated as well as address any conce
s or misconceptions that employees may have. Changes to the business travel expenses policies must also be communicated to employees in a timely manner to avoid potential misalignments.

EVALUATE THE BUSINESS TRAVEL EXPENSE POLICY ANNUALLY
To ensure that the business travel expense policy is in line with ongoing changes in local legislations, it is imperative that HR review the policies and guidelines annually. This also ensures that the policies are in line with the organisation’s financials as well as changes in the respective countries’ cost of living.

CHALLENGES OF MANAGING BUSINESS EXPENSES
Managing business expenses, especially when it is done manually, can be a problem for organisations. It requires employees to fill up paper or online forms and even attached hardcopies or softcopies of their receipts for submission to HR. All these processes are inefficient and highly prone to data entry errors. This method of business expense reimbursement is also administrative and is likely to take up a significant chunk of HR’s time.

Leveraging on expense management software is a good way to automate and track travel expenses within the organisation. It allows HR to easily monitor employees’ business transaction history, calculate tax differences, categorise employees’ expenses and more. Most expense management software in the the market today can be easily integrated into the organisations’ payroll system, which facilitates the reimbursement process while minimising duplicate expense entries or human data entry errors. Ultimately, an automated expense management software will save HR a significant chunk of time and money in the long run.