When planning a trip, what do you think of first? The answer is probably, “where am I going to eat?” Your employees who are traveling for business are the same. In fact, besides lodging and fuel, meals are the most common cost, and the one employees want to have specifics laid out for.
Are my meals paid for? What is my meal allowance? Is the allowance per day or per meal? Do I pay for meals upfront and get reimbursed or pay with a company credit card?
As a travel manager, it is imperative that you write a comprehensive meal allowance policy that is easy to understand for employees.
What is an Employee Meal Allowance?
An employee meal allowance is a stipend provided by an employer to an employee that is used exclusively for meals. A meal allowance can cover anything from a midday business lunch to a long-term business trip and can include breakfast, lunch, and dinner.
What’s covered and not covered under an employee meal allowance plan is up to the employer. Most companies do not cover alcohol, room service, snacks, and certain types of events including sporting events and concerts.
When to Give Employees Meal Allowances
A good meal allowance policy should spell out when your company will provide employees with a meal allowance. This includes what constitutes a business trip and will depend largely on your specific company and its operations. Two factors to consider when deciding on a policy are distance and length of the trip.
Meal allowances should be given when taking a client or prospective client out to dinner.
Meal Allowance vs Meal Voucher
A meal voucher is a contribution that an employer provides to an employee for a meal in the form of a voucher. The differences between a meal voucher and a meal allowance come down to how the money is taxed.
For meal allowances, the amount is tax-deductible in full for employers, while employees are exempt from taxes for up to 70% of the upper limit of the allowance.
Conversely, meal vouchers are a tax expense of up to 55% of the nominal value for employers, while employees are fully exempt from income tax on vouchers.
To choose the right policy for your company, you should evaluate your individual circumstances and dive deeper into the numbers and tax considerations, as both meal allowances and meal vouchers have their positives and negatives for each party.
Manage Meal Allowance During Business Travel
The key to properly managing meal allowances during business travel is to have a well-constructed meal allowance policy that all employees can easily access, understand, and reach out with any questions.
Your policy should include:
Meal allowance amounts
What will and will not be included in coverage
How employees will pay for meals
The meal allowance expense approval process
Expense reimbursement process
How Employees Will Cover Meals While Traveling
For an employee, it is extremely frustrating to try to figure out how to pay for meals while traveling for business, and when you will be reimbursed. Making your company meal reimbursement policy crystal clear will reduce stress for all involved. Be sure to include when the employee should use a company credit card or virtual per diem card versus using their own credit card and receiving reimbursement.
What to do if You’re Taking Others Out to Eat
This question can get rather complicated and requires a well-thought-out, specific policy point that clearly indicates the do’s and don’ts of taking others out to eat for business or when traveling.
For example, a business-related dinner with a client is far different than several coworkers going out for a regular lunch and engaging in water-cooler talk.
Are Meal Allowances Taxable
Meal allowances are always tax-deductible in full for employers up to a certain amount; however, for employees, meal allowances are tax-exempt up to 70% of the upper limit of the meal allowance. Tax questions get a bit complicated, so when formulating your meal allowance policy, be sure to consult your company’s finance department or a certified accountant.
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