Travel & Expense Policy: Small Business Essentials

There’s no doubt about it—the business world is back on the move! Your small business may now need a travel and expense policy to keep up with all the new activity. 

The use of video conferencing technologies has made remote work simpler and has reduced the need for face-to-face meetings and in-person events. Despite this, data shows the travel demand has picked back up. Global consultancy firm Deloitte reports that while business travel is already creeping up as 2023 draws to a close, a “full recovery to 2019 [business travel] spend volume,” adjusted for inflation, “appears likely by late 2024 or early 2025.” 

You may be noticing this uptick within your own business. If so, you’re likely wondering whether now is the time to implement a comprehensive travel and expense policy.

In this post, I’ll walk you through how to determine if a travel and expense policy is necessary. If you do choose to implement one, I’ll fill you in on the travel and expense policy best practices to keep in mind. 

RELATED: 5 Steps to a Comprehensive & Clear Business Travel Policy >> 

Travel and Expense Policy: A Requirement for Businesses?

The first thing to know is that businesses are not required by law to maintain or post a written travel and expense policy—this is true under federal law and, as of the time of writing, in all fifty states. However, when it comes to enforcing your policy, best practices dictate that you memorialize your rules within a written policy that employees and managers can refer to at any time. 

Identifying the Need for a Travel Expense Policy

Is it time to get the ball rolling on creating a formal travel expense policy for your small business? Here are the tell-tale signs that you shouldn’t wait any longer: 

• Your business is expanding

Are you welcoming new members to your team? Are you expanding to new markets (or trying to get there)? Are you sending sales employees out on in-person calls or entertaining prospective clients? If so, your employees need to know the rules they’re expected to play by. Business expansion is a top reason to create written travel and expense policies. 

While new experiences are going to reveal questions as they unfold, you can anticipate a certain measure of risk and mitigate potential misunderstandings by creating a comprehensive policy beforehand. 

• Your employees are asking for clarity

Are you constantly fielding questions about whether an expense will be reimbursed, whether an employee can attend an in-person conference, or whether a manager can fly business class? If so, you need a travel and expense policy. Everyone is happiest when boundaries are set, and a written policy does just that. 

Your travel and expense policy can be as detailed as you like and can lay out in no uncertain terms when in-person meetings should be prioritized, whether “luxury” travel will be eligible for reimbursement, and even whether your employees will be permitted to add on additional personal vacation time to their business travel. 

Your travel and expense policy will be unique to your business, and while it doesn’t have to be an immovable document without room for exceptions, it should at least exist if you’re getting questions about it. 

• You want to avoid risks associated with employee travel

Travel and expense policies help your business mitigate risk in several ways. First, they help set behavioral expectations before travel takes place, which in turn protects your organization’s reputation. Many small business travel and expense policies incorporate rules about reimbursements for alcohol, permissible and impermissible forms of client entertainment, and more. 

To mitigate financial risk, you can cap per-day spending, set transportation and accommodation cost ceilings, and even require employees to work with a list of preferred vendors. You can (and should) require the submission of receipts and other records where possible. 

Travel and Expense Policy Best Practices

As discussed, the law doesn’t require you to maintain a written travel and expense policy. But whether or not you reduce your procedures to an organized document, you should be familiar with the legal considerations involved in creating and enforcing travel expense rules. Here are some key items to note: 

• Failing to reimburse reasonable expenses may be illegal

  Under the laws of most jurisdictions, employers are required to reimburse (or “pay back”) their employees for the necessary expenses that employees incur while completing their jobs—including travel. While you don’t have to reimburse employees for unnecessarily lavish or travel expenses unrelated to your business, there is a fine line to navigate. An experienced HR compliance professional can help you find it. 

• You should apply travel and expense rules consistently to the extent possible

  One of the most critical reasons to maintain a written travel and expense policy is to ensure that your rules are uniformly applied across the company. Inconsistent application of rules leads to confusion among employees at best, dissatisfaction in the long run, and, in the worst instances, claims of discrimination against employers. 

• Reimbursed expenses shouldn’t be considered taxable income for your employees 

  When it comes to expense reimbursements (whether for travel purposes or otherwise), there is a world of IRS regulations to familiarize yourself with. Generally, your team will need to properly document and classify expenses according to IRS rules. If you don’t already have a thorough understanding of business travel deductions, don’t worry—a PEO can help. 

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Developing a Bulletproof Small Business Travel Expense Policy: Expert Guidance

Developing a travel expense policy for your small business isn’t a task that your organization has to handle on its own. Axcet HR Solutions is a certified professional employer organization that understands safety, risk management, and human resources compliance for small businesses. 

Axcet believes that every company’s employee policies should be unique. Your rules (and how you enforce them) will differ based on your industry, location(s), culture, and other details. We’d love to walk you through your distinct needs together and help you develop a travel and expense policy that fits your business and its employees. 

With Axcet HR Solutions, you’ll find that there’s no end to the benefits a growing company can reap by working with a PEO. Wondering if outsourcing human resources is the right call for you? Reach out to our consultants today to learn more.