Setting a Meal Per Diem Policy The Easy Way
If you read our blog post last week, then you know that meal per diems can improve travel for you and your team. So now that you've decided a per diem policy is the way to go, you have to build that into your overall corporate travel policy. So what should the rules be?
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Specify what is covered and what is not
“Meals” can be a pretty vague word. We typically think of meals as breakfast, lunch, and dinner. And that is how the GSA describes it on their charts that break down the per diem meal rates they have defined for cities around the country. But what about snacks? Or those tempting goodies in the hotel’s mini-bar? Or an after-work round of beverages accompanied by nachos and fried zucchini?
You have to spell it out for people. As with all aspects of your travel policy, clear, easy-to-understand rules make it easy for employees to stay within the cost guidelines.
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How much can they spend?
The easiest way to handle this is to follow federal meal per diem guidelines. The General Services Administration (GSA) sets annually-adjusted rates for cities large and small across the country. The lower 48 states, that is. The Department of Defense sets rates for Hawaii, Alaska, and US territories. And the State Department sets meal rates for travel to foreign countries. Employees can simply check the appropriate website to find the meal per diem for their destination.
What requires a receipt?
Some companies insist employees turn in a receipt for every food or beverage purchase, no matter how small, if they expect to be reimbursed. Other companies set a minimum below which no receipt is needed. The first option is somewhat more onerous, but it also provides your company with complete spending information.
However, reimbursement rules are a bit more complex than that. The government (the IRS, actually) also has a few policy rules that you and your traveling employees must follow:
Employees who receive per diem reimbursements must keep detailed records. For every expense, they must log the date, place, time, and business purpose as well as the dollar amount, although no receipt is required. (Of course, your travel policy should require receipts for your own internal purposes.)
Travelers must submit that information to you within 60 days of travel. Technically, there is an option to skip this paperwork, but it means the employee must either forego reimbursement or claim the entire amount as wages.
If an employee spends more than the GSA-defined per diem rate and you reimburse them for their entire expense, the amount above the federal rate is considered taxable. You’ll have to report that on their W2, and they’ll have to pay income taxes on it.
Specify a reimbursement deadline
The government might think 60 days is a realistic period within which to submit expense reports, but for businesses that can be too much time. In fact, one of the most common and most annoying challenges for many travel and finance managers is poky reporting by traveling employees, or incomplete reporting, that confounds accurate cost accounting. It’s easy for an employee to decide they can always get reimbursed next month, or whenever they find that missing receipt. Their only concern is getting paid back at some point. They don’t have to reconcile expenses to budget each month and try to puzzle out why things don’t align well.
Using real-time financial and accounting reporting to comprehensively manage your travel program streamlines everything from booking flights and hotels to capturing and submitting per diem meals and other expenses. All the ingredients needed for tracking, reimbursement, analysis, and future planning. Easy peasy.
(Shameless plug: Lola can help you manage your company's travel program. Learn more about our business travel management platform today.)