Travel allowance: Overview, definition and example
What is a travel allowance?
A travel allowance is a fixed sum of money given by an employer or organization to an employee or individual to cover expenses incurred during business or work-related travel. This allowance is typically used to pay for transportation, lodging, meals, and other necessary expenses while traveling. Travel allowances can be provided as a per diem (a daily amount), a lump sum for a specific trip, or a reimbursement for actual expenses incurred, depending on the organization’s policy.
For example, an employer might provide an employee with a daily travel allowance of $50 to cover meals and transportation while traveling for a business conference.
Why is a travel allowance important?
A travel allowance is important because it helps employees manage the costs associated with work-related travel without needing to pay out of pocket and seek reimbursement later. It ensures that employees can focus on the purpose of their trip—whether it’s meeting with clients, attending conferences, or performing work duties—without financial concern over travel-related expenses.
For employers, providing a travel allowance streamlines the expense management process, ensuring that employees are adequately supported during travel, while also maintaining control over travel costs. Travel allowances can also be a way for businesses to attract talent by offering a comprehensive benefits package that includes travel support.
Understanding travel allowance through an example
Imagine a consultant who is required to travel across the country to meet with clients. The consultant’s employer provides a travel allowance of $200 per day to cover meals, transportation, and incidental expenses. While traveling, the consultant uses the allowance to pay for taxi fares, meals, and hotel fees. If the consultant spends less than the allotted amount, they keep the remaining funds; if they exceed the daily allowance, they may need to cover the difference out of pocket or seek additional reimbursement.
In another example, a sales manager is asked to attend a trade show in another city. The company provides the manager with a travel allowance of $1,000 for the trip, which covers airfare, hotel costs, meals, and incidentals. The manager is expected to manage their expenses within the travel allowance, and any costs beyond the allotted amount are their responsibility.
An example of a travel allowance clause
Here’s how a travel allowance clause might appear in an employment contract or company policy:
“The Company will provide the Employee with a travel allowance of $[amount] per day for any business trips that require overnight travel. The allowance will cover reasonable expenses for meals, transportation, and incidentals. Employees must submit receipts for lodging and transportation exceeding the daily allowance, which will be reimbursed according to the Company’s travel policy.”
Conclusion
A travel allowance is a convenient and effective way for employers to provide financial support for employees traveling for work. It helps cover expenses related to meals, transportation, lodging, and other necessary costs, ensuring that employees can focus on their work without financial burden. For businesses, offering a travel allowance simplifies the management of travel-related expenses and helps maintain consistency and control over travel costs.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.