Want to support your employees’ wanderlust of travel? Perfect. Travel helps employees recharge, disconnect, and enter the workplace with new motivation. In fact, offering paid leave or a travel stipend can boost employee engagement up to 60%.
Whether you’re building a paid leave program from scratch, already have one, or are looking to support employee travel for ‘bleisure’ (business travel, bookended with leisure travel) or free time travel; it’s essential to create an employee travel stipend policy to support your team.
This policy helps you to set clear expectations, improve talent retention, and be at the forefront of employee benefits.
Here’s a quick guide on what this policy should contain, including types of personal expenses like per diem allowance, your reimbursement policy, tax laws, and more.
What does a travel stipend mean?
A travel stipend is a sum of money paid at regular intervals to support employees with personal travel expenses. This type of stipend is not meant to cover all expenses of an employee’s trip, it’s meant to ease the burden and contribute toward it in some way.
What is a travel stipend policy?
A travel stipend policy is also known as a vacation stipend policy, travel reimbursement policy, or leisure travel policy. It generally outlines the rules and regulations for employees to use the company-allotted stipend for personal travel expenses. Employees have the freedom to spend this fund for vacation at their discretion during a calendar year.
Since no federal or state laws require companies to offer a personal travel stipend, you can easily create policies of your own. Some companies prefer to start small and gradually build their travel stipend program to offer maximum amounts through their stipends. Others prefer to go all-in from day one—this article should help you decide what’s the best fit for your business.
What are the benefits of offering employee stipends?
Offering employee stipends for vacation creates a win-win situation for you and your employees. It’s a method to keep them motivated and satisfied with their role knowing their workday is contributing to more than just their salary.
Some businesses, especially early-stage self-funded startups, can be deterred from offering a travel stipend policy. It screams extra costs, and founders often expect covering travel expenses of employees to be out of reach.
However, there are ways to keep things affordable and flexible. Before diving deeper, let’s take a look at the benefits of offering employee stipends:
- Improved job satisfaction
- Boost employee productivity
- Attract and retain the best talent
- Reduced healthcare benefit usage
- Fewer compensation claims and sick days
What does a travel stipend policy cover?
First of all, there are no strict rules about what you can and can’t include in a travel stipend policy. It is this flexibility that makes it possible for companies to create unique stipend policies. Whether you want to offer fringe benefits or offset funds, it’s totally up to you—and at your company’s discretion.
Here are some of the most common things that a travel stipend policy can cover:
- Passport fees
- Per diem rates
- Meal expenses
- Leisure activities
- Hotel room cost
- Incidental expenses
- Car rental expenses
- The actual cost of airfare
- Mileage reimbursement
- Allowance for hotel room expenses
- A prepaid cell phone card for personal use
- Inter-state travel-related expenses like tolls
- Fuel expenses on personal vehicle for road trips
- Other personal expenses like event registration fees
- Remote commuting expenses (for example, if your employee chooses to work from a destination office)
No matter how many items you plan to cover from the list above, the first step is to get buy-in from the finance department, HR team, and senior management. One way of doing this is by clarifying a travel stipend’s tax implications.
Are travel stipends taxable?
Travel stipends are not considered regular income and are therefore tax-free by the IRS’ (Internal Revenue Service) standards. It’s the responsibility of employees to pay taxes on fringe benefits.
Your company may choose to cover the tax implications or pass it on to employees. Make sure your travel stipend policy clearly states tax laws, if any, and who is liable to pay what.
Stipends count as taxable income when your company goes for a non-accountable plan. In such cases, employees don’t need to account for expenses made using the travel stipend. They can simply spend the stipend without documentation and are not required to return the unused portion.
If this is the case, travel stipends will fall under your taxable income and be subject to FICA taxes. You can find the details on the W-2 form.
It’s better to keep track of stipend expenses and consult an income tax audit expert or the internal accounting team for further tax purposes.
Is a travel stipend necessary and how much should it be?
The federal government doesn't require companies to pay travel stipends to employees. Businesses often confuse having to cover employees taking a business trip and having business travel expenses on their hands, with an optional travel stipend policy to support leisure travel. A stipend isn’t compulsory, business travel expenses are.
That being said, travel stipends certainly add to the satisfaction and productivity of employees. Using an employee benefits platform can streamline the way you manage and reimburse employee stipends.
The amount of your stipend really depends on your company’s budget and the intended use of spend. Here’s what some of the big names offer for annual travel stipends:
- Airbnb: $2000
- Evernote: $1000
- TourRadar: $1800
- Afar Media: $2000
- Bamboo HR: $2000
You can use these figures as a rough benchmark for your own stipend offering.
How do travel stipends work?
There are companies that offer different stipend amounts based on seniority or performance. How you want to offer the stipend is up to you. It can certainly be an incentive to have an increased travel stipend the longer you’re with a company or the more senior you are. However, it can also be seen as more fair if everyone gets the same.
You can have employees submit receipts for reimbursement or deposit a fixed amount in their bank accounts. You can even offer a standard mileage rate or issue company credit cards. It’s whatever works best for your business model and finance team.
If you are reimbursing travel expenses, make sure to mention the processes to follow for submitting the employee’s expense report.
A travel stipend program makes a statement for your company culture. Plus, it’s a great way to offer and showcase the strength of your employee perks. While creating a stipend policy, make sure all rules related to actual expense reimbursement are clearly outlined.
If using a business travel management tool like TravelPerk, you can pass on business miles, additional savings on flight tickets and hotels, and support your travel stipend offering. See what TravelPerk can do for your policy today.
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