What is a meal allowance policy? Why should I have one?
A meal allowance policy (also known as a meal stipend or food allowance) regulates the actual cost that employees are allowed to spend when on business travel. It spells out what’s covered, any dietary restrictions to consider, spending limits, and what receipts or documentation are needed for reimbursement.So, why bother with one? First off, it keeps things fair and simple for all travelers. Without a clear policy, you might end up with one employee splurging on a three-course dinner while another sticks to a sandwich, all on the company dime. It also makes managing expenses less of a headache, saving you from sorting through inconsistent claims.Plus, staying compliant with tax laws and local regulations is crucial. Different regions have specific rules about what can be reimbursed and how these expenses should be reported for tax purposes. If your policy isn’t aligned with these rules, it could lead to unexpected tax liabilities for your company or employees (more on this later in the article).What should a meal allowance policy include?
Every company is different, and we know yours is unique. This is why your business needs its own meal allowance policy. However, these are some elements that all meal allowance policies share:1. Kickoff with clarity: set the stage for your meal policy
Here’s where you lay the foundation for your meal allowance policy. Start by clearly stating the purpose of the policy—this sets the tone and explains why the policy exists. It’s essential to define what is considered a ‘travel meal’ and what qualifies as a ‘travel meal allowance.’ This section should provide clarity on what types of meals are covered during business travel, whether it’s breakfast, lunch, or dinner.You’ll also want to detail what actual expenses are included under the meal allowance. This typically covers the cost of meals and non-alcoholic beverages during travel. Be specific about what’s excluded as well, such as alcoholic drinks or personal items. By defining these elements upfront, you ensure that everyone understands the scope of the policy, reducing confusion and setting clear expectations from the start.2. Money matters: set the right meal allowance limits
In this section, you will specify the amounts that employees are allowed to spend. These amounts can vary depending on the destination and the trip duration. Start by establishing daily spending limits, which might vary based on the destination. For example, high-cost areas like New York City or San Francisco may warrant a higher allowance compared to smaller cities or rural areas. You might decide to break down these limits by meal (e.g., breakfast, lunch, dinner) or provide an overall daily allowance.Consider using government guidelines as a benchmark to avoid facing legal implications. For example, if your employees are traveling to or within the United States, the Internal Revenue Service (IRS) provides specific per diem rates for meal allowances that can be reimbursed tax-free (more on this later in the article).It’s also important to clarify any differences in allowances based on the type of trip (domestic vs. international) or the employee’s position within the company. Be transparent about the rationale behind these limits so employees understand the expectations and the logic behind the policy.3. Swipe, pay, or reimburse? Pick your payment method
There are several options for handling the payment method, and it’s important to choose one that is both convenient for employees and easy for the company to manage. - Per diem payments: this is a common approach where employees receive a fixed daily amount before their trip. This allows them to manage their expenses without submitting receipts for every meal, simplifying the reimbursement process. The per diem rate should align with the allowance amounts you’ve set in the previous section, ensuring it covers typical meal costs for the travel destination.
- Reimbursement method: another option is to have employees pay for meals out of pocket and then submit receipts for reimbursement. This method provides flexibility, as employees can spend according to their needs, but it does require more administrative work to process claims. It’s important to clearly outline the reimbursement process, including what documentation is required and the timeline for submitting expenses.
- Corporate credit cards: some companies provide corporate credit cards that employees can use specifically for travel expenses, including meals. This method offers more control over spending, as the company can monitor transactions in real time. However, it’s essential to set clear guidelines on what expenses are allowable to avoid misuse.
- Meal cards or vouchers: in some cases, you might consider providing meal cards or vouchers that employees can use at designated restaurants or vendors. This method is less common but can be effective in countries where cashless payments are preferred or where meal allowances need to be closely controlled.
- Direct deposit or payroll adjustment: for simplicity, some companies opt to include the meal allowance as part of the employee’s paycheck, either as an advance before the trip or as an adjustment after expenses have been submitted. This method integrates smoothly with existing payroll processes but requires careful tracking to ensure accurate payments.
Each payment method has its pros and cons, and the choice will depend on your company’s specific needs and the nature of your employees’ travel. Whichever method you choose, make sure it is clearly communicated to employees so they understand how they will receive their meal allowances and what steps they need to take.4. No-go zones: what’s off the menu in your meal policy?
We recommend specifying what type of meal allowances are not included in the meal benefit.These can include: - Alcoholic beverages: typically, alcoholic beverages are not covered under meal allowances. It’s important to clarify this to avoid any confusion or potential misuse of the allowance. If your policy makes exceptions, such as for client entertainment, this should be explicitly stated along with any spending limits.
- Extravagant meals: your policy should define what constitutes an extravagant meal—this might include high-end dining establishments or unusually expensive menu items. The goal is to encourage reasonable spending that aligns with the company’s budget.
- Personal or non-business-related meals: meals not directly related to business activities, such as meals taken outside of business hours or in locations unrelated to the trip, are usually not covered. This ensures that the meal allowance is used strictly for its intended purpose—supporting work-related travel.
- Room service or in-room dining: these meals can often be more expensive than dining out, and excluding them helps control costs.
- Snacks and non-meal purchases: if your policy covers only main meals (breakfast, lunch, dinner), clarify that smaller purchases like snacks are not included.
- Meals for non-employees: If an employee purchases a meal for someone who is not a business-related guest or client, this expense would not typically be covered. Clearly state that meal allowances are only for employees or approved business-related guests.
5. Who’s in and how? Eligibility and approval guidelines
Eligibility typically depends on factors like job role, duration of travel, and the nature of the business trip. For example, employees who travel away from their usual place of work for a full day or longer, or who attend off-site meetings, are usually eligible for meal allowances. You should specify whether the allowance applies to domestic travel, international travel, or both, and whether it covers certain job roles or all employees.Approval guidelines detail the process employees must follow to approve their meal expenses. This involves submitting receipts or other documentation verifying the expense incurred during an eligible business activity. The process should be simple and clearly communicated, specifying who needs to approve the expense—whether it’s a direct manager, the finance department, or another designated authority.If employees need approval before making an expense, you must explain this requirement clearly. Include details about who is responsible for giving this pre-approval and through which platform or process this should be done.6. Getting your cash back: expense reimbursement process
First, specify how employees should request reimbursement for meal expenses. This typically involves submitting an expense report through a designated platform or system. Ensure employees know exactly where and how to access this platform—whether it's an online portal, a specific software, or a form that must be completed and submitted manually.Then, set a deadline for reimbursement requests—usually within 30 days of the business trip’s conclusion. Clearly state this deadline in your policy to prevent any misunderstandings.Employees should understand that they need to submit itemized receipts for each meal. An itemized receipt breaks down what was purchased, including the cost of each item, rather than just showing the total amount. This level of detail is essential for verifying that the expenses fall within the policy’s guidelines and for audit purposes.In addition to receipts, employees may need to include other relevant information in their expense report, such as the date and location of the meal, the names of any clients or colleagues present (if the meal was for business purposes), and any prior approvals if required. Finally, highlight the importance of accuracy and completeness in the expense report. Incomplete or inaccurate submissions can lead to delays in reimbursement or even rejection of the claim. Encourage employees to double-check their reports before submission to ensure everything is in order.How to set per diem meal allowance rates when traveling for business?
A lot of factors are involved when setting allowable amounts. Seniority, destination, and travel preferences are some of the most common. Some countries have specific regulations in place for per diem rates. This affects what classifies as meal expenses and how much of it can be reimbursed for tax purposes.You should consider whether your company will apply the official reimbursement rate amounts or not. It may be that the company wants to allow a more flexible budget. In this case, businesses will have to pay taxes on the price difference.Empower your team to travel confidently with a well-written meal allowance policy With a transparent and well-structured policy in place, employees can confidently handle their travel-related expenses, knowing exactly what's covered and how to get reimbursed. Once your meal allowance policy is ready, make sure employees can access it. You can share it on the company’s intranet, send an email reminder, or mention it at the next company-wide event.Connect your expense management solution to a dedicated business travel management platform—like TravelPerk—and streamline the entire process. With seamless third-party integrations, including options like Divvy and Expensify, TravelPerk allows you to consolidate all your travel-related expenses in one place. TravelPerk gives you a stress-free travel experience that lets everyone focus on what matters most: getting the job done!?)
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