Navigating Travel Policies: Should We Pay Daily Allowance When Food and Lodging Are Covered?

Hi,

I am working in a chemical manufacturing company and designing travel policies. There are certain questions that are coming to my mind. Request if someone can solve the same:

1. Is it necessary to pay daily allowance to the employee?
2. If yes, then on what basis should we define the same and what should be the maximum limit?
3. If the employee is getting free food and lodging, i.e., the employee is staying in the guest house and having food in the office premises, is it necessary to pay daily allowance to the employee? Why, even some part like 50% or so?

Waiting for the reply.

Regards,
Supriya

What is meant by Daily Allowance? Is it a part of the salary that is paid only on the days of attendance? If so, it is not mandatory as per any statute. However, if you mean DEARNESS ALLOWANCE or simply DA, it has a different position in the law. It is a part of the salary fixed as per the Minimum Wages Act.

According to the Minimum Wages Act, an employee is required to be paid a minimum wage, and that wage should reflect the cost of living of the place where the worker is engaged. Accordingly, the wages will vary every month or bi-monthly depending upon the cost of living index. The component of the salary that varies according to the cost of living is called Dearness Allowance or Variable DA.

Free food, housing, and other facilities are simply benefits offered to employees and they will not form part of the salary and hence cannot be clubbed together. However, the employer can fix a high salary and deduct the costs of these facilities from it and pay the net amount.

Regards, Madhu.T.K

Dear Madhu,

Thank you for your reply. I am inquiring about the daily allowance in terms of TA and DA provided to employees in the travel policy, particularly when they are away from the office but are on office duty, such as tours to plants, etc. Or perhaps I am getting confused with Dearness Allowance and Daily Allowance. This is not part of the Cost to Company (CTC), just something I wanted to mention in the Travel policy.

Is it necessary to pay the same to the employee?

Looking forward to your reply.

Thanks,
Supriya

Normally, when employees go on a tour, their expenses are reimbursed. The employees are working for the establishment and, therefore, they should be paid for whatever expenses they incur in connection with that trip, such as ticket fare, hotel room bills, etc.

In some organizations, there will be a specific tour policy wherein it will be clearly stated who is eligible to travel in AC classes of trains, how much each category of employee can spend per day for food and accommodation, how much each can spend for local conveyance, etc. In some cases, the travel fare will be fixed per kilometer traveled. Similarly, food and accommodation charges will also be fixed per day. Regardless of whether you stay in a hotel or dine at restaurants, you will receive the fixed amount as a daily allowance. In another scenario, reimbursements up to a certain limit will be permitted upon the production of bills. These are purely internal matters of the company and have nothing to do with any legal setup. Therefore, the company can also revise the policy.

If your policy permits staying in guest houses owned by the company only, then there is no need to provide any allowance for that. Similarly, if you have dining facilities for your staff, you do not need to provide payment for that either. In such cases, you can restrict the tour allowance to train/bus/airfare.

Regards,

Madhu.T.K

Hi Madhu,

That means it is not necessary to pay a daily allowance to an employee if the employee is visiting for official work and food and lodging are being provided by the company itself.

Please answer one more question for me... Is there a difference between Dearness Allowance and Daily Allowance?

Thanks in advance :-)

Regards,
Supriya

As stated in my first reply, dearness allowance is an allowance forming part of the salary, which is paid to compensate for the cost of living. In contrast, a daily allowance is just an allowance with more elements of reimbursement rather than being part of the salary.

Regards, Madhu.T.K

I would like to know what the decent acceptable DA (Daily Allowance) on travel allocated to employees is. Currently, I have it set as Rs. 500/- for managers and Rs. 300/- for technicians/sales executives. Especially from NCR/Punjab/Rajasthan, I keep getting requests that this is not sufficient. Could you please let me know if this amount is decent to survive? Earlier, there was no travel policy, so they were used to claiming whatever they were spending.

Thank you,

Poornima
HR Consultant

Please share your views on whether Daily Allowances (DA) paid along with Travel Allowances (TA) are taxable. If so, please share the reasons. Employees submit bills for TA, but there are no bills against the fixed DA as per grade, as per policy. I appreciate your time and await your response.

Thank you.