How to Handle Extra Allowances for Employees Working Out of State? Seeking HR and Business Insights

Dear All, I am working with a startup company. I am the only HR person in my organization, and there are only 7 people in the team. The company is a Structure Design consultant. My query is the company wants to give some extra allowances to our employees who are working at client locations in other states. The client has arranged accommodation for our employees, but we bear the expenses for food and traveling. Currently, these employees submit their expense details and bills to the company. We do not want to continue with this procedure. Instead, we want to provide them a fixed amount each month along with their salary. The employer wants to include this amount in the salary slip, but it will only be for a few months while they are working with the client.

Regarding these expenses, if we include them in their salary as allowances, what will be the statutory effect from a business point of view and from an HR point of view? These allowances shall be given as long as they are working at the client's location.

Kindly guide to clarify these things.

Regards, ND

Anything that comes under the purview of salary will attract statutory compliances. It is better to pay under the head other than any of the salary heads. For example, company expenses.

City-Based Allowance Policy

You can pay them X amount based on the city they are deputed to. For example, if they are deputed in metros like Mumbai or Bangalore, the living expense would be slightly higher than in other cities. Set a cap based on the discretion of the management and link it to the band, if applicable, and establish this as a policy.

Travel and Per Diem Policy

When discussing travel, the travel cost from the base location to the client's location should not be included in the per diem. The main purpose of the per diem should be for local travel in the deputed city along with food expenses.

Leave and Family Visit Policy

Additionally, you can allocate one leave per month to their leave balance when they are deputed at the client's place. If an employee is deputed at the client's location for an extended period, consider offering them the opportunity to visit their family once every two months. This can serve as a motivational strategy.

Regards,
ND

The best option may be Sodexo or other meal passes for food allowances.

Travel expenses can be reimbursement basis, or you can give prepaid petrol cards. I prefer not to include both in the payslip.

You can add a city allowance in the payslip or provide out-of-pocket reimbursement for such employees if the need arises.

If you include the payment along with the salary under the head of allowance only, it will attract ESI/PT/TDS deductions. It is better to pay as meal expenses/Sodexo, as suggested.