How Should We Handle Employee Travel Expenses for Client Visits in India?

Hi Friend, I need your urgent help with this matter. We are an IT company, and our client is requesting our employees to visit their offices in India as part of the project requirements. The client is covering the costs of flights and accommodation. However, for other expenses such as food, transportation, and daily travel, we are providing advance cash to employees, which they use during their trip and then submit the receipts to us.

Expense Management for Employee Travel

What are your thoughts? Should we continue giving them advances and follow the current process, or should they incur expenses and seek reimbursement from us? Please advise if there is an existing policy regarding this matter.

Policy for Employee Expenditure and Reimbursement

Whether employees spend on their own and later ask for reimbursement or take an advance and then submit the bills, the larger issue is having a policy that creates slabs of permissible expenditure. Any expenditure beyond these limits will have to be borne by the employees themselves. Therefore, first, create a policy that defines a permissible limit of expenditure depending on the employee's designation/rank.

While defining the policy, include the following additional points:

a) What would be the process for the submission of claims, i.e., how it is to be routed.

b) Turnaround time for the accounts department for the settlement of the claims.

c) If an advance is taken, then within how many days of completion of the travel, they need to submit the bills. Will the accounts department allot any reference number for the advance for easy settlement?

d) What will happen if it is discovered that fake bills are submitted or bills are padded? What will be the process of the inquiry? What could be the maximum punishment?

e) What will happen if employees link their Earned Leave to their outstation visit? How to demarcate the line that divides their personal and official expenditure?

f) What will happen if the near and dear ones also travel along with the employee? How to demarcate the employee's expenditure and their family's expenditure?

Hope the above points are sufficient.

Thanks,

Dinesh Divekar

Travel policy challenges

Travel policy is one of the major headaches for many companies. Most people are generally honest, but there are always a few bad apples who will find ways to exploit the system.

Per diem allowance system

Many companies have found that having a set per diem allowance for employees to cover accommodation, meals, and incidentals such as dry cleaning and taxis is effective. Usually, the company will organize and pay for the travel, e.g., flights, trains, etc. With this system, the employee has to book their own hotel/accommodation, etc. They are responsible for making their allowance stretch to cover the costs.

As various cities and towns have differing accommodation costs, the allowance has to take account of this. For example, Delhi hotels will be more expensive than those in a small town. So, you might have a higher per diem for employees who need to go to Delhi, Mumbai, etc. The same applies to meals, as food may cost more in bigger cities.

Potential flaws in the system

Now you can probably see the flaw in this system. Give an employee x rupees for their trip. If they are smart enough, they will find a hotel for y rupees, eat street food, and generally find cheap ways to get around. In the end, they may be able to save some of the money they were given. I know this because I have done it.

However, some employers find this is easier than trying to get employees to bring back receipts and account for their expenses, particularly those who overspend without regard for the company's money.

Importance of a comprehensive policy

As Dinesh has said, whatever you do, YOU MUST cover all the bases and make the policy as comprehensive as possible. Once you formulate the policy, you then run a training session to make sure everyone who needs to travel understands the policy to the letter. They also need to know that transgressions will be dealt with severely. You must have penalties in place and strictly enforce them to warn others.