How to Plan a Meal Allowance for Employees

During Business Travel

A good rule of thumb is to cover the cost of meals whenever you ask an employee to travel for business.Of course, your company can (and should) tighten up these rules to outline what counts as “business travel.”For instance, you might decide that any trip occurring during regular work hours that lasts more than eight hours qualifies as business travel. Or, you might define business travel as any trip requiring an overnight stay.Distance could be a defining factor, too. For instance, it might be the case that an employee asked to travel outside a 50-mile radius from their home will qualify for reimbursed meals.

When Taking Prospective Customers Out

Some companies take the “wine and dine” approach to securing lucrative business deals. If you ask an employee to treat a potential investor or client to a steak dinner, your company should foot the bill (within reason).

While Attending Some Conferences

Not all conferences include lunch or breakfast in the registration fee. But for those that do, you can deduct the employee’s allowance for that meal. Otherwise, you should cover any meals that occur during conference hours.Want to save money on business travel for your team? Engine can give you access to corporate hotel discounts for individuals and group travel!

A Brief Introduction

All meal allowance policies should begin by explaining what a meal allowance is and when employees are entitled to it. If your company only reimburses meals for overnight trips, make that very clear!

Allowance and Trip Length

Then, it’s time to zero in on financials.How much will you reimburse employees for breakfast, lunch, and dinner while they’re traveling?For smaller companies with fewer worksites or offices, you can organize this in a simple chart. Put the most common destinations in the left-hand column and the current per-meal reimbursement rates for breakfast, lunch, and dinner in the corresponding boxes.Reminder: If you set your meal allowance using the GSA’s per diem rates, you’ll need to update your policy every October when the GSA rolls out its new rates.If your company offers scaled-back 75% M&IE coverage for partial travel days, include sections about one-day trips and first/last days of travel.

How Employees Will Cover Meals While Traveling

Does HR hand out business credit cards with spending limits to cover all travel expenses? If they pay out of pocket instead of using a card, will you reimburse them?

What to Do If You’re Taking Others Out to Eat

Meal allowances get even more complicated when you add business meetings into the mix.While the typical per-meal rate wouldn’t apply to a five-course Italian dinner with a million-dollar client, most companies would reimburse employees for this meal as a "business entertainment expense."Now, there is a fine line between a business-related dinner meeting and a hangout session with colleagues that happens to involve food.For instance, your company should cover an employee’s lunch with a potential client. But if they treat a group of coworkers to a movie, you shouldn’t cover the cost of popcorn and sodas.If employees are unsure whether an upcoming business meal is covered by corporate policy, refer them to HR or the travel department.

Exceptions to the Rule

Here’s another common question:What happens if an employee decides not to — or simply cannot — eat a meal provided to them during travel?That depends.Did the original meal go against the employee's religious beliefs?Would it have aggravated a pre-existing medical condition?If so, that employee may be able to claim their entire M&IE allowance before the trip. However, your policy should specify that it’s the employee’s duty to try to arrange an appropriate alternative meal in advance.

The Reimbursement Process

Next, you’ll walk employees through your company’s reimbursement policy.To begin, explain how workers should document the cost of meals while traveling, such as itemized receipts reflecting the actual costs of each meal.Clarify that employees are only eligible for reimbursement if they submit a detailed expense report within 60 days of returning.

Certain Types of Events

Your company may reimburse meals between employees and prospective vendors as long as the get-together is business-related and pre-approved.However, you should also specify what’s not covered, like concerts, sporting events, or casual dinners.

Alcohol

While most companies won’t pick up an employee’s bar tab during a night out, whether you’ll reimburse employees for any alcohol is your decision.Some organizations will only allow a single glass of wine or beer with a meal — no hard liquor. Others require employees to request pre-approval to purchase alcohol for a business meeting over dinner.If you won’t reimburse alcohol whatsoever, make sure employees know beforehand that they’ll have to cover their own booze.

Snacks

In-between meals or small snacks eaten throughout the day are rarely reimbursed by employers. Workers will typically pay for these expenses out of pocket during their trip.

Room Service

Most organizations do not reimburse in-room expenses like room service. However, if employees begin their day at 7 A.M. and the booked hotel doesn’t offer a continental breakfast, you can make an exception to this rule.

Meals Provided to the Employee

Are you paying an employee per diem to attend a professional banquet? If you pay the event registration fee and it covers the cost of their meal, the employee is not eligible for reimbursement.

What’s the Standard Rate?

In 2021, the standard meal allowance for business travelers was about $55/day. However, the General Services Administration (GSA) redefines this number for business travel within the continental United States:

The First and Last Days of Travel

Employees will likely eat at least one meal at home on the day they depart for their trip and on the day they return. On these days, reduce the stipend by 25%. This same 75% meal allowance rule applies to one-day trips, as well.

Special Considerations

There are also plenty of “what if” scenarios that don’t fit into a neat box and complicate the usual meal allowance calculation.Corporations may increase meal stipends on a case-by-case basis for these reasons:

Reporting Meal Allowances Isn’t Mandatory If…

The IRS doesn’t consider per diem “taxable income” unless it exceeds the federal standards. If it falls below that line, meal stipends won’t appear as wages on an employee’s W2 tax form or be subject to payroll or income taxes.However, employees may owe taxes on per diem payments if they don’t file a detailed expense report with you — their employer.This expense report must be filed within 60 days of returning from the trip and cover these details:

• Trip’s business purpose
• Name and location of the restaurant
• Date and time of meals
• Itemized receipts showing the actual expenses from all meals (for meals >$5)

Employees will also have to do this for their incidentals and lodging.

Employees Must Report Meal Allowances If..

On the opposite side of the coin, employees do have to report meal stipends if they don’t submit an expense report or their travel expenses exceed the federally approved amount.Further reading: Per Diem and Taxes [7 FAQs]