Business travel allowances: what they cover and how they work

02 Nov 2021 · 9 MIN READ

Last updated July 2025
Business travel allowances are used by organizations to cover expenses incurred by staff during their corporate trips. 
And with over 405 million business trips taken by Americans each year, it is crucial that businesses ensure their travel allowances are clear in what they cover and how they work.
In this guide, Perk's Growth Marketing Director, Nick Roberts, will detail what a business travel allowance should cover, with information on Internal Revenue Service guidance and per diem allowance.

What should a business travel allowance cover?

Two hands exchanging a contactless payment: one holds a card, the other a card reader.

Generally, business trip reimbursements are made to cover the cost of hotel rooms, meals, and transportation, but they should also include anything that employees will be doing when away on their business trip. 
  • While the stipulations of reimbursement will vary from one business to the next, travelers will find that their covered travel costs will typically include:
    • Transportation expenses for additional travel outside employees' regular commute. This can encompass airfares, taxi or local transportation costs, car hire, motorway tolls, parking fees, and standard mileage rates when staff use their vehicles.
    • A meal allowance for food and drink consumed on the business trip. Usually, this will cover breakfast and dinner only when there has been an overnight trip.
    • Accommodation provisions.
    • Cover for incidental expenses such as tips and gratuities.
    • Entertainment expenses for cases where travelers need to step outside their food and beverage stipend for business meals or drinks with clients.
    • Travel insurance policies purchased for the business trip.
    • Costs for medical considerations such as vaccinations for international travel.
    • Provisions for dry cleaning or other laundry services when employees are required to stay away from their usual work location for extended periods.
    Employees should keep invoices or receipts for any of the above purchases, if not already purchased by their employer, so their employer can reimburse them for their travel expenses.
    Centralized invoicing can help to simplify this process for businesses to ensure that no payments get missed.

What is a per diem allowance?

Rather than reimbursing individual receipts and purchases, some companies and organizations prefer to set travelers a flat amount they can spend per day. Most people refer to this practice as a per diem rate, and it aims to make travel expenses more straightforward for all parties involved. Per diem rates give business travelers the flexibility to make arrangements to their comfort level, and companies may also find it a more cost-effective way to set travel budgets.
However, setting a per diem rate for your travelers can be challenging, especially if their business trips take them to various destinations. Our per diem calculator can help you work out exactly how much employees are entitled to spend on a work trip within the U.S., with information on the per diem for each state.
For travel in Europe and the UK, we have a series of guides dedicated to information on per diem allowance, which include the following countries:

How do employees get reimbursed for travel expenses?

When traveling for business, employers will require those traveling to keep all receipts related to business travel expenses, including hotel fees, airfare costs, meals and drinks, and other related expenses.
They then submit receipts, travel expense forms, and other supporting documentation on return for approval and reimbursement.
It can be quite time-consuming for businesses to double-check every receipt, so a corporate credit card program for employees can be used to better track and manage travel expenses.
In some countries, companies have a legal responsibility to provide an adequate system for reimbursing employee travel expenses. The mechanics of how businesses handle travel allowances will vary from country to country, as will the implications for organizations' tax returns.
Generally, the costs incurred on corporate trips have a legitimate business purpose and are therefore tax-deductible. As businesses can often offset these expenses, it's in their best interests not to quibble over reasonable travel-related expenses. Expecting employees to pay out of pocket on top of travel time they put in outside their usual work hours is a surefire way to damage staff retention rates.
In the United States, most companies will have what is known as an accountable plan for their employees' travel expenses. An accountable plan follows guidance from the IRS, enabling employees to obtain reimbursement for business costs without submitting these payments as part of their annual income tax return.

What are the IRS rules for travel reimbursement?

The IRS has outlined what qualifies as travel expenses in order to be able to claim them back. This is what it notes: 
  • If you are traveling away from your tax home for a period substantially longer than an ordinary day's work, and you need to get sleep or rest to meet the demands of your work while away
    • Generally, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.
    • For example, if you live with your family in Chicago but work in Milwaukee, where you stay in a hotel and eat in restaurants, and then return to Chicago every weekend, you may not deduct any of your travel, meals, or lodging in Milwaukee because that's your tax home.
  • You can deduct travel expenses paid or incurred in connection with a temporary work assignment away from home
  • You can't deduct travel expenses paid in connection with an indefinite work assignment. Any work assignment over one year is considered indefinite.
  • Travel expenses for conventions are deductible if you can show that your attendance benefits your trade or business. Special rules apply to conventions held outside the North American area.
A full breakdown of travel expense guidance from the IRS can be found on their website.

How can companies standardize their procedures for business travel allowances?

Smiling woman with long blonde hair enters a car on a city street, holding a smartphone, wearing a black coat. Urban buildings in the background.

Different travelers spend their business allowance in different ways. Some might choose a nicer hotel for extra comfort, while others might opt for room service to avoid going out alone at night. That’s why it’s so important to have a clear travel policy—it helps everyone stay on the same page and keeps spending within budget.
A good travel policy gives your team clear guidance: what they can book, how to book it, and how to handle expenses. It keeps things fair and consistent, and it helps your company stay in control of travel costs.

What to include in your company travel policy

Booking procedures

This includes the tools that employees can use to book, and details on which companies and services are approved for use.

Cost information

Travelers will need to know what they can spend, so this needs to be detailed. This includes hotels, airfare, and things like taxis to and from the airport.

Any exceptions

Are there special expectations or rules on booking for more expensive cities or routes? Or perhaps for busy times of year like Christmas or Thanksgiving? Maybe the rules stipulate a hotel with a maximum star rating for these cities or during busy times to minimize cost.

Approval processes

Establishing a transparent approval process is needed to set the standard for business travel allowances and ensure management green-lights significant expenses pre-departure. Using a system like Perk can help businesses streamline their travel booking process by plugging in corporate travel policies and enabling automated approvals.
Additionally, if there are trips that exceed typical limitations, a specific approval process will need to be drafted.

Expenses

The policy will detail which expenses are permitted and not permitted. This can include meals, entertainment or event registration fees, to name a few.

Duty of care

When your employees are traveling for business, your legal and ethical responsibility is to ensure their safety and well-being. This involves creating a thorough plan that evaluates foreseeable and unforeseeable risks, known as the duty of care .

Preferred company vendors

This will detail the vendors (for booking, arranging transportation, etc) that your business prefers for employee use.

Reimbursement process

Walk through the steps employees need to take to get reimbursed for their travel expenses. What do they need to submit? Is it just receipts, or do they also need to fill out a travel expense form or include other documents?

Debriefing process

It’s a good idea to check in with travelers when they get back. A quick debrief can help you understand what went well, what could be better, and how to make future trips smoother and more enjoyable for everyone.

Travel insurance

This will need to clearly outline the company providing the travel insurance and everything that is covered, clearly stating the protocols for handling emergencies.

Lodging policy guidelines

When it comes to accommodation, your travel policy should be clear on the maximum hotel star rating that can be booked, the types of rooms employees can stay in, and the cost of the hotel overall. 
You also need to be clear about what extras can be reimbursed, such as room service or valet parking.

Entertainment while traveling

Guidelines for travel entertainment, especially if employees are entertaining clients, should include:
  • Spending limits for meal expenses (either on a per-meal or per-day basis)
  • Rules on what is allowed (meals, alcoholic beverages, etc)
  • Whether alcohol can be expensed, and if so, the maximum amount that can be spent on alcohol per head
  • List of unallowable personal expenses, such as laundry services, mini-bar charges, and personal phone call charges
  • Instructions on information, original receipts, and other documentation required to process reimbursements

Automation

A game changer for compliance, automation allows business travelers a level of control over their arrangements, improving employee satisfaction and saving precious time for busy travel managers.

Travel admin

Make it easy for travelers to wrap things up when they return, and set clear guidelines and a fair amount of time to handle the admin. Doing this is a simple way to show you value their work on the road. Keep the process straightforward and consistent so it’s easy to follow, helps with compliance, and frees everyone up to focus on more important tasks.
Our guide to corporate travel policies details all you need to know for creating a policy for your business, and we have a free, comprehensive template as a useful example.
If your company doesn't have a travel policy, feel free to refer to our sample travel policy for employees to create yours.

Ensure that your business travel allowances cover all they need to

When you’ve got employees frequently traveling for business, it can feel overwhelming to know what to include in a travel policy. By following the steps above and building a business travel policy and detailing the allowances, your employees will feel assured that they know what they can book and will be taken care of, even from afar.
To learn more about Perk’s recommendations for building a travel policy, check out our guide to corporate travel policies , or book a demo to see the platform in action.

Written by

Nick Roberts
Nick Roberts

Growth Marketing Director

Nick Roberts is Growth Marketing Director at Perk, where he brings deep experience from high-growth tech to the world of business travel. With a sharp commercial lens, he’s focused on helping modern companies travel better.
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