In the wake of the COVID pandemic and rising costs, many UK companies are reassessing the necessity of business travel in the age of remote working.
However, data shows that face-to-face meetings are still essential. 85% of people believe they can build stronger, more meaningful relationships with in-person meetings, and 48% feel that in-person discussions allow for more complex strategic thinking.
Those businesses ready to reap the rewards of business travel must first address the costs. New challenges like air and rail strikes, rapid inflation and a remote workforce mean that expense receipts may be steeper than they used to be — but with a well-prepared travel budget, you can still ensure a significant return on your investment.
How much do companies spend on business travel?
The amount a company might expect to spend on business travel in a typical year will depend on several factors.
Large brands in multiple territories — or with overseas clients — might spend a lot to maintain highly profitable relationships (with a proven ROI). Smaller businesses may need to plan for team-building events or getting their key staff to industry conferences.
One consideration for UK businesses is that while the country is relatively small ( 3 in 4 business trips are completed the same day, a much higher ratio than in the US), travel costs can still be high. London is ranked the 7th most expensive city in the world for business travel, ahead of Paris and even Oslo.
One report published by Statista shows that UK businesses collectively spent an estimated £25.7bn ($36.7bn) on business travel in 2022. That figure is projected to jump up a staggering 82% to £46.8bn ($59.6bn) by 2025.
What kinds of expenses can employees claim?
Transportation
Employees can pay back the cost of travel to and from their destination. Pre-booked itineraries with trains, flights or cabs are straightforward: the employee shows the receipt, and the business pays it back.
Businesses usually pay for fuel, maintenance, and parking if employees use personal vehicles. You can create a company policy; otherwise, you can use HRMC’s mileage allowances for tax year 2023/24. According to the current rules, businesses should pay 45p for the first 10,000 miles used for business purposes and 25p for every mile after that.
Accommodation
UK companies should have a clear reimbursement policy for employee accommodation expenses during business travel. This policy should outline eligible expenses, reimbursement limits, and the necessary procedures for reimbursement. Employees should understand and adhere to this policy to ensure eligibility.
A reasonable claim for accommodation expenses would cover the cost of a standard, comfortable, and safe accommodation option that meets the employee's basic needs while on the business trip. This could include expenses for a hotel room, serviced apartment, or other similar types of accommodation. Luxurious or extravagant accommodations beyond what is necessary for business purposes may not be considered reasonable.
A business’s expense policy for accommodation may specify exclusions for specific expenses an employee may incur during their stay. Examples include:
Newspapers
Personal phone calls
Bar and mini-bar
Film rentals
Dining at the hotel restaurant (other than breakfast)
Laundry services
Meals and drinks
Employees should expect to claim back for sustenance — food and drink — while on their business trip.
However, employees should know they can’t claim just anything back. Food and drink claims that are unreasonable or personal may be exempt: these typically include personal snacks or non-work-related meals.
Alcoholic beverages are often not eligible for reimbursement unless specific circumstances allow their inclusion. Additionally, luxury or extravagant meals beyond what is considered reasonable in the given business context may also be exempt.
Clearly define which meal and drink expenses are eligible for reimbursement and require proper documentation, such as itemised receipts, to support the claims. Communicating these guidelines effectively to employees and providing training or resources to ensure their understanding of the expense claim process is essential.
Incidental expenses
Incidental expenses are small or miscellaneous costs during business travel or work-related activities. They are minor expenses that arise while employees are away from their usual workplace.
Incidental expenses include tips, laundry or dry cleaning fees, communication expenses (like phone calls or internet access), baggage handling fees, parking fees, passport and visa fees, and public transportation fares.
It's important to note that each company may have its own policies and guidelines regarding incidental expenses, such as specific limits on reimbursement. Employees should familiarise themselves with company policies and follow the proper procedures for claiming incidental costs.
Travel insurance and safety requirements
Travel insurance is essential for businesses sending employees on business trips for several reasons. Insurance can help cover medical emergencies, trip cancellations or delays, and personal liability (for example, if an employee causes accidental damage to a third party on their trip).
To ensure employees are properly protected when travelling, UK businesses should:
Provide travel insurance for employees during business trips to cover medical emergencies, trip disruptions, and other unforeseen events.
Ensure adequate coverage based on the nature of the trip and potential risks involved.
Establish safety guidelines, offer training, and conduct risk assessments to promote employee well-being and mitigate risks.
Fulfil their duty of care by providing necessary support and resources during the trip.
Comply with legal requirements and regulations regarding employee safety and travel.
Consulting with experts and considering individual circumstances is essential to ensure compliance with applicable laws and regulations.
“Bleisure”
"Bleisure" is a term that combines "business" and "leisure" and refers to the practice of combining business travel with leisure activities. It involves extending a business trip to include personal time for relaxation, sightseeing, or engaging in recreational activities.
For UK businesses, here's what you need to know about bleisure:
Increasing Popularity: Bleisure travel has gained popularity recently as employees seek to make the most of their business trips by incorporating leisure activities. It can enhance employee satisfaction and work-life balance.
Policy Considerations: Businesses should establish clear policies regarding bleisure travel to ensure transparency and address potential concerns. Determine guidelines for eligible expenses, the maximum duration of leisure time allowed, and any necessary approval processes.
Communication and Consent: Encourage open communication between employees and their managers regarding their intention to engage in bleisure travel. Ensure that both parties have a mutual understanding of the expectations, limitations, and responsibilities involved.
Expense Management: Define how expenses incurred during the leisure portion of bleisure travel will be handled. Businesses may specify that employees are responsible for covering their personal costs during bleisure, while the company reimburses only the expenses directly related to business activities.
Insurance Coverage: Assess the coverage provided by travel insurance policies for bleisure travel. Verify whether leisure activities are covered, and if not, explore options for employees to secure additional personal travel insurance for the leisure portion.
Compliance with Policies: Encourage employees to comply with company policies, local laws, and regulations during their travel's business and leisure aspects. Emphasise the importance of maintaining professionalism and adhering to ethical guidelines throughout the trip.
Bleisure travel can offer benefits for both employees and businesses, such as increased motivation, productivity, and employee satisfaction.
Miscellaneous expenditures
Miscellaneous expenditures, also known as miscellaneous expenses or sundry expenses, refer to small or miscellaneous costs incurred by businesses for various purposes.
Employees may need to claim for various miscellaneous expenses when travelling for business. These can include charges for internet and communication services, baggage fees, airport transportation, parking fees, tips and gratuities, laundry and dry cleaning, business-related printing and copying, office supplies, business-related meals, and miscellaneous incidentals.
Businesses should establish clear expense policies that outline the guidelines and procedures for handling miscellaneous expenditures. Communicate these policies to employees to ensure consistency and adherence.
How to track and calculate employee travel expenses
Calculating and tracking travel expenses for a UK business involves several steps. Here's a general process to help businesses effectively manage their travel expenses:
Establish Expense Categories: Determine the different categories of travel expenses relevant to your business. Common categories include airfare, accommodation, meals, transportation, parking, and incidentals. Customise the categories based on your specific needs.
Develop a Travel Expense Policy: Create a clear travel expense policy that outlines the rules and guidelines for employees to follow when incurring and reporting travel expenses. Specify acceptable expense limits, documentation requirements, and any additional approval processes.
Collect Expense Receipts: Instruct employees to keep all receipts for travel-related expenses. These receipts serve as evidence for each transaction and are crucial for accurate expense tracking and reimbursement.
Use Expense Tracking Tools: Implement an expense tracking system or software that allows employees to enter their expenses, attach receipts, and categorise them accordingly. This can streamline the process, ensure consistency, and provide real-time visibility into travel spending.
Capture Travel Details: Encourage employees to record essential travel details, such as the purpose of the trip, dates of travel, destinations, and any specific project or client information associated with the trip. This information helps link expenses to particular business activities.
Reconcile Expenses: Regularly reconcile expenses by reviewing the submitted claims against the policy guidelines. Ensure compliance, accuracy, and completeness of information provided by employees.
Audit and Approve: Conduct periodic audits of travel expenses to identify any irregularities or potential non-compliance. Put appropriate approval processes in place to ensure the relevant personnel authorises payments.
Record Expenses in Accounting System: Transfer the approved travel expenses from the tracking system to the company's accounting system. This ensures proper recording and integration of travel expenses into the overall financial records.
Analyse and Report: Utilise expense data to analyse spending patterns, identify cost-saving opportunities, and generate financial analysis and decision-making reports. This can help businesses optimise travel expenses and improve budgeting for future trips.
Regular communication, training, and education on travel expense policies and procedures are essential to ensure employees understand their responsibilities and adhere to the guidelines.
How to reduce the costs of travel expenses
Clear Policies: Create clear and easy-to-understand travel expense policies. Let employees know what expenses, spending limits, and preferred vendors are allowed so they can make cost-conscious decisions.
Plan Ahead: Encourage employees to plan their trips. Booking early often means better deals on transportation and accommodation, saving money for the company.
Explore Alternatives: Consider options beyond traditional hotels. Serviced apartments or sharing economy platforms can be more affordable, especially for longer stays.
Embrace Technology: Use technology for virtual meetings and conferences when possible. This reduces the need for travel expenses while still enabling effective communication and collaboration.
Monitor and Audit: Regularly review travel expenses to spot any excessive spending and identify savings opportunities. Highlighting overspending encourages cost-consciousness and identifies opportunities to cut costs.
What companies shouldn’t do to reduce business travel costs
Neglect an employee's travel preferences: Companies should consider the preferences and needs of their employees when it comes to business travel. Ignoring individual preferences, such as seating preferences, hotel preferences, or loyalty program benefits, can lead to dissatisfaction and potentially impact employee productivity.
Depend solely on corporate deals: Relying exclusively on corporate deals or negotiated rates may only sometimes be the most cost-effective option. It's important for companies to regularly evaluate and compare prices from different suppliers to ensure they are getting the best value for their travel expenses.
Make lots of changes to the travel policy: Frequent and sudden changes to the travel policy can create confusion and inconvenience for employees. Instead, companies should establish a clear and stable travel policy that provides guidelines and expectations for employees, allowing them to plan and make appropriate arrangements for their business trips.
Ignore safety measures: Neglecting safety measures can put employees at risk and potentially lead to costly consequences for the company. Businesses must prioritise their employees' safety and well-being during business travel by providing guidance on travel advisories, emergency procedures and ensuring compliance with health and safety regulations.
Assume all business trips are the same: Not all business trips are identical, and assuming they are can result in unnecessary costs or inadequate arrangements. Companies should consider the specific requirements of each trip, such as the purpose, duration, and location, to make appropriate and cost-effective arrangements that meet the needs of the employees and the trip's objectives.
Cut back on travel insurance: Travel insurance protects employees and the company from unexpected expenses and risks during business travel. Cutting back on travel insurance coverage to save costs can leave employees vulnerable and expose the company to potential financial liabilities. Businesses need to maintain adequate travel insurance coverage that aligns with the nature of their business travel and the potential risks involved.
By avoiding these pitfalls, companies can strike a balance between reducing travel costs and ensuring their employees' comfort, safety, and well-being during business trips.
Take the hard work out of planning travel budgets
Despite the challenges introduced by the post-COVID environment, there is the continued importance of business travel in fostering relationships and strategic thinking. While careful planning, expense management, and policies around different travel costs are critical, these processes can be complex and time-consuming.
As a specialist in ground transportation, CMAC provides a comprehensive, fully managed service that can streamline your business travel logistics, ensuring safety, compliance, and overall satisfaction. We take the stress out of coordinating travel logistics, allowing you to concentrate on the core aspects of your business.