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What is a travel expense?

A travel expense is a cost incurred by an employee through travelling on work-related activities, away from their usual place of work. Travel expenses are reimbursed by the company when the employee makes a claim.

Travel expenses must be associated with a business reason – they have to be incurred for the purpose of carrying out work for the organisation. Most organisations have an expenses claim policy and process that means the employee has to provide receipts and a business justification for any travel expenses they reclaim.

For example, organisations may ask for a one-line description of the reason for the business travel. Or the expense may have to be coded with a project, client or cost centre number. Some travel management systems allow you to book your business travel directly against an opportunity, project or campaign within your CRM. This helps organisations to calculate and understand the return on investment (ROI) of travel expenses. A company expenses policy will set out what kind of travel expenses employees can claim and may set limits on the suppliers or costs of different kinds of expense.

Employees may claim travel expenses for any kind of transport or travel to work-related destinations that are not their usual dedicated base. This might typically include:

  • Air fares – domestic or international
  • Rail travel
  • Car or vehicle rental
  • Taxi or minicab fares
  • Bus or coach travel
  • Mileage allowance or fuel costs for use of own vehicle

Many organisations encourage employees to think about minimising their carbon footprint through business travel. Alternative modes of transport for travel expense claims can also include:

  • Ferry or boat travel
  • Highway or waterway tolls
  • Cycle or scooter hire (electric or manual)
  • Mileage allowance for use of own bicycle

Travel expenses aren’t just about the cost of getting from A to B. Costs incurred by employees while they are living and working in another location can also be claimed. For example:

  • Hotels, lodgings, serviced apartments or short-term accommodation rentals
  • Nightly allowance for staying with a friend or relative
  • Subsistence allowance (for food and drink away from home)
  • Laundry
  • Wifi charges

Travel expenses can be a very significant cost for organisations if their workers need to be away from the base location regularly. Sales teams often have large travel expenses budgets, if they cover large geographic areas to visit customers and prospects. Without travel expenses, field-based sales teams can’t do their jobs and company revenues could collapse. The same goes for field-based employees including maintenance and service teams, employees who work at client sites on projects, and for inspection and audit teams.

In multi-site organisations, managers and executives may need to travel to other cities or countries for internal meetings, to oversee client work or to represent the company. These travel expenses are sometimes deemed less vital, as they don’t contribute directly to revenue generation. If companies are clamping down on costs in challenging economic times, they may ban or restrict business travel to save money. Applying this policy without exception can make the situation worse: it’s better to restrict non-essential travel and allow fee-earning and customer-facing employees to continue travelling on business to maintain client relationships and subsequently company income.

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