How to Plan a Meal Allowance for Employees
- When are your employees entitled to a food stipend?
- How do you create a meal allowance policy that fits your company’s budget and travel destination?
- Do you have to report meal stipends to the IRS?
What Is an Employee Meal Allowance?An employee meal allowance is an employer-provided stipend reserved strictly for food. Whether it’s a three-week-long cross-country business trip, a two-hour lunch with would-be investors, or a full-day conference for industry experts, meal allowances could cover breakfast, lunch, and dinner. It also happens to be the “M” in M&IE — meals and incidental expenses — when we talk about per diem allowances.
When to Give Employees Meal AllowancesFirst, we’ll tackle the “when?” question. When is an employee entitled to meal reimbursement, and when should you expect them to pay for their own food? Generally, you should give an employee a meal allowance in these situations:
During Business TravelA 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 OutSome 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 ConferencesNot 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.
What to Include in Your Meal Allowance PolicyYour company’s meal allowance policy should clearly outline the whens, whats, and hows of meal stipends while traveling. A loophole-free, easy-to-follow policy will include these sections:
A Brief IntroductionAll 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 LengthThen, 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. 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 TravelingDoes 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 EatMeal 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 RuleHere’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 ProcessNext, 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.
What Meal Allowances May Not CoverYet another piece of the puzzle is deciding what your company won’t cover and what you’re willing to reimburse on a case-by-case basis. As long as you make it clear in your company’s meal allowance policy, you can choose not to reimburse any of the following:
Certain Types of EventsYour 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.
AlcoholWhile 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.
SnacksIn-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 ServiceMost 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.
How to Calculate Meal Allowance CostsCongratulations! You’re one step closer to reserving hotel rooms, booking plane tickets, and sending your employees away for important business. Next comes the fun part: the math. Exactly how much should you reimburse employees for meal expenses while they’re traveling for work?
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:
By LocationMeal allowance largely depends on where the employee is traveling, whether the area has a high cost of living, and if the destination is in its peak season. For example, a trip to New York City around Christmastime will yield higher M&IE rates than one to Montana in the spring.
By MealThe GSA divides the total daily meal allowance into three meals: breakfast, lunch, and dinner. If the destination’s per-meal rates are $14 for breakfast, $16 for lunch, and $29 for dinner, the employee would receive $59/day for meals.
The First and Last Days of TravelEmployees 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 ConsiderationsThere 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:
Special Dietary NeedsWhether your employees are in a cubicle or halfway across the country at a job site, it’s your responsibility to accommodate their needs (within reason). That includes special diets, whether for medical, religious, or moral reasons. Gluten-free, vegan, and kosher dishes tend to be more expensive both in the grocery store and at restaurants. So, employees with unique dietary needs may require a larger stipend to dine out with their colleagues.
Business MeetingsBusiness meetings are even less exact, especially when employees are trying to impress high-bidding clients or big-name vendors. A $32 lunch budget shared between two diners likely won’t end with a sealed deal. But how much should you budget for these special occasions? Double? Triple? An unlimited stipend (minus the alcohol, of course)? That’s your call!
Certain Types of WorkAs strange as it sounds, your company’s line of work is another factor worth considering when calculating meal allowances. For instance, construction workers who perform manual labor up to eight hours a day require more nutrients and calories than, say, IT professionals at a workstation. In instances like this, increasing the per-meal budget by even $4 could provide your employees with the energy they need to get through the day.
Reporting Meal Plan Allowances to the IRSOkay, here comes the dreaded tax question: When do you (or your employees) have to report meal stipends to the Internal Revenue Service? Or do you?
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 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]
ConclusionCreating a meal allowance travel policy and calculating per-meal rates requires a bit of time and patience. But once these policies are in effect, it’ll take the headache out of scheduling business trips and handling reimbursements. And if you want to save money on hotel bookings for your team, join Hotel Engine today!
Audrey Fairbrother is the Content and SEO Manager at Hotel Engine. She spends her days writing about all things business travel, researching topics that are important to Hotel Engine’s audience and cultivating the company’s brand voice. When she’s not working, Audrey enjoys spending time with her family, and hiking in the nearby Rockies with her dog, Albie.