How to Build a T&E Policy: Best Practices

In 2019, companies spent over $111.7 billion on business travel.

Of course, the frequency of business travel has ebbed and flowed a bit since 2020 with the uncertainty of the pandemic, but one thing remains the same:

Business travel expenses affect the bottom line.

That’s where T&E policies come into play.

No matter how many trips your employees take or what business expenses they incur, every company needs a travel expense policy.

If you’re ready to build your first T&E policy for your business (or revamp the one you already have), here’s everything you need to know about making one.

What is a T&E Policy?

T&E stands for travel and expenses. This includes the costs of flights, trains, rental cars and ground transportation like taxis, Uber and Lyft.

It also includes hotel accommodations and expenses such as:

• Food
• Tips
• Related incidentals
• Work-related entertainment expenses (such as team-building events or taking clients out)

T&E policies aren’t just for employees on overnight business travel. Corporate travel can be brief, so it doesn’t always require the employee to travel far or spend a night in a hotel.

Regardless of when or where your employees travel, it’s crucial to have a T&E policy that includes all relevant expense categories. It should cover everything from how much money an employee can spend on lunch to how much they can spend on a flight or a hotel room.

Business expenses vary greatly from company to company. Small businesses, large corporations, state and local governments and nonprofits can all benefit from having an easy-to-understand T&E policy in place.

See also: What Is M&IE in Per Diem?

Tips for Creating a Fair and Effective T&E Policy

Whether you’re looking to create your first T&E policy or to update the one you have, here are our top tips for establishing an effective T&E policy.

Keep it Simple

To limit confusion among employees, your T&E policy should be simple to read and easy to understand.

After you create your policy, add a table of contents so that employees can skim the policy whenever they have a question on a specific item. Include bolded headings so employees can easily find the details they’re looking for.

Most people prefer to skim bullet points than read paragraphs, so wherever possible, add a list of bullet points for easy comprehension.

T&E policies are an essential factor in the expense management process. Still, if your employees don’t follow it (or aren’t held accountable for expenses incurred outside the scope of the policy), it won’t do you much good.

When you write your policy, use simple, straightforward language. The easier the policy is to understand, the better.

Keep it Fair

Try to create one standard set of rules for all employees. For example, don’t allow senior management level executives to fly first class and insist that all other employees fly coach.

Keep in mind that it’s reasonable to make exceptions on total T&E expenses incurred. An employee entertaining out-of-town clients for a week should have more flexibility than one traveling an hour for a one-day business meeting. Building flexibility into your policy is key.

No matter how much you allow employees to spend, track expenses in the same way and maintain a standard expense reimbursement policy.

To create a policy that’s fair to all employees, consider putting a T&E committee in place to draft the policy. That way, you’ll get input from different types of employees on what their typical T&E needs look like.

Besides CFOs and travel coordinators, this committee can include members from departments, such as:

• Accounting
• HR
• Risk management
• Marketing
• Procurement
• IT
• Sales

Make it Comprehensive

For a T&E policy to be effective, it must be comprehensive and include all types of expenses that are allowed (or not allowed) for business purposes.

This includes daily allowances for:

• Meals
• Hotels
• Flights
• Ground transportation
• Tips at restaurants, airports and hotels
• Incidentals

The policy should also include how your employee expenses are reported or reimbursed.

Some companies provide employees with a corporate credit card to pay for all expenses. Some automate their T&E policy and track expenses digitally. Others require employees to pay for out-of-pocket expenses and then reimburse them. (After the employee provides proof of expenses through paper receipts, of course.)

Whichever approach you take, you must be clear about how you expect your employees to pay for expenses and provide proof of them.

You should also make it clear what type of employee expenses will not be reimbursed.

As of 2018, unreimbursed employee expenses are no longer tax deductible with the IRS. So there’s no need for employees to keep or manage receipts for items the company will not reimburse them for.

Inform Your Employees of Where and How to Book Travel Plans

The policy should also include how and where to book travel arrangements. If you want your employees to use a particular travel agent, a specific website or a certain online booking platform — make it clear.

Include guidelines for the type of transportation allowed.

For example, if the destination is less than two hours away, you might want to specify that employees travel by car rental or train rather than by air.

Include a Statement on Bleisure Trips

Many employees turn business trips into leisure travel (hence the term bleisure) by arriving a day early or staying a few days later after business has concluded.

For this reason, it’s vital to include rules regarding bleisure trips. Employees love this perk, but businesses need to set clear rules and guidelines as to which expenses the company will cover and which they won’t. They should also outline the policy for how the employee should go about booking their leisure time to avoid having it charged to the company.

Automate Your Policy for Ease of Use

A T&E policy is useless if employees don’t comply with the procedure. To streamline the process and ensure compliance, automate your policy through a platform such as Hotel Engine.

Hotel Engine lets you build policy limits right into the travel booking process. That way, employees only have the option to book hotels that fall within the company’s pricing guidelines.

To simplify paying for travel costs, Hotel Engine also offers a direct billing option. Pay for all your corporate hotel bills with one line of credit at the end of each month.

With automation through Hotel Engine, you can streamline employee travel booking. This makes T&E management easier for those responsible for monitoring business-related expenses. Hotel Engine also allows you to monitor real-time T&E costs and analyze incidental expenses for every employee and each trip.

An automated T&E policy with Hotel Engine helps you consolidate expenses into one single booking tool, further speeding up the approval process of reimbursements for employees who pay for expenses out of pocket. The more your employees travel, the more an automated T&E policy makes booking, billing and tracking expenses easier.

And by analyzing your travel spending trends via custom reports from Hotel Engine, you can continually monitor your budget and make adjustments as necessary.

Related: What Employers Should Know About Per Diem and Employee Rights

Why is it Important to Have a T&E Policy?

Having a T&E policy in place saves businesses both time and money.

Most businesses put a T&E policy in place to curtail and control business-related travel expenses, but there’s a bit more to it.

First and foremost, finance teams and CFOs initiate T&E policies because they cap employee travel expenses. They limit how much employees can spend on flights, hotels, incidentals, food and client entertainment.

A bonus is that they also streamline the processes of T&E expense reporting and reduce the hours spent compiling expense reports. This cuts back on time spent on travel expense management and frees up valuable time to focus on other essential aspects of the business.

A T&E policy is crucial if you want to make your employees accountable for how and where they spend company money while traveling for business. Without a written document that clearly states the parameters of the company travel policy, maintaining a business travel budget is nearly impossible.

Discover: Best Travel Management Software By Service

Make Your T&E Policy Flexible, Within Reason

While it’s crucial to have rules and budgetary guidelines for employee travel, it’s also important to give some flexibility.

Everyone has their preferred travel method. It’s best to allow employees the option to book the travel arrangements they feel most comfortable with, as long as they fit within the budget.

One way to do this is to allow employees to choose their travel times. Some people may prefer to fly in the morning, while others may prefer an afternoon or evening flight.

Another way to offer some flexibility is to let employees choose their own means of ground transportation. Some employees may want to rent a car and drive themselves, while others might prefer to take Uber, Lyft or taxi rides.

Offer Flexibility in Accommodations

Employees like to feel as though they have some level of control over what types of accommodations they choose. Try to give employees options on which hotel chains or what class of hotels they can stay in.

Hotel Engine is a lodging performance network that makes it easy to do exactly that.

Create travel policies within the Hotel Engine platform that limit how much employees can spend per night on lodging. This gives employees options and allows them to make the final decision on the hotel they book — albeit within company guidelines.

You can also build spending flexibility into your Hotel Engine travel policy. For example, say the nightly budget for hotel accommodation is $200, but no rooms are available at that price point. Hotel Engine will automatically show the employee available options at the next budget tier.

Hotel Engine partners with over 700,000 hotel properties, allowing employees to enjoy many options within various budgets in thousands of destinations.

Your employees will be happier about traveling for business when they have the flexibility to choose their own preferred hotel chain and book rooms themselves — without worrying about going over budget.

Put a Plan in Place for Unforeseen Circumstances

Sometimes the need for an unexpected trip arises. When this happens, flights might cost significantly more than they would have if you had planned the trip in advance. Or, unpredictable weather may force an employee to rearrange travel plans or find different accommodations.

Put a system in place so that employees know how to obtain approvals for charges above the allowable expenses outlined in your policy.

You may also like: Unmanaged Business Lodging Can Kill Your Bottom Line. Here’s How to Fix it

Already Have a T&E Policy? It Might be Time to Update It

The cost of hotels, flights, fuel and food change over time, so it’s important to revisit your T&E policy regularly and make adjustments. Schedule annual or bi-annual meetings to review and revise the policy to be fair to your employees and appropriate for your business.