While the line separating work-related expenses and personal expenses can be blurry, delineating between paid and non-paid travel time is its own payroll nightmare. Here are some examples of what does—and what doesn’t—constitute paid travel according to law.
Commuting vs. Travelling
The first thing you need to understand is the difference between “commute time” and “travel time” insofar as these terms pertain to nonexempt employees. By law, you must compensate employees for both resources (e.g., gas) and hours spent traveling if their travel is a byproduct of work during the day; however, you are not required to compensate your employees for the time or resources needed to get to and from work originally.
One exception to the above is if you assign a work-related task that necessitates deviation from one’s usual commute. For example, if you ask an employee to run an errand or perform extra work that requires travel before or after standard operating hours, you’ll need to compensate them accordingly.
Non-domestic business trips are a bit trickier to keep track of, especially if your employees in question travel abroad. For example, you don’t need to pay your employees for the time and resources it takes to get them to the airport, but you do need to pay them for the time from which they arrive at the airport to the time at which they arrive at their destination.
This concept extends to including overtime in situations wherein the employee’s total hours spent travelling would have qualified for overtime compensation in a typical setting.
Once an employee arrives at their destination, you have a couple of business expense options should you choose to cover them: you can reimburse the employees after the fact, or you can send them per diem in amounts dictated by the IRS. Either way, you should make sure your employees keep all their receipts accrued during their travel since doing so will help both you and the employees calculate exemptions during the following tax year.
How is this impacted by the new tax law? View Alloy Silverstein’s Infographic on Meqals, Entertainment, and Commuting Changes Under Tax Reform
As mentioned previously, you don’t have to pay back employees for their travel accommodations or meals—but you should, and not just because it’s the decent thing to do. You can write off any employee travel expenses as deductions in the following tax year, meaning that the expenses need not come out of your own pocket, and your employees’ morale won’t suffer in the process. That’s about as close to consequence-free as one can achieve.
More importantly, however, is the matter of state law. While federal law is lax in terms of requiring you to reimburse employees for their travel expenses, your state’s legislature may be less forgiving. As with many payroll subtleties, this is an instance in which you’ll want to check your state’s specifics on travel reimbursement before definitively determining whether you’ll reimburse your employees for their travel expenses outside of what’s dictated by federal law.
We understand that calculating your company’s business expenses is an arduous process, so let us help ease your burden. For more information, call Abacus Payroll at (856) 667-6225 today for a free consultation!