What is business travel?
Business travel is any traveling undertaken on behalf of a business or organization away from the building (here: your library). It does not include home-to-work commuting or leisure activities. It is a critical part of keeping organizations running. Business travel could include: traveling to meetings, conferences, and training; performing outreach events; and errands like bank deposits or going to the post office.
What considerations should employers be factoring into business travel?
There are three main considerations for employers who require business travel: insurance, employee working hours, and payment of expenses.
- Insurance: All employers should ensure that there is liability coverage on any employee that is expected to leave the building for business purposes. Most policies will cover some combination of walking, public transportation, employer-owned vehicles, and personally-owned vehicles. The liability coverage should cover things like an employee being robbed on the way to the bank, or being injured in an accident while taking a package to the post office. Make sure that your insurance agent understands the nature of typical business dealings for your library as well as understanding less-frequent traveling (such as attending bi-monthly meetings) so you have appropriate coverage.
- Work Hours: Employees, in general, must be paid for travel time, so this must be factored into scheduling and budgeting. (There are some minor exceptions, but it is generally safer to err on paying for time that isn’t required by law than to omit payment when it is required.)
- Travel Expenses: Business travel expenses must be paid. Legal requirements are not as strict here as with travel time, but ordinary and necessary travel expenses should be paid by the employer (either directly or via reimbursement) as a typical business expense.
What counts as work time for employees performing business travel?
The US Department of Labor covers the laws that determine if travel time can be compensable work time, or time that the employee must be paid for. Time spent commuting from home to the workplace is not compensable, even if it is performed in a company-owned vehicle. Commuting can be either to the same place every day or to a set variety of locations such as branch locations of a library, but it only covers the travel from home to the daily work location; travel between locations during the work day is work time.
If an employee is traveling to a special one-day assignment in another location, the travel time is work time, except that the employer may deduct the normal commute time from the travel to the special assignment.
Travel time is work time if it clearly cuts across a work day; for example, running to the post office, traveling to an outreach site once work has started, or traveling between library locations to attend meetings.
As a rule of law, employers are not required to count travel time as work time if the employee is only a passenger and the travel is outside of the employee’s regular schedule. It becomes work time if the employee is expected to work or “engaged to wait” while a passenger (such as being expected to take calls or reading meeting preparation materials) or if the required travel is during the standard work week for the employee and thus is replacing standard work time.
Time spent while away from home (like at a conference) but relieved of duties for periods long enough for a worker to use the time effectively for his or her own purposes is not considered work time.
Travel time that is compensable work time must be included in overtime calculations.
A consideration specific to nonprofit organizations is that an employee cannot legally volunteer travel time; it must be considered work time and be paid.
(Details can be found on the Department of Labor’s website: Fact Sheet #22 Hours Worked.)
What are the rules around paying for business travel?
There is no legally-required payment of business travel expenses by employers in Pennsylvania. However, paying for business travel is expected by most employees, and not allowing room in the budget for travel expenses generally ends up costing the employer more in the long run in terms of employee retention and work quality.
The traditional categories of business travel include transportation, lodging, meals, and incidental expenses.
- Transportation: Some employers choose to have company-owned vehicles that are used by the employee with fuel paid for by a company credit card. Other employers choose to reimburse employees for the use of their personal car with a set mileage rate. The mileage rate should take into account not only the fuel but the wear and tear on the vehicle that occurred in service to the company.
- Lodging: Many businesses book lodging on the employee’s behalf and pay directly with a purchase order or company credit card; the same goes for certain types of transportation like plane tickets. Even if you are a nonprofit, Hotel and Occupancy taxes are still required. Regardless of the organization’s tax-exempt status, sales tax cannot be removed if the employee is booking personally instead of booking the lodging under the organization.
- Meals & Incidentals: Some employers opt for a per diem payment for meals and incidental expenses rather than tracking individual receipts; others set a per diem allowance that is the maximum the employee can request with receipts per day.
Reimbursement timelines should be spelled out in a policy; employees should be able to expect prompt reimbursement for business expenses, and employers should have a deadline for receipts and forms to be turned in for reimbursement. The policy should also acknowledge the need for a pre-approval of any business travel.
Specific to nonprofit organizations: reimbursing volunteers for business travel does not turn them into employees as they are not receiving a wage and are merely being reimbursed for expenses.
How do I know what amount to reimburse?
A reimbursement can only be a reimbursement if there is some proof of correlating expenses; otherwise it would be taxable income for the employee. There is an exception for businesses that choose to use the per-diem model of providing a set amount for meals and incidental expenses rather than requiring receipts to be turned in; however, there should be a travel reimbursement form that the employee completes to verify the dates and locations of the business travel as well as the purpose.
There is no legal requirement for the amount to reimburse employees; however, the government does set standard rates for reimbursement and tax deduction purposes that is pegged to the location. Many businesses choose to use these annually-updated rates instead of attempting to set their own rates, which helps easily accommodate employees traveling to higher cost-of-living areas as well as simplifying budgeting.
You can find the rates on the US General Services Administration website. Meals and lodging allowances are on the Per Diem Rate page and mileage is on the Privately Owned Vehicle Mileage page.
To calculate the mileage, businesses can use the work location-to-travel site to calculate the mileage, or they can opt to calculate based on the shorter of work location or employee’s home address to the travel site. Some businesses record actual miles on the vehicle’s odometer while others use mapping software like Google Maps for the calculations.
What about income and corporate taxes?
Employers can deduct business travel expenses that are away from the tax home, ordinary (common and accepted in your trade) and necessary (helpful and appropriate; not necessarily required). Errands such as performing bank deposits would typically be within the tax home and thus are not deductible; however, considerations such as insurance coverage would still apply.
If the employer does not pay for these expenses (either directly or via reimbursement of the employee), the employer cannot deduct them, but the expenses then become eligible for deductions on the employee’s taxes (they are above-the-line deductions). Volunteers are typically not able to deduct travel expenses in service of a nonprofit organization as a business expense like an employee, but they are able to deduct a portion of non-reimbursed expenses as a charitable deduction.
Details on what is deductible for both the employer and employee can be found in IRS Publication 463. Details on what is deductible for volunteers can be found in IRS Publication 526.
Last updated September 2024
This information is provided to the best of our knowledge as of the date provided. Information is subject to change without notice. While authoritative, it is not guaranteed for accuracy or legalities. If there are questions, please reach out to your district consultant, who may encourage your library to ask a local solicitor/lawyer for further guidance.