Henry82

My question focuses on corporate travel reimbursement policies toward expats or employees on an extended foreign assignment situation. I'm not referring to business expense airfare but rather "leave benefit" airfare... I'm not sure what to call it, basically talking about the trips home that a company gives to employees who are assigned to a foreign country or far from home as a "job package benefit".

Hypothetical situation: say that an employee is assigned to work in a foreign country and allotted 3 trips home a year. The company does not have a travel booking partner/agency and therefore gives employees a per-ticket budget (economy fare) and allows them the freedom to book their own flights, processing reimbursements accordingly.

Here are the topics are would like to bring up for discussion:

• Would you treat this an expense budget or a travel benefit?
• If cost of a ticket surpasses the allotted budget, employee must cover it out of pocket. However, if ticket was less, should the employee be reimbursed for the unused amount? or only the actual amount?
• Would you allow the over/underage from each individual ticket to carry over until the end of the year? or reconcile the balance for each transaction?

I'd appreciate everyone's input on this... all angles are welcome: small/med/large companies, US-/Euro-/Asian companies... employees, manager/executive POV, Boss/employer perspective, etc.

kimberlyrose

What I think *should* happen is that if the airfare comes out to be cheaper than the allotted amount, the leftover money should be added to the amount allotted for the next ticket. I also think that if the airfares for the year add up to less than the total allotted amount, that money should carry over to next year.

acunningham

I'd allocate a budget for the entire year*, and let the employee spend it as they wish. That gives them maximum flexibility (and therefore job satisfaction) without costing you any extra. If they go over budget, they need to pay the excess out of their own pocket. Whether you want to give anything left over (or perhaps 50% of it) at the end of the year to the employee is entirely up to you. I wouldn't let it roll over to next year - that's an accounting nightmare in that it's potentially an ever-increasing liability on the company's books.

This is from the perspective of a small business (based in Europe) owner who travels 330 or so days per year.

*One caveat: If you don't trust the employee not to spend it all at the start of the year then quit, you may want to have a quarterly budget and allow rolling over from quarter to quarter until the end of the year.

deniah

our mega huge international company covers non-business / home travel using an expense reimbusrement process, not an allowance basis

which means if you dont lose it, you use it

fortunately, the home travel covers "full fare economy" ... which means Y bucket for easier upgrades

MoreMilesPlease

I would consider this as an expense or even be considered as a bonus to the employees salary. (I believe this is a taxable benefit for US employees on their US taxes).

I would treat this just like a housing allowance and pay it quarterly or however you allow the time off for the flight. IE. if they are allowed a leave after three months then give the allowance at 3 months. They can buy their ticket with the own money and consider the payment as a reimbursement or wait and buy a ticket with the money as they get it. or maybe they won't go anywhere and use the money for other things.

So just roll it into the "living expenses" benefits and give a set amount to be used when and how they choose.

Often1

This is first and foremost a question for your tax lawyer. How you structure the trips for your employees can have significant impact on whether or not the value of those trips is a taxable benefit to the employee. It is then a question of the company's accounting system, whether the company has a negotiated corporate discount (which would generally require the use of an enrolled TA to do the bookings) and other factors.

Many companies authorize and budget these trips in the same class of service as they would were there a direct business purpose (remember, there is a business purpose in these trips, it's just less direct). Thus, if this would be a trip in F or J/C for direct business, the "home leave" trip is in that class as well.

I would certainly authorize employees to buy up or otherwise UG as the case may be, out of their own pocket if they wish (just as I would authorize this on business travel).

I would not roll these funds over, rebate them to the employee or otherwise repurpose them. The goal of home leave is for employees to decompress. You should want to encourage them to take the trips, not save the money.

Jalinth

I'd start by saying what is the purpose of "home leave"? If it is a perk, I'd likely give the employee a pool of $X per year for flights based on receipts and ultimately a copy of the boarding pass. Rollovers should be limited - perhaps maximum 1/3 to 1/4 of the pool just to deal with timing differences.

For expensing purposes, depends on the local tax law. Many countries would view this type of travel as a perk and tax it accordingly. Ask your local accountant or lawyer . If the flights are a perk, look at allowing the employee to travel wherever they want within their limit rather than returning home. IF the person is single, definitely a "better" perk.

As far as how to expense it, I've seen a few different ways for larger companies. Some have formal secondment program where the local operation is only charged (at least for KPI, and annual bonus/performance review purposes) the local level of wages and expenses for that position. Anything else (higher salary, flights home, housing, schooling, the list goes on) goes to a cost pool picked up by someone else. The logic is that they want high potential individuals to get exposure to many markets and operations and they want the receiving operations to accept them without them being a drain on local profits or budgets.

B747-437B

I will echo the comments above regarding the local tax jurisdiction determining how the process should be set up.

In the tax jurisdiction my present and previous employer operate in, there is specific provision for tax exemption for one annual trip home per year for an expatriate employee. We try to maximize the benefit to employee by using that exemption for any "direct" trips home and using "tags" to other business trips for other trips home.

Flahusky

My future employer handles 'home visits' this way.
Every 6 months you are handed a $1500 travel allotment.You chose how and were to spend it.
It is treated as 'Other Income' on the 1040

erik123

This is quite typical and easy to administer.

The only condition I would put on it would be proof of travel (e.g. a used ticket to home country) - as the purpose is for the employee to stay connected with home and family and not additional income. You could also offer 2 additional days off to cover travel to/from.

You could make exceptions (e.g. travel to home country of spouse)

MoreMilesPlease

I think you could mandate that the employee take the time off at certain intervals, but not what they do, where they spend it, or who they spend it with.

As a former expats, we would not have taken contracts that mandated our personal lives on our leave time and considered it intrusive and none of the companies business! If we wanted to stay in country and save the money for future use that was our business (yes some people did just this and were quite happy). If we wanted to go to some exotic place and lay on a beach that was our business.

Expats are happiest when they see a large financial return for their time. During leave time some want to go home, some will travel to new places, and some may just stay put and eat/sleep for the week.

MoreMilesPlease

^^^^^ Makes everyone happy

STBCypriot

As an expat being on 4 different international assignments, I have experienced the following:

Home leave airline ticket must be purchased through company travel agent. They guaranteed (ahem) the best price. Cost of travel was added to income and I paid FICA, FICM, and this was considered part of my gross income.

Home leave airline ticket purchased by me and reimbursed by company. No limit was provided, but I had to purchase non-refundable coach ticket. Cost of travel was not added to income. This policy later changed and the cost of travel was added to income and I paid FICA, FICM, and this was considered part of my gross income.

Cost of cab/shuttle from home to airport was allowed (with receipts). No hotel accomodations were allowed. No meal allowance either.

In all cases, if I did not go home, I was reimbursed or allocated the cost of my ticket home or to the alternate destination, whichever was lower. That meant if the ticket to the alternatre destination cost less, I did not get to keep the difference, if it cost more, I paid the difference. No carryover allowed.

Company policy allowed employees to fly business class on flights longer than 10 hours, but the individual project contracts often overrode this and we were not allowed to fly busness class. My 6'3" project manager was not happy about this at all.

On one assignment, there was a manager who was a real pain about how to handle/ process expense reports. He scrutinized every single travel request authorization and expense report like he paying out of his pocket. His attitude was that all the expats were trying to cheat the company. This made for bad morale.

Personally, I would prefer if I were always allowed to make my own arrangements. The less interference my other departments and people the better. I would have appreciated business class seats on my 11 flights. I gave up (in my personal life) a lot to work on these foreign assignments and a business class ticket would have been a fair reward.

Alpha

I think it's unfair to call this income unless the employee is given the option of not spending it on travel.

Often1

It's not "called" income, it is defined by Federal law as income. Just like other perks such as gym memberships. You don't have to accept the benefit and that way you don't generate the income or the tax liability. But, if you accept the benefit, you pay the tax.