The world of per day and mileage allowances, within the context of company expenses, is not without its complexity. In fact, the concept generates doubts right at its very core. It is sometimes hard to make a distinction between what is considered an expense allowance or what type of expense mileage counts as, for instance. Find out below.
Before we can answer Shakespeare’s eternal question of ‘to be or not to be’ when it comes to per day and mileage allowances, it is important to have a clear understanding of the basis of the two concepts. Mileage allowance is one of the company’s travel expenses, which encompass any financial aspect related to the employee’s transport. These can be divided into:
- Service costs: expenses incurred for journeys on public transport, such as train or aeroplane tickets and taxi fares, among others.
- Consumption and maintenance costs: expenses incurred for journeys in a private vehicle, such as fuel, wear and tear and insurance, among others.
Meanwhile, an allowance is an amount of money that the company pays the employee to compensate for the related expenses generated during a business trip. The concept of an expense allowance can be divided into:
- Living expenses: expenses related to the employee’s basic needs in relation to food, etc.
- Accommodation: expense relating to staying at hotels, etc.
However, it is also true that allowances also enable a certain degree of flexibility. In fact, each company adapts its allowances and the concepts that they encompass to their own needs. As such, if an employee wants to find out more about the company’s regulation of allowances and expenses, they have to read the collective bargaining agreement, within the framework of the travel policy. Meanwhile, to find out the company’s price rate for mileage, they also have to look in the collective bargaining agreement. In the absence of such an agreement, they should read the sector agreement on such matters.
The amounts covered by per day and mileage allowances are subject to modification, either for internal decisions in the
company or external causes such as changes in the legislation or taxation rules. Updates are usually applied on an annual basis or every few years, adding the RPI differential and sometimes an additional percentage.
Meanwhile, limitations can generally be found with respect to what does and does not fall within the scope of per day and mileage allowances.
Mileage allowance does not cover:
- Traffic fines and parking fees
- Distance travelled for activities not related to business
Expense allowances do not cover:
- Although it may seem obvious, meals and journeys that are not related to business.
- Meals paid for by a customer or third party. Allowances cannot be accumulated. Use them or lose them. If the employee’s meal has been paid for by somebody else, they are no longer entitled to the living expense allowance that would otherwise have covered this meal.
- Extra expenses above the contracted living expense allowance.
- Personal expenses that are not indispensable for performing professional tasks.