Creating and Enforcing Travel and Expense Policies: A Happy Medium for Staff Satisfaction and Cost Control
Business travel and expense policies have been a contentious issue for HR teams. On one side are travellers, who want to be able to select hotel chains and airlines, or choose lodgings that are convenient for them. On the other hand, there are CFOs and business controllers whose main focus is to handle expenses and reduce unnecessary spending.
While they may seem like two groups without common ground, an combination of intelligent enforcement, robust technology tools, and policies can keep both parties satisfied.
Risks of Penny-pinching
The growing business adoption of automated travel booking and expense management solutions has led companies to control travel spend. Based on corporate travel policies, parameters for flights can be relaxed or tightened as desired. Companies can select to enforce the minimum possible fare between two points, regardless of schedule or routing.
Alternatively, they can mandate the lowest price offered by the company’s preferred carrier, or the flight of the traveller’s choice as long as it is within a precise threshold of the low-priced logical fare. Similar restrictions can be imposed on hotel bookings as well.
Preferred hotel, cab, and air partners have certain advantages for a manager. Suppliers will offer discounts over standard rates in return for a commitment to a particular volume of spend. If the traveller picks other vendors and the spend declines below the agreed level, then the discount will be revoked.
In the case of out-of-pocket costs like meals, companies can make restrictive policies, and enforce them via cloud-based expense management tools such as SutiExpense that can stop out-of-policy expenses from getting submitted for reimbursement.
Businesses that tightly prevent staff travel expenses may be aiding in managing short-term expenses. But, in the future, it could lead to many serious issues. The most apparent problem is discontent traveling employees. Employees traveling the most for business purposes are, therefore, impacted by travel and expense policies. They are the most valuable producing staff, such as billable consultants and sales managers.
Hence, alienating these staff and potentially causing them to look for alternative employment is a short-sighted move. Especially given that estimates of how much it costs to replace a staff range from 17 percent of the annual salary for an hourly staff up to 214 percent of the yearly wage of an administrative.
Secondly, making travel booking channels, such as business online booking tools or approved travel agencies restrictive, will lead to worker side-stepping channels and booking independently via customer travel websites. For finance teams, it leads to two significant challenges. The inability to control spend before it takes place and lack of visibility into travel purchasing patterns. Both of them leading to difficulties in monitoring and assessing expenses, therefore, inaccurate decision-making.
Spot Reasons for Non-compliance
An organization must make sure that a trip gets booked with the given corporate policy. But, even the most reasonable of travel programs that leverage high-quality hotel chains and airlines, and also provide out-of-pocket expense policies still has a certain level of non-compliance. It is regardless of whether businesses use official booking channels or enable their team members to leverage customer travel booking sites.
For travel leaders and HR departments to reduce non-compliance, they need an understanding of how, where, and why it takes place. This is where a SaaS-based travel and expense management tool can prove to be useful, as the solution’s analytics abilities can allow companies to spot patterns of non-compliance quite easily.
Traveling employees can also be a good source of information while determining why they are not adhering to company policy, and it will show that not every out-of-policy booking is harmful.
If a traveller is booking a room, which is 50 dollars per night over the preferred hotel, but is within walking distance of where they should be, it is preferable to stay in an inexpensive hotel that costs a 30 dollar taxi ride away. Maybe, a flight provided by the company’s preferred travel carrier is 100 dollars more for the same plane that staff found for themselves. The traveller may need to drop their child off to school, and hence, the earlier and cheaper flight will not work for them.
There are workers who believe that they can stay in good quality and lavish hotels than those mandated, deserve to eat expensive lunch or take costly flights . Regardless of why staff book travels and submit expenses, which are out-of-policy, it is crucial to get to the bottom of it.
If workers fail to understand the implication of their actions, a friendly approach can be more pleasant for all parties than a severe reprimand. Employees who misuse corporate policies deliberately must be counselled on their actions and encouraged to make prudent choices in the long run. Additionally, if the policy fails to work for your company’s staff, you need to add more flexibility so that it becomes easier to comply.
Following Strict Corporate Guidelines is Not Always a Good Option
Today, many forward-thinking companies are starting to understand that strict policy enforcement is not the best way. They are searching for new solutions, which can find a happy medium between the finance team and travellers. When people attempt to avoid travel and expense policies, it shows that the archaic incentive for traveling employees to stick to guidelines does not work efficiently. Hence, it is becoming very clear that companies require a new approach to creating travel policies.
Abandoning expense policies will not work as it will lead to confusion and resentment of workers who are seen as taking advantage by booking costly hotels. Hence, travel teams and the HR departments should develop adequate programs that are more cost-effective without placing many constraints on employees.
Today, one of the buzzwords that we are starting to view more is an expense guideline. Rather than mandating which flight to select or hotels to book, giving instructions empowers travellers to make smart purchasing decisions for the company as well as themselves. Also, it enables organizations to maintain an element of control over spend. While such parameters for travel booking- classes for flights, hotel types, meal expenses, and so much more are outlined, staff are not bound to stick to these strictly.
One of the primary advantages is that many travellers will do the right things when it comes to travel booking. They will not make unprofessional decisions, such as staying in five-star hotels or booking expensive flight tickets. Treating staff like responsible people will make them feel more trusted and will empower them to act like responsible adults.
For instance, they won’t resent managers for forcing them to fly at inconvenient times or stay at hotels that are too far away and more. While the overall expense of travel may increase, it will likely get mitigated by increased traveller happiness and productivity and lower expenses related to replacing all unhappy staff.
Expense tracking is crucial to ensuring that there is no abuse of the system. Organizations can leverage expense automation software to assess travel and expense data and spot either groups or individuals who exceed guidelines continually. Travelers whose booking expenses are continuously higher than the normal may be counselled on adequate practices. When workers know that their expenses are being monitored quite often is enough of an incentive for them to prevent any excessive spending.
But, for those who continue to abuse and misuse travel and expense methods, HR leaders can introduce a penalty box that enforces these policies more strictly, such as enabling meal costs up to the guideline amounts should be submitted, and zero tolerance over lowest fares for airlines. Automated expense management solutions can be configured down to individual users so that they can have more strict expense submission parameters compared to their colleagues.
Users trying to submit their expenses over a particular threshold can be blocked from expense submission over the limit or prompted to explain the overage. When this is combined with enforcing hotel and flight purchases, it can stop out-of-policy bookings, unless the time in the penalty box expires .
The Bottom Line
Looking for an expense solution, which works both for your finance department and the company’s crucial assets need not be an impossible trade-off. Working with each party to find their objectives and goals along with recognizing their challenges and pain points, and later imposing a solution that works for all will lead to long-term financial benefits, as well as an increase in the morale of traveling personnel.