TRANSFORMING CORPORATE TRAVEL POLICIES
One of the most challenging problems in corporate travel today is to formulate a well-conceived corporate travel policy
In today’s fast-paced world where technology is driving change, companies are transforming their travel policies in order to keep pace. Keeping a corporate travel policy consistent across all touch points is of paramount importance. In order to build a good travel policy, companies need to broadly outline processes which are simple, have a clear policy, and provide flexibility for choice.
Employees need clarity and simplicity. They need access to an online travel booking tool, mobile apps, and a travel help desk to advise and guide. While this may sound simple in theory, the challenges in practise are many. Companies aim to achieve significant savings by driving compliance within mandates that try to balance company requirements and a consumer-centric experience.
However, balancing cost and compliance is difficult. At the end of the day, a company can only achieve cost savings in a travel management programme if all colleagues adhere to it and adopt it. And, that is the Catch 22 situation.
Very often, travel policies do not reflect purchase trends and patterns, nor do they identify new savings opportunities or proactively manage risk. The over-riding question, therefore, is what should the guiding principles be?
Should employees have a fixed budget cap for travel or be reimbursed on actuals? This heated debate was kicked off by 30 pan-India Corporate Travel influencers attending the MTM Think Tank at Le Meridien Hotel, Delhi.
Needless to say, controlling costs and expenses is critical to the success of any business and the house conducted a robust debate on the pros and cons pertaining to per diem versus actual expenses.
Post the Think Tank, the discussions continued on LinkedIn and some of the views are reflected in the discussion.
Capt. Rajesh Sharma, Managing Director - IFM & Asset Services at Cushman & Wakefield, opined, “With regard to the perennial debate on per diem versus actual expenses, it is a divided house with strong views on the merits and demerits of both.”
He went on to say, “Personally, I weigh in on the per diem view, as I feel that in the long run it benefits both the individual and the company. With actuals, there is generally a tendency to spend more as it is from the “Sarkari Khatta,” whereas with per diem it is a fixed spend for the company and the individual feels incentivised (especially at the junior level) to try and save some amount on the per diem for personal shopping/saving.”
In sync with Sharma was Ajay Bhatt, Head - Administration & Facilities, Godrej Industries, who declared, “Per diem is the way to go, to avoid disparity during the process of claims. This will help to reap a long- term benefit and to have a defined structure.”
Acquiescing with both dignitaries, Sriram Natrajan, Head, International Lease Administration, Verizon, stated, “I completely agree with you. Paying per diem will definitely eliminate other issues on compliance, including falsification of bills. This debate may not end immediately, but a larger consensus might come through if follow-up sessions are held.”
Abhijit Sarkar, MRICS, Vice President & Country Head-Corporate Real Estate, Admin & Infrastructure-Sharekhan Ltd, said, “Business travel is a major expense which every organisation would like to have control over. It’s imperative to adopt policies which are employee friendly and also enable the organisation to achieve its objective of saving costs.”
He elaborates, “Ideally, one should use both methods - per diem for food and actuals for lodging, depending on travel. Though per diem allows more certainty and predictability in travel budgeting, however, it doesn’t eliminate the possibility of fraud, and its reduced documentation requirements may actually make it easier.”
Sarkar feels, “Using actual expenses is more straightforward, because it demands supporting documentation. Although it is time-consuming and laborious in practice, it makes employees more organised. On the flip side, often it takes a longer period for the accounting staff to review travel costs and can lead to discrepancies that take time to investigate and resolve.”
He recommended to have a per diem approach for regular travel, whereby it can cover food and lodging, especially when there is a clear understanding of the destination. When the travel is to a destination where employees often do not travel and the costs are higher, opting for actual cost may be the right approach.”
Mixed reactions included those of Vijay Sheopuri, Manager Business Excellence & Administration at Tata Chemicals, who believed, “Cap is necessary on travel to avoid misuse and prevent money of the investor from being wasted.”
Armaan Shaikh, Branch Head at Confidential, favoured a balanced approach, remarking, “In some categories, like car rental expenses, the budget per employee can be fixed. Today, car rental contracts are signed with a lock-in period and prices are negotiated. These prices rarely get an increment during the contract term, unless there is high inflation. However, with reference to air travel, I guess the ticket, forex, visa fee, etc, and related costs of travel vary and fixing them would be an arduous task. In cases where rates go above the allowed limit, a person would have to keep on taking approvals, which would end up in confusion and frustration.”
Geetha Rao, BDM, Sam Tourist, Bengaluru, added, “Firstly, paying reimbursement is also expensive and results in higher costing. Secondly, car rentals may vary from one provider to another, which also results in high costing. Thirdly, Corporate Ola or Uber differ in peak hours when rates vary. Sometimes, we may not get cabs which assure our safety.” Another suggestion from Rao was that, “Tech parks can have a shuttle system where different companies can tie up according to their shifts, which might result in lower costs to the company.”
Utpal Trivedi, Travel Manager at HDFC Bank, held the view that corporates were concerned with overspending and that the per diem option was the right one. “I think the per diem option is better as the same can be divided on the basics of grade and hence there will be no over spending, which is what corporate companies are looking for. Moreover, companies could also fix the budget at the start of the year.”
However, Benjamin Banh, Vice President, Global Sales - Asia Pacific, Preferred Hotels & Resorts, differed, saying, “In my opinion, it’s too easy to focus on a fixed amount while forgetting the BIG picture. The BIG picture is – can a company afford the potential incremental revenue by sticking to a pre-planned budget?”
He went on to say, “Both options of budgeted amount and reimbursement, will work depending on the needs of the employee. There should be a SOP in managing incremental expenses to budgets and similarly a SOP in managing expenses that should not be spent just because it is in the budget.”
Gautam Acharjee, Sr. Manager, Audit, Technocon Services, India, felt employees ought to be “Reimbursed on actuals, as a fixed budget cap for travel would hit actual ground operations.”
The hospitality industry also had a voice in Benaifer Kapadia, Director of Sales and Marketing, The Chedi Mumbai, India, who commented, “As a hotelier, I feel per diems play a role of restriction vs. effective cost control. Per diem rates can’t be paid to individuals who own 10 per cent or more of the business. Room rates are subject to the scale of economy (Demand vs. Supply). Per diems are fixed amounts throughout the fiscal or financial year, subject to grades within the organisation and city tiers of guest travel. A more evolved approach is to ask hotels to quote seasonal pricing which benefits the consumer and the hotel, too.”
Gurmukh Singh Bawa, Senior Advisor at Aviation Industry; Former General Manager (PR), Airport Economist, at Airports Authority of India (AAI), made a significant point, expressing, “Foreign Travel has never been quite the subject in corporate corridors and Board rooms, be it government or private. Foreign travel should be respected like any business travel; jet lag should be respected and reimbursements should be based upon actuals as per entitlement, plus-minus 10 per cent. Further, if the meeting is scheduled on the same day as landing, the Business Class travel lease of one extra day should be kept in the schedule. One must remember that it’s not a pleasure trip, though employees get pleasure as they love their work.”
Vinod Kumar KM, Independent Business Consultant & Advisor–Processes, Services & Marketing, had a different approach, reflecting that company culture and philosophy must get reflected, even in the smallest of policies, including travel. “It really is a question of how you approach the issue and the philosophy behind the approach. If there is a fear, expressed or unexpressed, that employees can misuse actuals to either spend more, be extravagant or be outright dishonest by bogus bills, etc, perhaps per diem is a good way to go,” enunciated Kumar.
Continuing, Kumar observed that nothing prevented employees from trying to save as much as possible on the per diem. They could stay and eat in places which demeaned the company brand or resort to fictitious per diems (by not travelling as many days as claimed). Some companies, pointed out Kumar, offered a combination, i.e. fixed hotels, where the company paid directly and there was a fixed per diem for food and incidentals. “My approach is to have an open system of actuals, springing from respect to people, and then deal with the odd miscreant ruthlessly. Easier said than done, but I have seen it both working very well and also misused in many ways,” added Kumar.
Thomas Tuttass, Senior IT Manager, Nokia, proffered another solution, “Just setting an upper limit makes employees stretch their cost up to the limit. For each employee, set a travel cap based on their last year’s travel cost. If the New Year cost is lower, give them 20 per cent of the savings as bonus and set the new (lower) cost as a target next year. This will give a personal incentive to everybody to save money. Team goals do not seem to be as effective as the effect of their own choices.”
Amita Parashara, Deputy General Manager, Projects- IFMG, Avon Facility Management, set the onus on the reporting Manager, saying, “Travel requirements vary according to job requirements. Capping has both positive and negative pros and cons, where expenses are budgeted, but employees could misuse it as well. Depending on the profile, a maximum limit should be set, but the prerogative and onus should be on the reporting Manager to justify the expense.”
Some sections believed that it was important to create a Corporate Travel Policy that would not only help the company control costs, but also factor in employees’ needs.
Thus, Sudhir Guptta, Assistant Vice President-Business at NCDEX e Markets Ltd, Hyderabad, opted for a fixed allowance, revealing that “employees who operate in smaller towns and cities are not able to manage their expenses easily or provide bills because of the lack of billable services in small cities, often making them forge claims to cover expenses.”
His take was that, “Employees operating in small cities be given a fixed allowance. Senior Management level employees should be reimbursed for hotel and air travel and be given a fixed allowance for other expenses, considering their seniority and time constraints, which prevent them from making out bills for small expenses. This would ensure that the morale of employees is kept high.”
This vigorous discussion has made it abundantly clear that travel is an intrinsic part of business and that it is imperative to establish a Corporate Travel Policy that is consistent, reasonable and accountable and strikes the right balance between the employer and employee.