How to Create a Travel and Expense Policy: Steps, Template, and Best Practices

Business travel is one of the more visible and variable cost categories a company manages. Without a written policy governing it, spending decisions default to individual judgment, approval processes break down, and the finance team is left reconstructing what happened after the fact. Modern expense management platforms help organizations apply policy rules consistently, but only if your policies are well-defined.

What is a Travel and Expense Policy?

A travel and expense policy is a written document that defines whichcosts the company will reimburse when employees travel or incur expenses for business purposes, how employees are reimbursed, and what happens when someone falls outside those boundaries.

At its core, a T&E policy must answer four questions clearly for every employee who might submit an expense:

• What expenses are covered? (Eligible categories and limits)
• What does the reimbursement process require? (Documentation and submission requirements)
• Who approves it? (Approval workflows)
• When does reimbursement occur? (Reimbursement timelines)

Policies that clearly and consistently address all four areas are easier for employees to follow and help reduce exceptions, disputes, and compliance issues.

Why Your Business Needs a T&E Policy

As organizations grow, informal expense processes become harder to manage consistently.

What works for a small team often becomes more difficult to scale as approval workflows expand and spending decisions vary across departments. Creating a formal travel and expense policy helps organizations address several challenges at once, and pairing it with a dedicated expense management solution makes those rules enforceable at scale:

• Cost control: Defined limits help prevent individual travelers from making spending decisions from accumulatinge into significant budget overruns.
• Compliance: A policy that meets IRS accountable plan requirements can help protects both the company and employees from unnecessary tax liability on reimbursements.
• Fairness and clarity: Standardized guidelines help reduce inconsistent approval and reimbursement decisions across teams.
• Faster reimbursement: Standardized submission requirements help reduce manual follow-up and approval delays.
• Audit readiness: Consistent documentation practices make it easierto support expense claims during an audit.

Once the business goals of a T&E policy are established, the next step is defining the operational rules that support consistent expense management.

Essential Components of a Travel and Expense Policy

A complete T&E policy covers six governing areas. Gaps in any of these areas can create approval bottlenecks, delayed reimbursements, or additional manual review.

Eligible Expense Categories

Establish which expense types the company will reimburse. Common categories include:

• Airfare and ground transportation to and from the airport
• Hotel or other lodging during business travel
• Meals while traveling or conducting business
• Ground transportation during travel (taxis, rideshare, rental cars)
• Parking and tolls
• Business communications (international phone charges, roaming fees)
• Conference and event registration fees

The policy should be specific. "Transportation" is too broad. "Economy-class airfare booked through the company's preferred booking channel, with upgrades requiring prior written approval" is a policy.

Non-Reimbursable Expenses

Listing what the company will not pay for is as important as defining what it will. Unclear guidelines can create inconsistency in how expenses are reviewed and reimbursed.

Spending Limits

Define limits by category. Vague language like "reasonable meals" is not useful without a number attached. Use explicit per-meal or per-day limits, and vary them by city where appropriate (meals in New York City cost more than meals in a mid-size regional city).

Approval Workflows

Clarifywho approves what, at what dollar threshold, and how. A typical tiered structure:

• Expenses under a defined threshold: Manager approval only
• Expenses over a higher threshold: Finance or VP approval required
• Any pre-trip expense (airfare, hotel) over a set amount: Pre-approval required before booking

Documentation Requirements

Specify what documentation employees must submit with each expense. Most policies require itemized receipts. The question is where to set the minimum threshold.

IRS Publication 463 requires adequate accounting for expenses but does not specify a minimum dollar threshold. Organizations may set their own threshold based on their internal risk tolerance and audit exposure. $25 is a widely adopted threshold for requiring itemized receipts, appearing across multiple business policy resources.

Modern receipt capture tools make it practical to capture documentation for every expense regardless of amount, which reduces the threshold decision to a policy design choice rather than an administrative constraint.

Reimbursement Timelines

Tell employees when to expect payment after submitting a compliant expense report. A common structure is: approved expense reports submitted by the 15th of the month are reimbursed by the last business day of that month.

Reimbursable vs. Non-Reimbursable Expenses

The table below is a reference guide for building your own policy. Add, remove, or adjust categories based on your organization's specific operations.

Per Diem Rates: How to Set Them and Apply Them

Per diem is a fixed daily allowance for lodging, meals, and incidentals during business travel, in place of requiring actual receipts for each expense.

Why some organizations prefer per diem: It simplifies expense reporting, removes the need to collect and review individual meal receipts, and sets a predictable budget per travel day.

How to set per diem rates: Most private organizations use one of two approaches:

• GSA rates as a benchmark: The General Services Administration publishes domestic per diem rates annually for federal government travel. These rates cover lodging, meals, and incidentals (M&IE) and vary by location. They are updated annually on October 1. You can look up current rates by city or county at gsa.gov/travel/plan-book/per-diem-rates. Private businesses are not required to use GSA rates, but they are a credible and publicly verifiable starting point.
• Company-defined flat rates: Some organizations set their own per diem based on their typical travel destinations and cost analysis. This is acceptable, but the rates should be revisited at least annually.

International travel: For international destinations, the U.S. Department of State publishes per diem rates for foreign locations. Look up rates by country and city at the State Department foreign per diem lookup tool. Do not hardcode any international per diem figures in the policy; link to the live portal instead.

First and last day of travel: Many organizations that model their policy on GSA Federal Travel Regulation conventions prorate per diem at 75% for the first and last days of a trip. This is a common policy design choice, particularly for organizations following government travel standards. Private businesses are not required to use this proration.

The IRS Accountable Plan Rules: Why They Matter

If your company reimburses business expenses, the IRS has a direct interest in how you do it.

Under IRS Accountable Plan Rules, qualifying expense reimbursements are generally non-taxable to the employees. When those requirements are not met, reimbursements may be treated as taxable wages, creating withholding obligations and payroll tax implications for the company. Automated policy compliance tools can help finance teams apply these rules consistently across every expense submission.

Note: The accountable plan framework typically require expenses to have a clear business purpose, be submitted within a reasonable timeframe, and include repayment of any excess reimbursement amounts. This approach aligns with commonly referenced IRS guidance, but specific conditions and timeframes should be confirmed against current IRS guidance before finalizing any policy language.

A practical implication: Expenses submitted after the IRS-defined reasonable period may become taxable wages rather than tax-free reimbursements. Many organizations address this risk by setting a 30-day submission deadline and making the consequence of late filing explicit in the policy.

When to consult legal counsel: If your workforce spans multiple states, includes unionized employees, or if your company has international operations, have an employment attorney or tax advisor review the policy before it goes into effect. State wage and hour laws vary, and some may affect how reimbursements are structured or timed.

How to Write a Travel and Expense Policy: Step by Step

With the core components defined, the following steps walk through building the policy from the ground up.

1. Audit your current state. Before writing a new policy, review how expenses are currently handled. Identify where spending decisions are inconsistent, where approval processes break down, and what categories generate the most disputes. This tells you which gaps to prioritize.
2. Define the policy's scope. Decide who the policy applies to (all employees, contractors, specific roles) and what types of expenses it covers. A policy that is unclear about scope will be applied inconsistently.
3. Gather input from the right stakeholders. Finance owns the budget implications. HR owns the employment relationship and policy communication. Legal should review if you have a multi-state workforce or international operations. Department heads can identify practical constraints you might otherwise miss. Bring all of them in before the policy is finalized.
4. Set spending limits for each category. Work from your budget, your typical travel destinations, and market data (GSA rates are one source). Set limits that reflect reality; limits that are too low will generate constant exceptions, which is more expensive to manage than a slightly higher limit.
5. Establish approval workflows and escalation paths. Map out who approves what at each dollar threshold, and make the chain of approval explicit. Include what happens when the primary approver is unavailable.
6. Document submission procedures and receipt requirements. Specify exactly what employees must submit, in what format, and by when. If you use an expense management system, reference it by name and include instructions for first-time users. Expense policy automation can enforce these rules at the point of submission, reducing the manual review burden on finance.
7. Draft the enforcement section. A policy without consequences is a suggestion. Define what happens when employees miss the submission deadline, submit expenses without receipts, or book outside the policy. Cover graduated consequences rather than jumping straight to termination for a first offense.
8. Add version control and an effective date. Include the policy version number, the date it takes effect, and a note indicating how employees will be notified of future material changes. This is a practically and legally useful detail that is easy to add, yet often overlooked.
9. Communicate the policy before it takes effect. Send a summary to all affected employees, include it in onboarding materials for new hires, and make the full document accessible in your HR system or company intranet. A policy that employees cannot find is not enforceable.
10. Schedule a review cycle. Set a calendar reminder to review the policy at least once per year, or whenever there is a material change to IRS guidance, GSA rates, your workforce size, or your typical travel profile.

Travel and Expense Policy Template

Legal disclaimer: This template is provided for illustrative purposes only. It is a starting-point framework, not legal advice. Before adopting or distributing any T&E policy, have it reviewed by qualified legal counsel, particularly if your workforce spans multiple states, includes international operations, or is covered by a collective bargaining agreement. Rate-dependent fields (mileage rate, per diem) should be populated with live references to official sources rather than hardcoded figures, as both change on annual cycles.

Travel and Expense Policy Best Practices

A well-drafted policy only delivers value if it is written clearly, maintained regularly, and communicated actively. The following practices apply regardless of company size. For a broader view of how leading finance teams approach this, see Emburse's guide to T&E management best practices.

• Write in plain language. A policy that requires interpretation will generate the questions it should be answering. Avoid legal boilerplate in the main body; save that for the appendix or disclaimer.
• Include a non-reimbursable list. The most common source of reimbursement disputes is ambiguity about what is not covered. A clear list reduces those conversations.
• Vary limits by market. A single meal limit that applies equally to San Francisco and Columbus, Ohio, is either too restrictive for high-cost cities or too generous for lower-cost markets. Tier your limits by location.
• Revisit limits annually. Lodging and meal costs shift with inflation and market conditions. A limit that was appropriate two years ago may create compliance friction today if it no longer reflects actual costs at typical destinations.
• Communicate the policy actively, not just at launch. Include T&E policy training in employee onboarding. Send a summary to all employees when the policy is updated. Do not assume employees have read it because it is posted somewhere.
• Use the GSA- and IRS- published benchmarks as live links, not hardcoded numbers. Both the GSA per diem rates and the IRS mileage rate change on annual cycles. Embedding a number in a policy document without a reference to the live official source means the document will be wrong within a year. Link to the source and note the current figure as of the policy's effective date.
• Separate the policy document from the process instructions. The policy defines the rules. A separate quick-reference guide or FAQ explains how to use the expense management system. Mixing them makes both harder to maintain.

How to Enforce Travel Policy Compliance

A T&E policy is most effective when compliance expectations and escalation procedures are clearly communicated. Enforcement needs to be graduated, consistent, and clearly communicated in advance so employees know the consequences before a violation occurs. Finance teams that want to move beyond manual enforcement can use data analytics to systematically identify patterns and flag violations.

Tier 1: Administrative non-compliance (minor)

These are process failures rather than misconduct. Examples include missing receipts, a late submissions, or an expense reports that lacks a business purpose description.

Appropriate response: Return the expense report to the employee with a request to provide the missing information within a defined window (typicallycommonly 5 to 10 business days). If corrected, process normally. If uncorrected, delay reimbursement until the report is complete.

Tier 2: Policy violations (moderate)

These situations involve expenses submitted outside established policy. Examples include booking a higher class of service without pre-approval, using a company card for a personal expense, or submitting an expense for a non-reimbursable item.

Appropriate response: Deny the non-compliant portion of the expense. Issue a written notice to the employee and their manager. Require repayment for any personal expenses charged to a company account. A second violation within 12 months should trigger a formal performance note.

Tier 3: Fraudulent claims (serious)

These involve intentional misrepresentation, such as submitting false receipts, claiming expenses that did not occur, or inflating amounts. These situations indicate intentional misuse of company funds and require immediate review.

Appropriate response: Immediate escalation to HR and legal counsel. Suspension of reimbursement privileges pending investigation. Potential termination and, where applicable, referral to law enforcement. This category requires legal and HR involvement before any action is taken.

International Travel Considerations

International travel introduces policy complexity that a domestic-only framework does not address. Even if your company rarely sends employees abroad, the policy should establish clear guidelines for reimbursement, documentation, and traveler support. Understanding the benefits of business travel management at an organizational level is useful context for structuring international provisions.

Per diem rates for international destinations

The U.S. Department of State publishes per diem rates for foreign locations. These rates vary by country and city and are updated monthly. Finance teams can look up current rates at the State Department foreign per diem lookup tool. Link to that tool in your policy rather than hardcoding figures.

Health insurance and travel insurance

Confirm whether your company's existing health insurance plan covers medical care in the countries where employees will travel. If it does not, or if coverage is limited, the policy should specify whether the company provides supplemental travel medical insurance or whether employees are expected to purchase it and submit it for reimbursement. Check what existing corporate coverage already provides before adding a separate travel insurance provision.

Duty of care

Organizations that send employees to international destinations have a responsibility to monitor conditions at those destinations and have a plan for employee safety in the event of political instability, natural disaster, or medical emergency. This is a distinct policy element that should either be addressed in the T&E policy or in a separate travel safety document referenced by the T&E policy.

Currency and receipts

Specify how employees should handle foreign currency expenses. Common approaches include reimbursing at the exchange rate on the transaction date (using the employee's credit card statement as the reference) or requiring employees to use the company card for all international expenses so the conversion is handled by the card issuer. Receipts in foreign currencies should include either the USD equivalent or the card statement showing the conversion. Emburse's global reimbursements solution handles multi-currency processing for organizations with frequent international travel.

International car rentals

Some corporate credit cards include collision damage waiver (CDW) benefits, but coverage varies significantly by card issuer, card type, and country—some cards do not extend CDW coverage outside the United States. The policy should specify whether employees are expected to purchase rental car insurance internationally and whether that cost is reimbursable.

Note on the Fly America Act: The Fly America Act requires the use of U.S.-flag air carriers for federally funded travel. It applies to organizations that receive federal funding, such as universities and research institutions with federal grants or contracts. It does not apply to private businesses that do not receive federal funding. If your organization receives federal grants, consult your grants administrator or legal counsel regarding the Fly America Act obligations.

Managing Travel and Expense at Scale

A written policy is the foundation. As your workforce grows and travel volume increases, managing compliance manually becomes progressively harder. Finance teams that rely on spreadsheets and email approval chains find that the administrative burden of expense management scales faster than the workforce.

If you are formalizing a T&E process for the first time, or if an existing policy has outgrown your current systems, Emburse offers travel and expense management software that automates the workflows your policy defines: approval routing, receipt capture, per diem calculation, and reimbursement processing.