Are Employers Liable for Out-of-Town Expenses During Work-Related Travel? A Comprehensive Overview in the Philippine Context

When employees are required to travel for work—be it for client meetings, trainings, conferences, site visits, or other business-related purposes—they often incur additional expenses. These can include transportation, lodging, meals, and other incidental costs. In the Philippine setting, questions often arise as to whether employers are legally obliged to shoulder or reimburse these out-of-town expenses. While the laws and regulations do not provide an overly detailed, single-statement rule on this matter, several legal principles, administrative regulations, and best practices guide us to the conclusion that work-related travel expenses are typically borne by the employer.

Below is a comprehensive discussion on the topic.

1. Relevant Legal Framework

1.1. The Labor Code of the Philippines

The Labor Code of the Philippines (Presidential Decree No. 442) does not expressly enumerate every possible employment benefit, including reimbursement for travel expenses. However, the Labor Code, in its broad policy declarations, seeks to protect the welfare of employees and to ensure just conditions of work.

Article 1700 (General Provisions on Labor) of the Civil Code (often read alongside the Labor Code) provides that “[t]he relations between capital and labor are not merely contractual. They are impressed with public interest...” This overarching principle is commonly interpreted to mean that employment contracts or company policies should not violate the worker’s rights or impose conditions that are unjust or onerous.
Article 100 (Prohibition against Elimination or Diminution of Benefits) of the Labor Code states that benefits already being enjoyed by employees cannot be reduced unilaterally. If a company has historically shouldered or reimbursed employees for their out-of-town expenses as a matter of practice or policy, removing or reducing such coverage may run afoul of the no-diminution rule.

1.2. Department of Labor and Employment (DOLE) Regulations

There is no specific DOLE issuance that singularly governs employer liability for work-related travel expenses. Instead, the DOLE upholds general principles that employees must be compensated for all hours worked, and they should not be made to unduly shoulder costs that are primarily for the benefit of the employer’s business.

1.3. Civil Code Provisions on Agency

Under the Civil Code, when an employee acts on behalf of an employer (who is akin to a principal in agency terms), the employer as the principal generally has the obligation to reimburse necessary expenses the agent incurred in carrying out the principal’s instructions. If an employee is directed to undertake official business or work out of town, then the employer typically has the duty to cover or refund legitimate expenses incurred while carrying out that mandate.

2. Obligation to Reimburse Travel Expenses: Legal and Practical Rationale

Benefit to the Employer
In principle, if the travel directly serves the employer’s business interests (e.g., meeting clients, inspecting sites, attending trainings), the employer is the primary beneficiary. Under equitable principles, the employer should bear the costs of such out-of-town trips rather than transferring the burden to the employee.
Avoiding Wage Deductions
If an employee uses personal funds for work-related expenses and is not reimbursed, it effectively reduces the employee’s net take-home pay. The Labor Code generally prohibits unauthorized or unwarranted deductions from an employee’s wages. Shifting business costs to an employee could be interpreted as an indirect deduction, which could be contested.
Encouraging Compliance and Efficiency
When employees are assured of reimbursement for legitimate business expenses, they can focus on their tasks without hesitation or personal financial strain. This promotes efficiency and compliance with official assignments.
Consistency with Good Employer-Employee Relations
Providing fair reimbursement or allowances helps build trust and fosters a positive workplace culture. Failing to reimburse can lead to disputes, grievances, or low morale.

3. Common Practices and Policies

Per Diem / Daily Allowance
Many companies opt to provide a standardized daily allowance for employees traveling out of town. This allowance often covers meals, incidental transport, and other minor expenses.
- Advantages: Simplicity in administration; employees need not keep every receipt.
- Consideration: The set per diem should be reasonable, reflecting the cost of living in the travel destination.
Reimbursement upon Submission of Receipts
Alternatively, some employers require the employee to submit official receipts for lodging, transportation, and meals to be reimbursed.
- Advantages: Ensures accountability and clarity on actual expenses.
- Consideration: Requires employees to be diligent in collecting and submitting proofs of expenses.
Corporate Cards or Direct Billing
Larger companies may issue corporate credit cards or have direct billing arrangements with hotels or airlines.
- Advantages: Reduces the out-of-pocket burden on the employee; streamlined expense tracking.
- Consideration: Requires strict internal controls to prevent misuse.
Hybrid Approaches
A combination of allowances (for meals, daily incidental expenses) and direct reimbursement (for major expenses like airfare, hotel accommodations) is also common.

4. Tax Implications

BIR Regulations on Reimbursable Expenses
Under Bureau of Internal Revenue (BIR) regulations, legitimate reimbursements for business expenses are generally not considered taxable income for the employee, provided these expenses are duly supported by receipts and documentation.
Accounting Treatment
- Operating Expense: Employers can generally book these reimbursements as a deductible business expense, reducing their taxable income.
- Supporting Documents: The BIR typically requires original receipts, proof of travel (tickets, boarding passes), and an approved travel authorization or similar document for the expense to be treated as valid.

5. Key Considerations and Potential Disputes

Written Company Policies
It is best practice for employers to have written travel and reimbursement policies. These policies should:
- Clearly outline which expenses are covered.
- Provide procedures for claiming reimbursements (deadlines, forms, and required documentation).
- State whether a per diem or actual-expense reimbursement system is used.
Reasonable vs. Excessive Expenditures
Employers are generally obligated to cover “reasonable” expenses directly tied to work. Excessive or non-business-related costs (e.g., personal entertainment, luxury upgrades beyond policy limits) may be disallowed.
No Diminution of Established Benefits
If the employer historically allowed certain travel-related claims (e.g., hotel accommodations up to a specific amount, or daily meal allowance) and this practice has become customary, the company cannot arbitrarily discontinue or reduce it without risking violation of the Labor Code’s “no-diminution” principle.
Potential Breach of Contract
If an employment contract or collective bargaining agreement (CBA) includes clauses on travel reimbursement, failing to reimburse legitimate expenses may constitute a contractual breach.
Dispute Resolution
- Internal Grievance Mechanisms: Employees may first raise the issue with HR or a designated committee if reimbursement claims are denied.
- DOLE / NLRC Complaint: In unresolved cases, employees can file a complaint before the Department of Labor and Employment (DOLE) or the National Labor Relations Commission (NLRC) for illegal deduction or non-payment of benefits.
- Court Litigation: As a last resort, parties may opt for judicial resolution.

6. Best Practices for Employers and Employees

For Employers
1. Publish a Clear Policy: A transparent, detailed policy helps prevent confusion and disputes.
2. Provide Timely Reimbursements: Delayed reimbursements can burden employees financially.
3. Maintain Proper Documentation: Clear record-keeping and consistent rules help if questioned by tax authorities or in labor disputes.
For Employees
1. Understand the Company Policy: Familiarize yourself with allowances, caps, and required supporting documents.
2. Keep Receipts and Records: Ensure that you have evidence of all expenses if the company requires receipts for reimbursement.
3. Seek Clarification in Advance: If uncertain about an expense, get pre-approval from management or HR.

7. Conclusion

While Philippine labor laws do not contain a specific, standalone provision mandating reimbursement of out-of-town expenses, the overarching legal principles, established labor practices, and civil law concepts on agency collectively make it clear that employers bear responsibility for necessary and reasonable travel costs incurred by employees in the course of their duties. In practical terms, most companies in the Philippines already implement travel policies—whether in the form of per diem allowances, direct reimbursements, or corporate credit cards—to comply with these norms and maintain fair employer-employee relations.

Ultimately, clear communication, solid written policies, and a spirit of fairness are key to preventing and resolving any issues regarding travel expense reimbursements. Employers who fail to reasonably shoulder work-related travel costs risk potential labor complaints and low employee morale. Conversely, employees should ensure that all claimed expenses are legitimate, within policy limits, and properly documented to avoid any misunderstandings.

Disclaimer: This article is for general informational purposes only and is not a substitute for legal advice. For specific concerns or clarifications regarding labor laws and company policies in the Philippines, consultation with a qualified legal professional is recommended.