How do you budget for extended business trips or for the cost of short assignment-related trips? With the right information companies can anticipate expenses and check whether there are savings to be made. Simon Franklin, ECA’s Benefits and Daily Rates Manager, explains.
Being able to access accurate per diem data enables organisations not only to set appropriate allowances for business trips – or benchmark against expenses – but also allows the business to anticipate costs. Useful for short or extended business trips, such figures can also help when costing out assignment related trips. For example, when sending an assignee on a five day pre-assignment visit or to cover expenses for time spent in temporary accommodation at the start of an assignment while the family is waiting to move into their rental property.
ECA’s Daily Rates reports provide average costs for hotel accommodation, which makes up the bulk of any daily allowance, as well as meals, drinks, laundry, taxi transport and daily essentials such as toiletries and international newspapers. Furthermore, this information is broken down so it can be tailored to exclude certain items if necessary. For example, a company using the figures to devise an allowance to pay a commuter away on assignment just a few days each week might choose to remove laundry costs.
A global overview
Assuming costs for all of the above are included, the African cities of Lagos (Nigeria) and Luanda (Angola) are among the most expensive of ECA’s Daily Rates locations for business trips. The difficulty of finding secure hotel accommodation and the high prices of services and imported goods push costs up in these locations. A business standard 4 star hotel room in these cities including breakfast typically costs USD 420-470 per night. Data from our latest survey suggest that a company should count on allowing around AOA 72800 per day in Luanda for employees staying in 4 star accommodation there, which at today’s rate is USD 680.
In Europe, the Swiss cities are particularly expensive and an allowance to cover daily costs in Geneva is likely to hover around CHF 680 (USD 700). In Central London don’t be surprised to see a GBP 230 bill (USD 340) for one night’s 4 star accommodation with breakfast while in Paris the equivalent would cost EUR 170 or USD 180 at today’s rate.
Predictably, perhaps, New York is the Americas’ most expensive destination in terms of Daily Rates. A business dinner at a restaurant in Manhattan is likely to cost anywhere between USD 60 and USD 140 and overall a company should anticipate costs of around USD 720 every day their employee is there for work.
In Oceania, Papua New Guinea’s Port Moresby is more expensive than any Australian city at just under PGK 1470 (USD 555) a day. With security in the city being a big concern and safe hotels being few and far between accommodation costs are extremely high (PGK 920/USD 345).
Seoul in South Korea is one of the Asian locations where the daily cap is highest at around KRW 558 370 (USD 500) per day.
At the opposite end of the scale the cheapest cities for business trip expenses include the Kosovan capital, Pristina, Cuba’s Havana and cities in South Africa and India. Tarawa, the capital of Kiribati in the central Pacific is one of the cheapest locations surveyed. 4 star overnight accommodation including breakfast there is just USD 80 and you can budget USD 150 each day your employee is there and still expect to get some change.
Exchange rates movements will of course also have an impact on costs to a company sending staff on international trips. The recent strength of the US dollar, for example, means that companies sending employees out of the States will find costs in dollar terms have fallen. Conversely, those sending staff outside of the Eurozone are likely to have seen the cost to them of covering daily living expenses increase. Our Daily Rates reports capture costs in the local currency wherever possible so that organisations can quote in and check against the currency which the employee will be spending while on the trip.
Reimburse or per diem?
Reimbursing host country travel and subsistence expenses upon submission of receipts is the more common way in which companies cover daily business travel expenses. However, administratively it can be burdensome. Alternatively a per diem rate is used or employees are permitted to use company credit cards. In some scenarios more than one of these approaches may be adopted: a company might pay a per diem for trips of between ten days and one month, for example, but ask employees to provide receipts for shorter trips.
Cost of compliance mistakes
Should an employee exceed a threshold of total number of days in a country, a tax liability may well be unwittingly triggered –which can of course be costly. Keeping track of employees is a challenge – especially if you are not always aware of the trip. Expense management and a centralised flight booking system can assist to some extent. It's also important to be able to record which days were worked and which were vacation or weekends. Incidentally, ECA’s Daily Rates can be beneficial should companies need to justify granting per diems above any national guidelines for tax purposes since it enables them to show that the figures they apply come from a third party provider.
When a daily rate is no longer cost effective
Calculating costs on a daily basis is usually only appropriate for business trips lasting no more than two weeks. Certainly, should it end up being closer to a month, short term assignment conditions are likely to be more cost-effective, through the provision of rented accommodation or self-catering rather than hotels and meals out, for example. ECA’s Short Term Assignment Calculator enables companies to calculate weekly or monthly essentials allowances for short-term international assignments. For more information about this or anything you have read here do get in contact. 150 each day your employee is there and still expect to get some change.
ECA’s Daily Rates reports for 2014-15 cover 289 locations in 170 countries. They are available to purchase on an individual basis, as a global set, or as part of a wider subscription. Get in touch for more details or to view a sample report.