Are Employers Required to Pay Travel Allowances for Out-of-Town Work in the Philippines?

Short Answer

There is no blanket law that forces private-sector employers to pay a travel allowance (e.g., per diem) whenever employees are sent out of town. However, Philippine labor and tax rules create practical obligations that often mean the employer must shoulder or reimburse necessary and reasonable travel expenses when travel is required for work—and compensate travel time that legally counts as “hours worked.” In many companies, the duty to pay a travel allowance arises from contract, company policy, or a CBA; once consistently granted, it may become a demandable benefit under the non-diminution of benefits rule.

Below is a complete, practitioner-style guide.

The Legal Building Blocks

1) No statute mandating a universal “travel allowance”

The Labor Code and its IRR do not impose a general requirement to pay a fixed travel per diem in the private sector.
Exception sources that can make it mandatory in a given workplace:
- Employment contract / assignment letter
- Company policy or handbook
- Collective bargaining agreement (CBA)
- Long-standing company practice (consistent, deliberate, and unconditional over time), protected by the non-diminution of benefits principle

2) Who must bear necessary business expenses?

When the employer requires out-of-town travel to perform work, the costs of transportation, lodging, and similar necessary, reasonable expenses are ordinarily for the employer’s account.
Related wage principles:
- Employers generally cannot shift business costs to employees through wage deductions except in narrow, lawful cases.
- Items primarily for the employer’s benefit (e.g., required lodging to finish work) are treated as supplements rather than “facilities”—they shouldn’t reduce the employee’s wage.

Practical upshot: Even without a formal “allowance,” employers should reimburse required, reasonable costs of official travel or directly provide them (tickets, hotel booking, etc.).

3) When is travel time compensable?

The IRR on “hours worked” (reflected in DOLE’s official handbook) recognizes these core rules:

Compensable travel time
- Travel that is all in the day’s work (e.g., moving between job sites).
- Required travel during the employee’s normal workday—even if it happens on a rest day or holiday—generally counts as worktime.
- Time when the employee is working while traveling (e.g., required to perform tasks on the way).
Usually not compensable
- Ordinary home-to-work and work-to-home commuting.
- Purely personal side trips while on travel.
Edge cases
- Overnight/out-of-town trips: travel that cuts across normal working hours tends to be treated as hours worked; travel outside normal hours typically doesn’t count unless the employee is made to work while traveling or is not free to use the time for their own purposes.
- Waiting time that the employer controls (“engaged to wait”) is worktime; purely personal waiting (“waiting to be engaged”) is not.

If travel time qualifies as “hours worked,” then it can trigger:

Overtime pay (generally +25% of hourly rate; higher on rest days/holidays)
Night shift differential (generally +10% for 10:00 p.m.–6:00 a.m.)
Premium pay when applicable (rest day/holiday rules)

4) Field personnel and managers

Field personnel (whose hours cannot be determined with reasonable certainty) are usually excluded from overtime, premium pay, and night shift differential. Many employers instead give a fixed travel/field allowance by policy.
Managers and members of the managerial staff are likewise excluded from overtime and premium pay, though companies often still grant per diems.

5) Tax treatment of travel allowances and reimbursements (private sector)

Reimbursements under an “accountable plan” (substantiated by official receipts/itineraries; any excess returned) are not taxable to the employee and are deductible to the employer as business expense.
Unliquidated fixed allowances (no receipts or liquidation; or amounts beyond reasonable business need) are generally treated as taxable compensation to the employee and subject to withholding.
Company tip: Use clear, written travel policies and liquidations to keep travel benefits non-taxable where intended.

6) Non-diminution of benefits

If a travel allowance/per diem has been regularly, deliberately, and uniformly granted over time, it can become a demandable benefit which the employer may not unilaterally withdraw or reduce, absent a valid reason recognized in jurisprudence.

7) Contractors and project assignments

The direct employer (e.g., the contractor) bears primary responsibility for wages and benefits—including travel-related obligations—of its employees deployed to a principal’s site. Principals can incur solidary liability in some cases if labor standards are violated.

8) Occupational safety and work injuries during travel

Employers have a general duty of care (OSH Law) when directing employees to travel for work (e.g., safe transport arrangements where applicable).
Work-related injuries sustained in the performance of duty while on official travel can be compensable under the Employees’ Compensation Program, even if away from the usual workplace (subject to the usual factual tests). Ordinary commuting is treated differently and has limited exceptions.

What Counts as a “Travel Allowance” vs. Reimbursement?

Travel allowance / per diem: A fixed amount intended to cover meals, lodging, or incidentals. May be:
- Non-taxable if structured as an accountable plan with liquidation caps tied to actual business purpose; otherwise
- Taxable if paid regardless of actual expenses or not liquidated.
Reimbursement: Employer pays the actual, reasonable, necessary expenses supported by receipts. Typically non-taxable to the employee.

Best practice: Use a hybrid—reasonable per diem caps plus mandatory liquidation of major items (e.g., airfare, hotel invoices; receipts for ground transport) with a small incidental per diem.

Policy and Contract Drafting Tips

Clarity on eligibility and triggers
- Define when travel is required by the company vs. voluntary.
- Identify who approves travel and what costs are covered.
Define compensable travel time
- Mirror DOLE’s “hours worked” framework; specify examples of compensable vs. non-compensable time.
- Address overnight travel and travel that crosses normal hours.
Rates and caps
- Set reasonable per diem bands by location (e.g., Metro Manila vs. provincial vs. international).
- State that the company books major items (air, hotel) whenever possible to avoid employee outlay.
Liquidation rules
- Require receipts for transportation and lodging; allow a small unreceipted incidental allowance.
- Impose timelines for liquidation and treatment of advances and excess.
Tax language
- Declare that the policy is an accountable plan: allowances are for business use; employees must substantiate and return excess amounts.
Non-diminution / practice
- Reserve the right to review rates, while acknowledging that existing statutory benefits and any demandable company practices will be respected per law.
Safety and insurance
- Require approved carriers/hotels; outline emergency procedures.
- Remind employees of coverage under company HMO/EC Program where applicable.

Worked Examples

Example A: Required day trip within normal hours

Normal schedule: 9:00–18:00 (1-hour unpaid meal break).
Travel for client meetings between sites from 10:00–17:00 (with 1 hour meal break).
Compensable time: 7 hours (excluding meal break) as hours worked.
Allowance: If policy grants a meal per diem for official travel days, pay it. Otherwise reimburse actual meals if covered.

Example B: Overnight trip cutting across normal hours

Flight 20:00–21:30 the night before; hotel check-in 22:00.
Next day: 9:00–17:00 meetings; return flight 19:00–20:30.
Compensable travel time: Generally the segments that fall within 9:00–18:00 and any time the employee is made to work while traveling. Evening flights outside normal hours typically not compensable unless work is performed or the policy says otherwise.
Expenses: Airfare/hotel/ground transport reimbursed or company-booked; meals per diem if policy provides.

Example C: Field personnel

A field sales rep with indeterminate hours receives a fixed field/travel allowance by company policy. Overtime and premium pay don’t apply; the allowance (taxable or not) depends on how the policy handles liquidation.

Frequently Asked Questions

1) Are we legally required to pay a per diem? No. But if you require the travel, you should shoulder or reimburse necessary and reasonable business expenses. A per diem is a common, clean way to do this.

2) Do we need to pay for travel time? Only when travel time qualifies as hours worked under DOLE rules (e.g., travel that’s part of the day’s work, or that occurs during normal hours on required trips). If so, all usual premiums apply.

3) Can we deduct travel costs from wages if the employee fails to liquidate? You may offset documented, justifiable advances or overpayments consistent with law and due-process notice, but you cannot use travel to make unlawful wage deductions or push pay below minimum standards. Structure the policy carefully.

4) Our per diem has been paid for years—can we cut it? If it has become a regular and deliberate practice, reducing it may violate non-diminution of benefits. Seek legal review; changes often require collective bargaining or transition arrangements.

5) Are ride-hailing, parking, or tolls covered? If necessary for the official trip and approved by policy, yes—either reimbursed at actual cost or under a reasonable allowance.

6) What documents should we keep? Approved travel authority, itinerary, boarding passes/e-tickets, hotel folios, official receipts, liquidations, and certifications (e.g., client meeting attendance). These support tax compliance and defend audits/claims.

Compliance Checklist (Private Sector)

Written travel policy (scope, approval, rates, liquidation).
Clear “hours worked” rules for travel; overtime/night/rest-day logic.
Accountable plan wording (substantiation + return of excess).
Rates benchmarked by location; reviewed periodically.
Booking rules (company books vs. employee outlay).
Safety standards for transport/lodging; emergency contacts.
Documentation workflow for audit and payroll/withholding.
Training for supervisors and payroll on the policy.
CBA alignment (if unionized) and legal review.
Guardrails against unlawful wage deductions and benefit diminution.

Bottom Line

No across-the-board legal mandate to pay a travel allowance.
Yes to reimbursing/shouldering necessary out-of-town business expenses when travel is required.
Pay for travel time that counts as hours worked; apply overtime/rest day/night premiums when triggered.
Put it all in a clear, accountable travel policy—and once you consistently grant a travel allowance, treat it carefully to avoid non-diminution issues.

(This article provides general information for the Philippine private sector. Specific facts, contracts, and regional wage rules can change outcomes; when in doubt, obtain tailored legal advice.)