The employer’s obligation to reimburse the costs of business trips and to pay daily allowances is usually based on the provisions of collective agreements. There are also sector-specific differences in the reimbursement of travel costs and the conditions for the payment of daily allowances, so you should check what your collective agreement says on travel allowances. Company-specific travel rules often contain more specific instructions regarding business trips.
The Income Tax Act and the tax administration’s cost decision determine to what extent the reimbursement of travel costs can be duty-free. The Finnish Tax Administration confirms the annual criteria for calculating fringe benefits and the maximum amounts of kilometre allowances, domestic and foreign daily allowances, and meal and accommodation allowances.
The division of work is clear: the provisions of collective agreements tell us what the employer must compensate. For its part, the tax administration’s cost decision determines the maximum amounts of reimbursement of travel costs annually.
As a general rule, time spent travelling on business trips is not counted as working hours unless it can also be considered to contribute towards work performance. In practice, this means that travel time is not taken into account when calculating overtime. Time spent travelling does not primarily count as working hours, even if the travel takes place within the framework of regular working hours. Nor does the interpretation of the matter depend on whether the journey is made by the employer’s order or whether the employee is possibly compensated for the travel time.
Travelling as an employee can be part of work performance mainly for persons performing installation and maintenance work, whose regular workday essentially includes short trips from one place of work to another.
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When an employee travels during regular working hours, the employer normally pays wages. When travelling outside regular working hours, the employer is normally not liable to pay wages, unless the applicable collective agreement provides for it or the employer and the employee agree on it.
Under many collective agreements, when travelling during free time, compensation is paid as follows:
- on a workday, for the travel time, but no more than eight hours’ basic pay
- on a day off, for the travel time, but no more than 16 hours’ basic pay.
Since the reimbursement of travel during free time is usually based on collective agreements, you should always check what your collective agreement says on the reimbursement of travel time.
A business trip is normally travel undertaken by an employee on a temporary basis in order to carry out their duties at a specific place of work. It is usually an individual trip to a destination, such as a meeting trip, a customer event or travelling to a customer.
The distance between your home and the actual place of work is not considered a business trip and the employee cannot reimburse costs of such travel duty-free for the employee. However, the employee can deduct the costs in their own taxation as expenses for the production of income. If the employer reimburses the cost of travel between home and work, the compensation is treated as salary income.
Employment relationship
When an employer and employee sign a work contract, an employment relationship is created. Both sides, the employer and the employee, also have rights and obligations during and after the employment relationship.