A travel policy is the foundation of any company’s travel and expense management program. It's a set of rules and best practices that specifies how employees should book their trips. Without a travel policy, an organization has no system for controlling costs, ensuring employee safety, and capturing expense data. Even with a travel policy, it can be difficult to achieve these T&E objectives. That’s because a travel policy is only useful so far as employees actually follow it.
Low policy compliance is one of the biggest factors behind the high cost of corporate travel. A survey by the Association of Corporate Travel Executives (ACTE) found that 72% of travel managers had not yet achieved their desired level of policy compliance. However, that same survey also found some encouraging signs. More than half of corporate travel managers reported that compliance rates were improving. Moreover, travel policies are becoming more sophisticated, and hence better suited to helping companies achieve their objectives related to cost control.
The ACTE wrote that “the language and terms of travel polices are being tweaked to be very specific; mandates are being implemented, accompanied by clearly spelled-out penalties for offenders; and sophisticated reporting tools are being utilized to monitor and measure compliance.” Additionally, travel managers were found to be “taking steps to consistently and effectively educate travelers about the policy,” and were placing a greater emphasis on “being sensitive to travelers’ experience and stresses on the road.”
So how can you tell if your company travel policy is working?
There are dozens of KPIs that companies use to measure program effectiveness. Some of these are based on a managed travel framework, in which employees are required to use a travel management company (TMC) and corporate online booking tool (OBT) when planning trips. In this case, compliance is a matter of employees using the official systems that are in place.
For companies that allow employees to book on the open market, policy compliance might be defined differently. For instance, a trip could be considered compliant if it falls within prescribed spending guidelines, is booked far enough in advance, and is properly submitted for expense reimbursement.
Some compliance KPIs measure how much of a company’s travel spend is being captured and accurately reported:
Booking Visibility - The percentage of travel booked via an approved channel, such as a travel management company or online booking tool. Bookings made outside of an approved channel are not guaranteed to comply with the spending and vendor guidelines laid out in a travel policy.
Payment Visibility - The percentage of travel booked using an approved form of payment, such as a corporate card. More broadly defined, payment visibility refers to the extent to which employees’ travel purchases can be associated with relevent expense data (e.g. line item details on the vendors used, the trip dates, and destination). Incomplete expense records means low payment visibility, which makes it difficult for a company to see exactly how it is spending on employee travel.
Other compliance KPIs measure whether employees are making the desired booking decisions. Here are just a few:
Spend Under Contract - The percentage of travel spending that goes to the airlines, hotels, and car rental companies with which an organization has contractually set rates. This KPI gives a top level indication of whether employees are actually taking advantage of the discounts negotiated by a company’s travel procurement team.
Cabin Compliance Rate - The percentage of airline tickets booked within the appropriate airline cabin class, as specified for a given flight type by the company travel policy.
Hotel Compliance Rate - The percentage of hotel bookings that meet the star class and/or vendor specifications laid out in the company travel policy.
Advance Booking Compliance Rate - The percentage of trips booked more than the minimum number of days in advance, as specified in the company travel policy.
Lowest Logical Fare Utilization Rate - The percentage of trips for which employees booked the lowest fare available within the online booking tool.
There’s another KPI that greatly impacts travel policy compliance and that’s often overlooked: traveler satisfaction rate. If employees find the company policy to be a source of inconvenience and discomfort, they’re more likely to ignore it. By continuously gauging whether travelers’ needs are being met, a company can make necessary modifications, improve employee communications, and ultimately improve policy compliance.
Looking to reduce travel expenses at your company? See how Rocketrip can improve policy compliance.