Meal Allowance: What Employers and Employees NEED To Know
Food benefits are a great way to engage employees and support their well-being. Read up on designing a competitive program.
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It’s nothing new for companies to provide food for their employees and cover business-related meals or food for special occasions. Whether it’s an office pizza party, treats in the communal kitchen, or catered lunch for a team meeting, company-provided food is a norm of office culture.
A regular meal allowance allows businesses to take this perk to the next level. With today’s workforce being increasingly remote and geographically dispersed, more employers are offering flexible stipends that allow employees to purchase the food that best suits their preferences. These stipends are often top-rated by employees and are a forward-thinking way to care for your workforce.
In this guide, we’ll cover the ins and outs of meal allowance policies, including the benefits of providing them, the various types of food stipends to choose from, examples from leading companies, and how to navigate budgeting and setup.
A meal allowance is money given to employees to buy food. It’s also known as a meal stipend or food stipend and is usually a taxable benefit. Employers often provide these stipends so employees can purchase lunch, but they can also cover items like groceries, food delivery, meal kits, or restaurants. You might also provide a stipend for employees who travel for work so they can easily pay for meals during business trips.
Meal stipends are a great alternative to office cafeterias or catered lunch, especially as more employees are working from home. The best part about a stipend is its flexibility — instead of restricting employees to certain meal options, a stipend can give employees as much choice as you allow. Benefits programs are more powerful when employees have the freedom to tailor their benefits to their unique needs and lifestyle, making food stipends a strong offering.
There are many benefits to providing your employees with a meal stipend. We’ve outlined a few below.
Research by Square shows that “lunchflation” is real. The payments company analyzed sales of popular lunch items in the U.S. over a two-year period and found that the price of lunch items is rising faster than the average cost of all other items. For example, the average price of wraps increased by 13%, while the cost of sandwiches rose by 14%. Meal allowances can help your employees manage the rising costs of food, save money, and ease their financial worries.
Providing food benefits to your employees will keep them happy and help them stay productive throughout the day. With a flexible stipend, employees can purchase the food they want the most. Employees who have convenient access to free, nourishing food are more likely to report high levels of satisfaction and engagement.
Robin Brown, CEO of Vivipins, noticed a positive impact on employee satisfaction and productivity after implementing a meal program:
“Our employees feel valued because they know their company is taking care of them with regards to food needs, and overall morale has improved due to this benefit. Furthermore, when surveyed about how the meal allowance impacts their productivity in the workplace, an overwhelming majority reported positive results. By providing not just financial but emotional support through something as fundamental as a daily meal allowance, we are sure that engagement will only get better over time.”
Meal allowances are a powerful way to win talent and improve retention within your organization. People want to work at organizations that care about their well-being and go beyond the bare minimum in their support. Food stipends are one way to stand out among your competitors and improve your employer brand.
The flexibility of a stipend means that you’ll be providing more equitable, inclusive benefits to your employees. A stipend can support a wider range of preferences than catered meals and provide more options for individuals who are gluten-free, vegetarian or vegan, or sensitive to different allergens.
It’s also more equitable for a geographically distributed workforce. While Grubhub or DoorDash corporate accounts might seem like an attractive way to administer food benefits, they aren’t the best option for organizations with a remote worker base. Employees who live in rural areas might not have as many options for food delivery as those who live in cities. With a flexible meal program, employees can use their funds not only on food delivery but also on groceries, restaurants, meal kits, and more.
Flexible meal allowances are a more cost-effective option than other types of meal programs. Food delivery corporate accounts often tack on service, administration, and delivery fees. These fees reduce your actual food perk by as much as 20%, making your benefit less powerful. Flexible stipends reduce extraneous costs and help your benefit dollars go further.
With a flexible meal allowance, you can design a completely customized program. There are many options for how you design your stipend, and the meal allowance policy that you land on will depend on a variety of factors like budget, business goals, and employee demographics. Here are a few types of meal allowances to consider:
Food stipends are a great option if you want to provide daily lunch for your employees, whether they are on-site or remote. Giving employees a set allowance per day might be easier than catering lunch every day. Instead of worrying about ordering food that caters to different preferences and dietary restrictions, a stipend allows employees to purchase what they like. It’s also an equitable way to ensure your remote employees don’t miss out on the food perks that on-site employees enjoy.
“We offered a meal allowance of up to $10 for each employee per day. We wanted to give our employees the option to enjoy a healthy, affordable lunch while at work so that they would be better able to focus on their tasks throughout the day.”
If you have many employees who travel for work, you might want to provide a food allowance that they can use to purchase meals while they are on work trips. This business expense can be non-taxable if your company does not exceed the per diem rates set by the General Services Administration (GSA) for meals and incidental expenses (M&IE).
Per diem is a fixed daily allowance that you can pay to employees for expenses incurred while traveling. The M&IE category covers all meals (breakfast, lunch, and dinner) and other incidentals such as laundry, dry cleaning, room service, and service tips. Per diem rates are based on geographical location. While employees don’t need to submit itemized receipts for each meal, they must keep a record of their business travel.
Meals are more than just a source of nourishment — they’re also a time for bonding and connection. Companies like Automox and Muck Rack encourage employees to grab coffee or lunch together with a special stipend designed to nurture positive work relationships. As Muck Rack transitioned to a permanently fully remote model, they wanted to recreate the lunches hosted at their New York City office prior to the COVID-19 pandemic. With Benepass, they built their Muck Meals program to promote team bonding.
VP of People Erica Raphael explains the impact:
“We’re seeing photos of people connecting, collaborating, and bonding shared in real time on Slack. It’s a simple way to compel the team to take the time to connect and create those relationships that come naturally from working closely with a team. It’s been such a treat to watch friendships grow.”
The Lifetime Value Company created a similar twice-weekly food perk that they paired with a company-wide meeting invite so employees could take a break and enjoy their lunches together virtually.
Chief People Officer Stefani Ribaudo says about the program:
“These weekly lunches are frequently cited in our regular employee satisfaction surveys as one of our most-loved perks! In addition to the calendar invite, we have a ‘Lunch Days’ Slack channel where employees are encouraged to share pictures and even a monthly competition for the most mouth-watering meal. This channel has a high level of engagement and offers an opportunity for members around the globe to share their local cuisine and spark fun and interesting conversations.”
If you want to provide the most value to your employees, a completely flexible stipend is your best bet. You can still design the program to your liking (for example, you might want to restrict employees from spending at liquor stores), but this option gives employees more freedom to purchase the food they prefer. Here are some examples of the types of meal expenses that employees can spend their stipend on:
“Our monthly meal allowance provides a fixed amount of money to employees on a monthly basis, which they can use to purchase food and drinks during the workday. We chose this type of allowance because it provides flexibility for our employees to choose where and what they want to eat, rather than restricting them to specific food options.”
Website development platform Wix provides a biweekly food allowance for their employees to use on a wide variety of meal expenses. They transitioned from a corporate food delivery account to Benepass so they could create a more flexible, equitable program. Because employees have so many options at their disposal, the program enjoys a 100% engagement rate today. Read our full customer story to learn how Wix designed their program.
Healthy, nourishing meals comprise just one component of employee wellness. Employees have so many other wellness needs, and a lifestyle spending account (LSA) allows you to support all of them. A lifestyle spending account is a taxable benefit that covers a wide variety of categories such as fitness, childcare, professional development, mental health, travel, charitable giving, and home office equipment. Instead of creating a stipend solely for food, you can also add food as an eligible spending category under an LSA to give employees even more ways to care for their wellness.
If you choose to provide an allowance specifically for business travel expenses, it’s important to be aware of relevant per diem rates so you can provide adequate funds to your employees. Use the GSA’s per diem tool to calculate 2023 rates by city, state, or zip code.
You don’t need to withhold payroll taxes on per diem payments or include them in an employee’s wages unless the rate exceeds IRS-approved maximum rates or the employee fails to provide an expense report. Employers can deduct up to 50% of per diem payments for meals and incidental expenses. There are five tiers of daily per diem rates, with major cities typically having the maximum tier of $79 per day and smaller cities falling between the lower tiers of $59 to $74. The standard rate is $59.
Creating a successful food program requires some thoughtful strategizing and planning. Follow these steps to design a stipend that meets your employees’ needs and company goals.
Your employees have incredibly varied needs, and it’s important to be aware of this as you design your stipend. Run an employee benefits survey to learn more about what your employees value most in their benefits. Ask questions that help you decide the type of stipend you offer and how you structure it.
Outlining goals for your allowance will help you track its success and evaluate if you need to adjust anything about the program. Your goals might include:
Consider conducting regular pulse surveys after implementing your food allowance to assess how these metrics have changed as a result of the program.
Next, you’ll want to determine how to structure your program. Choose the type of stipend you’ll offer and the kind of eligible expenses the stipend will cover. With Benepass, you create a unique meal allowance policy that we code into our platform and Visa card, so transactions are automatically approved or denied without manual work from your team. Remember that greater flexibility translates to higher levels of employee engagement and satisfaction.
Determine how much you want to contribute to food stipends and how often you’ll replenish funds. Monthly cadences are common for stipends, but biweekly or quarterly timeframes are also options. If your stipend is centered around travel expenses, per diem rates can help you set an appropriate budget. You can also survey employees and research average meal prices in your area, as Shirley Borg did at Energy Casino:
“To determine the amount of the allowance, we considered the average cost of a meal in the local area and surveyed our employees to understand their typical spending on food during the workday. Based on this information, we set a monthly amount that we felt was fair and reasonable.”
You should also benchmark against employers of a similar size and industry to assess the competitiveness of your benefits. The 2023 Benepass Benefits Benchmarking Guide found that companies provided an average of $89 in monthly food benefits. Download the complete report to see how companies of various sizes and industries are investing in meal benefits.
You have a few options for managing your meal program. Evaluate the pros and cons of each approach.
Some employers go the manual route and set up a process to collect receipts, approve expenses, and reimburse employees through payroll. The problem with this approach is that it can be incredibly time-consuming and error-prone, with many teams resorting to Excel spreadsheets to track expenses. Reimbursements are also not equitable as you are asking employees to front the costs of their benefits and wait to be paid back.
Another option is to use expense software like Concur or Expensify to manage your food program and reimburse employees for eligible expenses. But this type of software is meant to help organizations handle business expenses, not benefits and stipends. With this option, it can be tricky to track food expenses apart from all other business expenses uploaded to the platform and ensure that employees are not spending over their limit. The blending of expenses also makes it more difficult to manage tax compliance accurately and efficiently.
Lastly, you can use a flexible benefits platform like Benepass to handle the stipend. Benepass allows employers to design a program that fits their unique requirements. Employees receive Visa cards they can use to spend on a variety of items within their company’s benefit policy, and they can easily view and manage their benefits within the platform. Flexible benefits platforms are a valuable option because they automate certain processes such as tax compliance and reduce the administrative burden of tracking and approving or denying hundreds of expenses.
Ensure that employees understand your policy by communicating the details thoroughly. Explain how the stipend works, its tax implications, and where employees can go if they have additional questions. Give employees ideas of how they can spend their funds to increase engagement, and provide the valuable context of why you are implementing this benefit.
For many teams, the biggest hurdle to implementing a food allowance is finding the budget for it. Below are a few ways to budget for a stipend program.
Maybe you’ve already allocated new budget for a food program. Make sure you factor in the price of your chosen benefits platform, or estimate the cost of time and labor to your HR team if you choose to handle the program manually.
Often, it’s necessary to pursue buy-in from senior leadership before your budget is approved. Highlight the benefits of meal benefits, including how they improve employee engagement, productivity, and retention. Conduct benchmarking against companies similar to yours to make a case for competitive benefits like a food program.
You don’t always need net new budget to create a meal program. Another option is to review your current benefits and assess whether there are underutilized programs you can sunset and redirect budget from. Most companies can consolidate the point solutions they may be using to manage their various benefits programs into a single lifestyle spending account that covers a wide range of eligible expenses, including food expenses.
If your company has a large base of remote employees or operates on a hybrid work model, it makes sense to rethink certain on-site programs such as free lunches or office cafeterias. Instead, you can redirect the budget earmarked for office snacks and food to a stipend that’s inclusive regardless of whether employees work from home or the office.
Offering meal allowances will excite your employees and cement your reputation as an employer of choice. Giving employees funds they can use to purchase food reduces financial stress, promotes employee well-being, and improves productivity.
Follow these steps to get started with a Benepass Food account:
To learn more about setting up a Benepass Food account, book a demo or email firstname.lastname@example.org. Make sure to read up on other flexible benefit stipends like wellness stipends, work from home stipends, cell phone stipends, and childcare benefits that can complement a food program and further support employee well-being.