Managing how employees spend company money on various expenses can be a challenge for employers. Are staff expected to spend their own money on certain expenses? How can they claim this amount back? Companies must have a formal reimbursement procedure in place for specific occasions. Employees can use this policy and procedure to understand what kind of spending is and is not allowed. This reduces the risk of overspending and false claims, A clear policy on claiming expenses helps maintain a positive working relationship and ensures there is no wastage of company funds.
Legitimate business expense claims
A business expense is any cost incurred by the company while running the business, and these costs can help reduce tax liability for business owners.
Specific expenses may vary depending on the industry and type of company but generally include:
hotel and travel expenses
motor vehicle expenses
the cost of running a business website
maintaining or replacing plant equipment, office supplies or utilities
capital contributions
environmental expenditure
subscriptions for software packages
Limits employers can impose
Employers have a right to impose limits on staff spending. The purpose of these limits is to reduce overspending, time spent on chasing false claims and to streamline the approval process. Spending limits must be within reason and clearly communicated to employees and those in charge of the approval process.
An employer can impose limits on spending in the following ways:
the maximum amount of money an employee can spend on an expense
the kind of providers employees can choose (for example, certain airlines or hotel chains)
the amount of notice an employee must give to request the spending
whether employees use company-issued corporate cards or pay for the expense, then ask for reimbursement
How to write an expense claim policy
The purpose of an expense claim policy is to inform employees on what kind of spending is and is not acceptable. It should outline the process of getting company approval. It can also document how the business keeps records of spending, and the kind of limits imposed on employees.
Each industry and organisation is different, hence there will always be variations to the expense claim policy. For example, truck drivers may need to manually seek reimbursement for fuel costs, while another company may have company-issued corporate cards for purchasing fuel.
An expense claim policy should also describe how employees are reimbursed for costs they incur while carrying out the business. The reimbursement must only apply to company-approved spending and be within the limits of the policy.
Other information employers should outline in their policy include:
who approves staff spending
methods for maintaining records of company spending
how employees submit a reimbursement claim
how the business claims for tax deductions
the process of investigating false claims and penalties for non-compliance
For more information on claiming expenses in the workplace, contact Employsure on 0800 568 012.
