Like it or not, the pandemic has fundamentally changed how employees and employers approach work. More than ever, employees are now prioritising job opportunities and companies that offer something extra, be that a hybrid working setup, extra support for parents, and other benefits that facilitate a better work/life balance.
One way to boost employee satisfaction is by introducing an expense scheme. However, when formulating such a scheme, you should know the things that should be included for it to serve its purpose.
So, in this article, we will be taking a closer look at what expense policy is and some important things that should be included in it.
What Is An Expense Policy?
An expense policy is essentially a guide for employees who are purchasing things using company money. The policy should outline what is deemed an appropriate company expense whilst also indicating what specifically is not allowed.
The policy should then explain the reimbursement procedure, including who to contact and which forms to fill in.
Important Things to Consider When Putting Up an Expense Policy for Your Company
1. Purpose and Scope
Define the purpose of the policy and the scope of what it covers. For instance, mention what expenses are covered, whether it’s business-related travel, meals, lodging, office supplies, etc.
2. Approval Process
Describe the process for obtaining approval for expenses, including who is responsible for approving expenses and the types of documentation required for approval. This can include receipts, invoices, or other forms of proof of purchase.
3. Reimbursement Process
Specify the timeline for submitting expenses for reimbursement and the process for receiving reimbursement. For example, mention the frequency of reimbursements, whether it’s weekly, bi-weekly or monthly. This is very important, so all your employees will be well-informed about the whole process.
4. Spending Limits
Specify spending limits for different types of expenses. You may want to set a limit on the amount of money an employee can spend on meals while travelling for business purposes.
5. Travel and Lodging Guidelines
Define guidelines for travel and lodging expenses, including airline tickets, hotel bookings, car rentals, and other related expenses. Specify what types of travel expenses are reimbursable and what expenses are not.
6. Meal and Entertainment Guidelines
Specify the company’s policies on meal and entertainment expenses, including whether these expenses are reimbursable and if there are any spending limits.
7. Define non-allowable expenses
It’s important to make clear what kind of expenses are not going to be covered by the company in order to avoid some awkward misunderstandings later down the line.
Make it abundantly clear that personal purchases like clothes, souvenirs, and excessive food bills will not be reimbursed and are completely the employee’s responsibility. This is really important as some employees might try and take advantage of such schemes and use them to save money in their life outside of work.
8. Non-Compliance
Clearly define the consequences of violating the expense policy, including disciplinary action and potential legal action.
8. Training
You want all your employees to be aware of this policy and adhere to it, so consider providing training to them about the expense policy. Show them how to submit expenses, what expenses are reimbursable, how to maintain appropriate documentation, and many more.
9. Updates
Ensure that the expense policy is reviewed regularly to reflect any changes in company policy, tax laws or regulations, etc.
Which Expenses Should Be Included?
It’s very common for companies to have a travel allowance for employees. This is particularly beneficial for employees who work remotely but are required to come into the office every now and again for a client or team meeting.
For such instances, you should offer to reimburse them for their train tickets or subsidise the petrol costs if they are driving. You may also include taxi fares or even airfares if they’re coming from far away.
Other expenses include food if the employee needs to buy food on the go. You might even go one step further and contribute to employees’ physical and mental health with subsidised gym memberships or counselling.
Policy Management
Policy management is key if you want the policy to work. This requires you to keep everyone up to date with any changes to the policy, make the policy understandable with clear and simple language, and incorporate employee feedback. This shows how much you value their opinion and your commitment to making their life more pleasant at work.
FAQ
Which company should have an expense policy?
Every company, regardless of size or industry, should have an expense policy in place. It is a best practice for managing and controlling expenses, reducing financial risk, and promoting transparency and accountability.
Is the expense policy the same for companies in all industries?
No, the expense policy can vary depending on the industry, the size of the company, and the nature of its business. For example, a company in the manufacturing industry may have different types of expenses than a service-based company, and the expense policy should reflect those differences.
What are some common types of expenses covered in an expense policy?
Common types of expenses covered in an expenses policy can include:
- Travel expenses (such as airfare, car rental, and lodging)
- Meal expenses (such as breakfast, lunch, and dinner)
- Entertainment expenses (such as client dinners or team-building events)
- Office expenses (such as supplies or equipment)
- Professional development expenses (such as conferences or training programs)
- Mileage expenses (for employees who use their personal vehicle for business purposes)
- Communication expenses (such as cell phone bills and internet service)
- Miscellaneous expenses (such as tips or gratuities)
Are there any tax implications for reimbursing employee expenses?
Yes, there can be tax implications for reimbursing employee expenses. In some cases, the reimbursement may be considered taxable income for the employee, and the employer may be required to withhold taxes or report the reimbursement on the employee’s W-2 form.
However, there are also some types of expenses that can be reimbursed tax-free, such as business-related travel expenses or certain work-related education expenses.
