Defining expense reimbursements for your employees
Updated: Apr 4
For your company's expense policy to work accurately and efficiently, you need a complete definition. This may include any type of company expenses your employees may incur to be able to tell if specific payments are actually valid for reimbursements.
In this blog, we will focus on which expenses should be covered by your business and which ones shouldn't.
So to begin with, let's define what expenses are actually reimbursable. A business expense should be defined as an expense in regards to either a service your employee provides the company with, or an expense that your employee needs to make to be able to get their job done.
The exact legal definition differs from country to country, but also from company to company. It's up to you to decide whether you accept reimbursements for phone internet plans or a meals during a business trip.
Another important factor to take into account is how an employee proves the expense made. It's important to have a valid evidence, whether that's a receipt or an invoice.
The said receipt or invoice should include a date and time of purchase, address, total amount and taxes incurred to the total amount. A defined purchase description is also vital to make sure the expense was in fact, a business expense.
For instance, you may pay your employee for a hotel stay during a business trip abroad. However, you are not accountable if they choose to use the spa facilities or massage treatments.
To allow for a proper procedure done in terms of expense reimbursements, your business should have a department and a person assigned for this, as well as a time frame an employee can ask for their reimbursement.
Let's dive right into which categories your business accounts for when it comes down to expense reimbursements.
1) Travel Expenses
Possibly, but not definitely, one of biggest reimbursement are employee business travel expenses. As an essential part of business for any company, employees should feel confident that they will get reimbursed for any costs that they wouldn't otherwise have to pay for.
From acquiring visas or vaccines depending on the destination, to the ride to the airport, plane ticket costs itself, any food or drink purchases during the travel, hotel stays and much more depending on the duration of the trip and the destination.
Clearly, each business is different, and depending on the role of the employee, the rules of travel expenses change. For instance, you can't expect a manager to travel with public transport to the airport or stay at an airbnb. But the rules may differ if you're sending a junior employee.
Whether your employee needs reimbursement for transportation expenses during a work related trip or coming to the office everyday, your business needs to have a complete guideline as to how they will accept these expenses.
For instance, a taxi ride to the office everyday is not something a business should cover but maybe a parking area, or a bike to work scheme, or season tickets for public transportation should be considered by any business to ensure to healthy relationship with the employees.
Furthermore, whilst an employee is abroad on a work trip, depending on the country they are in, the travel expenses should differ.
For instance, in Europe, public transportation is more than sufficient but in other countries such as the Emirates or other Asian countries, the use of taxis for short trips or car rentals for longer trips should be assumed.
Coming to a frequently occurring expense, meals can also be a tricky one.
Obviously, an employee should be reimbursed for any meals they have whilst on a business trip or a business conference. Now whether your business creates an itinerary for them or the employee decides on the restaurant themselves, there needs to be cap.
Where it gets tricky is when an employee decides to take a business partner, client or prospective business associate to a meal. The cap on this expense needs to be much higher, because maybe your employee is fine with going to a local restaurant for a medium priced meal but a business associate will not appreciate that.
Similar to meal expense reimbursements, entertainment can be the same.
Your company can offer Tuesday happy hours after work to develop a friendlier work environment and help employees to get to know each other. This expense should also obviously be reimbursed by the company, and this is where the company has the most say. As a company, you can choose the menu and the place for where these hangouts happen.
Another example would be if your employee wants to take a business partner or client to a lounge for a drink or to a concert to win them over. Having evidence that the client is in-fact present, thee company should not hesitate to reimburse the employee for such expenses.
5) Office Expenses
Office expenses could be anything from subscription to a daily newspaper to have handy at the office, to new desktop computers, keyboards and mouses handy in case an employees tools stop working. Another office expense is subscription to computer tools which could differ from business to business. For instance, Microsoft Office or Google tools are pretty common, adobe, financial, legal, accounting and regulatory platforms may also be needed to simplify and ease the access for employees and the directors board.
Proper lighting, chairs and desks are also expenses a business should incur to offer a better work environment for their employees.
We hope you have benefited from this article on defining expense reimbursements for your employees.
Every business has a unique expense definition. This article will help understand how to define business expenses for your company as well as helping you define which expenses you will have reimbursed and which ones you won't.
Follow us over at https://www.haslle.com/blog so you don't miss a blog!