Reimbursement Policy at Workplaces

Running a business can be expensive. As a business owner, you should...
  • Author: Siva
  • Last updated: September 20, 2022
  • 5 Minutes

Running a business can be expensive. As a business owner, you should know that expenses can go beyond operation costs if not properly managed. As your business grows, your employees may be required to spend on services that benefit the company. However, without setting limits, accounting for such expenses may be difficult. For this reason, every employer should communicate to their employees the kind of expenses that can be reimbursed and those that cannot. This information can better be presented using an Employee Expenses Reimbursement Policy.

But what is an Employee Business Expenses Reimbursement Policy and how should it be implemented?

In this article we will look to answer these questions and many more.

Let’s begin.

What is an Employee Business Expenses Reimbursement policy?

An Employee Expense Reimbursement Policy is the process an employee must follow in order to be paid back by their employer when incurring business related expenses. Typically, a reimbursement policy is related to an employee traveling for work, engaging in business dinners, or purchasing work-related supplies or tools.

Why is it important to have an expense reimbursement policy?

Having a comprehensive Expense Reimbursement Policy brings many benefits to a company. These include:

It allows you to partition reimbursable and non-reimbursable expenses

One of the main reasons an employer would create an Expense Reimbursement Policy is to help distinguish reimbursable expenses from the non-reimbursable ones. When employees are made aware of the legitimate expenses they can pay on behalf of the company, it is easier for them to know what they can purchase and what they cannot.

It allows businesses to control costs

Having a robust Expense Reimbursement Policy can help with cost control. There will be cases where an employee will want to claim more than their allocated budget. When a business doesn’t have a clear expenses policy, it gives free reign to employees to overspend or, sometimes, engage in fraudulent activities. 

It can help create an efficient workflow

Managing company expenses can be difficult. Having a comprehensive Expense Reimbursement Policy can help the finance team to track and manage employee expenditure easily as it brings all the information about expenses and expense reimbursement into one area. 

What should I include in an employee expense reimbursement policy

Knowing what to include in an Expense Reimbursement policy can be challenging, especially if you are new to the problem. Typically, a standard employment reimbursement policy should contain the following elements:

A list of reimbursable expenses

Depending on the nature of the business, an employer may prefer to list all the types of valid expenses as part of its reimbursement policy.

Generally, the following are the main types of expenses that will qualify for reimbursements:

  1. Travel expenses. These include all expenses made to facilitate business trips such as accommodation, legal documents, transportation fares, vaccinations, and taxi fares.
  2. Conference and seminar fees.
  3. Office supplies and stationaries.
  4. Computer software.

State the guidelines for requesting expense reimbursements

As an employer, you need to outline clear guidelines on how reimbursements should be requested. You will need to state to employees that they must track their expenses by keeping every receipt of purchase. While paper receipts may sometimes look bulky or tedious to handle, there is digital software that can make the process even much simpler.

You will also need to set a deadline for filing expense reports. Once the expense reports have been presented to the financial team, they should be processed as soon as possible.

Finally, the employer will need to decide whether to reimburse the employee out of pocket, direct to a bank, or through any other convenient payment method.

A list of non-reimbursable expenses

There are certain expenses that won’t qualify for reimbursement, and, should the employee incur any, the employer will not be held responsible. These need to be listed in the policy.

Generally, the following are the common non-reimbursable expenses:

  1. Loss of personal property.
  2. Penalties charged due to employee recklessness.
  3. Unauthorized flight upgrades, meals, or entertainment.
  4. Any other expenses made on non-authorized persons such as spouses, friends, or children.
  5. Buying personal items that do not conform to the company’s operations.

Set out the consequences of fraud

In your Expense reimbursement policy, you should clearly indicate the consequences of an employee violating any set rule. Consequences can include:

  1. Non-reimbursement of the expense.
  2. Written or verbal warnings.
  3. Repayment of the fraudulent amount.
  4. Summary dismissal.

How do I create an effective Expense Reimbursement Policy?

Creating an Expense Reimbursement Policy can sometimes be confusing, especially for those doing it for the first time. If you want to do it effectively, proper documentation should be your utmost concern.

The following are some of the ways an employer can implement an effective reimbursement policy:  

Have a distinct and specific policy

The first thing you need to ensure is that your reimbursement policy is clear and straightforward. Make good use of simple and easily understandable language so that everyone understands what is expected of them.

Test the policy out on employees

The chances are that not every employee will fully comprehend the policy in its written form. Therefore, you will need to test the policy on a small representative sample before rolling it out to the entire workplace. The feedback you receive will enable you to see which parts are understood and which ones are not. 

Make it available to all members of staff

Once the policy is finalised and tested, you will need to make it easily available. Depending on your preference, you can share the policy document through a cloud-based drive, email, hard drives, or printed copies.

Make sure the policy asks for receipts

When an employer requests reimbursement, the employer should always request the receipts of purchase. This is the only way to confirm or validate the expenses made on behalf of the company. 

Once you have the receipts scrutinize them

The employer should take their time to validate receipts. Check whether the receipt is forged, or whether the purchase was necessary at that particular time. Also, investigate whether the purchase was business-related or personal.

In conclusion

Having an employee business expenses reimbursement policy is a great way to protect your business from fraud and higher than expected expenses while at the same time highlighting to staff that you are there to look out for them and cover their needs.

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Written by Siva

I write & describe the value & benefits delivered by Paperhift's rota planning, staff time tracking, and employee payroll management software. Especially useful for Shift Planners, Rota Managers, Team Admins, and HR Teams :-)