Business owners and employers need to keep track of several things including their employees, performances, and even finances within the business. This includes employee expenses and related costs that may arise in the workplace. Employees can claim expenses in certain situations and depending on their role and nature of work. It is vital to have a clearly communicated and documented expenses policy and process, so employees are aware of their duties and expense limit. Your employees are entitled to be reimbursed, as long as their spending falls within the policy.
In this best practice guide for Aussie employers, we outline what is an expense policy, things to include in an expense policy, and related factors. Peninsula has worked with thousands of businesses in Australia, supporting them in matters of employment relations and workplace health and safety.
Employee expense policy
Your employees can claim expenses in established situations, depending on their role and nature of work. Having an employee expense policy is standard practice and good for your employees as well. It helps them understand the expectations around reimbursement, expenses, and filing invoices. The employee expense policy should explain documentation, approval processes, and define both reimbursable and non-reimbursable expenses.
In your employee handbook or induction process, explain the expense policy, the way to claim expense and eligibility. Several companies only allow expense claiming to sales and business development executives or public relations employees.
You can outline your expense policy and share it with your new and current employees. It should be available on your company intranet, your company social media, your company handbook, and with HR.
Things to include in an employee expense policy
Your expenses policy must set out what spending is legitimate and what is not. It should describe what evidence employees need to show to support their claim, such as receipts, and whether they need approval or countersigning first. It is expected to have a person or department that handles these claims and keeps a record of expenses.
You are allowed to set limits, such as a maximum cost for hotel rooms, or informing your employees to use a company approved hotel chain or airline. Businesses can create a company account that can be used to book hotels, flights, or cars. You can also set limits on length of time before making a claim, so employees do not build up large expense claims over time.
Review these expenses every year or quarter, depending on the size of your business to understand your finances.
If you make changes to your expenses policy, you have to let your employees know in writing. You can also ask them for sign-off, to prove they have read and understood the changes.
By enforcing the expenses policy in practice, employees are less likely to make false claims.
Writing a good employee expense policy
A good employee expense policy should be written clearly and have a positive tone of voice. Most of your employees submit valid claims and so it's vital that they don’t feel penalised or burdened for the same. By focusing on writing what employees are entitled to, you avoid them feeling restricted or mistrusted. A fair and reasonable expense policy will maximise staff uptake and helps to reduce costs.
Use clear and specific language to avoid ambiguity. Provide examples to help them understand their duties and responsibilities. Create a FAQ section or glossary of terms to sit within your policy.
Before you write your policy, you might want to research the expense types of similar organisations. Look at the monetary limits they set and let those limits reflect the level of authority.
Types of expenses
Employee expenses fall under two categories:
- Expenses that are paid directly by the company on behalf of employees.
- Expenses that are paid by the employees and are reimbursable.
Travel expenses include any kind of transportation and accommodation expenses that employees incur when going on a business trip. Expenses related to this category that may be fully or partly reimbursable include:
- Accommodation.
- Legal document expenses (e.g. Visa).
- Air, train, ship or other transportation fares,
- Necessary medical expenses (e.g. vaccinations).
- Local transportation during trips (taxi fares, rental cars etc.).
- Other minor or per diem expenses that have been approved by an employee’s manager (e.g. meals, business material).
Work-related expenses include expenses that are related to an employee either in the form of a benefit (e.g. business phone) or entertainment expenses that may occur in a business setting (e.g. professional dinners with clients or colleagues).
Non-reimbursable expenses
There are few types of expenses that cannot be claimed:
- Personal purchases and personal travel.
- Normal travel to and from work.
- Fines incurred while driving a company vehicle.
- Non-business subscriptions or training.
- Hotel mini-bar costs.
- Lost items.
- Expenses incurred by spouses/partners or other non-employees who accompany employees on business trips.
- Service upgrades.
Procedure to claim expenses
When your employee goes on work-related trips, the office manager/ personal assistants/HR manager will arrange for accommodation and transportation costs. They will also document expenses. Your employees will need to:
- Document any expenses that the company hasn’t directly arranged for (e.g. taxi fares). Get bills and receipts from everywhere. There is also a per diem sum to cover other necessary travel expenses.
- Submit a reimbursement claim through the company software or submit an expense report with all necessary documentation.
Dealing with falsified expenses
If you believe there are falsified or exaggerated expenses, they should be investigated. Consistent violations can also lead to potential disciplinary action. When your employees breach company expense policy, they may also be required to repay the Company any amounts incurred otherwise in accordance with this policy.
Manage your workplace confidently with Peninsula
Employers have responsibilities they need to meet, and a big part of these responsibilities is providing clear policies and procedures to employees. Having established and clear policies makes your workplaces secure and consistent. We know the challenges business owners and employers face and the support they need for employment relations and workplace health and safety. For expert advice on creating a claiming expenses policy for your business contact the team at Peninsula.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.