Employee Expense Reimbursement Best Practices

HR Resource
October 10, 2012 — 3,952 views  
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Employee Expense Reimbursement Best Practices

Reimbursements made to employees for expenses they have incurred should be easily accomplished. The major difficulty becomes apparent when employees are ill-informed about allowable costs. Personnel Rules and Regulations should explain in detail allowable as well as non-allowable expenses. This is especially true when expenses incurred are for traveling. 

Correctly processing travel expenses and wages earned for travel time can be tedious and trying. However, clear, concise procedural guidelines can help eliminate some of the problems. Some businesses allow for per diem amounts meaning that each traveling employee is allowed a certain amount per day for travel expenses and no further charges can be incurred. Other companies reimburse the employee on a dollar for dollar basis using receipts as proof of expense. 

When personal vehicles are used for company travel purposes, per mile charges are allowable. Regulations should establish per-mile allowances and contain a source for base map site to site miles allowable. These rules should also allow for vicinity miles within the designated area.

On-the-job traveling can become a tremendous expense if regulations don’t spell out exactly how many salaried hours are to be incorporated. Typically, working days consist of eight hours and any additional hours are considered overtime. For travelers, there must be an understanding as to when the work day ends and the employee is considered “off the clock.” The Department of Labor can furnish the latest rulings regarding wage and hour requirements for employees traveling on behalf of a company. 

It is also very important to inform employees that some expense reimbursements are taxable. The Internal Revenue Service can add fines and penalties for improper taxing procedures. Employee expense reimbursements should be kept separate from payroll to insure that no misinterpretations of taxable income can be made.

Another problem area of employee reimbursement is Petty Cash. Timely and accurate receipts should be an absolute must for repaying any expenses. “Cash ahead and receipt later” practices should be prohibited. Any outlays from petty cash should be well documented and all expenditures should be represented by signed receipts. Charges that are not allowable through the normal payment processes should also be disallowed through the petty cash system. 

Agencies exempt from sales tax have to inform the employees ahead of time that sales taxes on purchases are not allowed. This means that if the employee pays sales tax on items purchased, there can be no reimbursement for that expenditure unless otherwise stated or allowed by the auditing staff.

The best plan of action regarding reimbursing employees for expenses incurred is to have a plan and put it into action. Employees who are properly informed have no excuses for misappropriating funds. 


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