Company Expenses Policy: All The Pro Tips
If your company employs staff, then it’s likely that your employees are able to claim expenses from the company, to get refunds for products or services that they purchased for business purposes. However, what can or cannot be claimed as a company expense often falls within a grey area. That’s why it’s good practice to establish a clear expenses policy that is known to all employees, thus limiting the amount and nature of expenses allowed.
Common examples of employee expenses
UK companies typically reimburse all expenses that employees incur for the purposes of performing their job. These usually include (but are not limited to):
- Transport costs, such as plane or train tickets
- Mileage claims when using their own car for work
- Business hospitality and entertainment (aka networking and schmoozing)
- Sustenance, or ‘food and drink’
- Training courses and materials
- Hotel costs
- Credit card fees
Why do you need an expenses policy?
Establishing a clear expenses policy will help you manage claims in a more efficient manner, allowing you to have a clearer idea of where expenses come from and to better predict them.
Additionally, a written policy that all employees agree on will protect you – in part, at least – from issues such as fraud and breaches of compliance. While every employer hopes to be safe from these with their staff, it never hurts to be prepared.
The National Fraud Authority found that UK businesses lose over £100m yearly due to false or exaggerated claims. Having a clear and robust document in place will cover your back, protecting you in case of disputes.
What should a company expenses policy include?
It is always advisable, before you start drafting your expenses policy, that you speak to legal, payroll and HR experts. They can guide you through the nuances of the process and make sure you avoid potential pitfalls.
However, for your initial reference, here are some vital pieces of information which you should include in your expenses outline:
- A summary of how the company handles employee expenses;
- What does and doesn’t qualify as an expense;
- The required procedure to make a claim;
- Processing and payment times for expenses;
- What happens in the event of a dispute around any expense claim.
A study from WebExpenses found that 43% of employees felt that an unfair expense policy justified fraudulent claims. In order to avoid such circumstances, you will need to find a reasonable compromise between reducing unnecessary spending and being indulgent towards your staff.
Getting your employees involved in the drafting of your policy, asking for feedback and encouraging their contribution helps you make sure the policy takes their necessities into account while also reinforcing consensus.
Avoiding confusion is key, and so is making sure that everyone reads your whole policy document. Both are good reasons for making your policy as short and simple as possible.
It is advisable to update your company’s expenses policy each time a relevant change occurs, and to review it periodically to evaluate the effect of external changes such as inflation, cash flow etc.. Additionally, whenever a change is made, it is good practice to seek legal advice to make sure that modifications to the policies are communicated clearly to your staff.
Finally, you should never underestimate the power of making details explicit. Spending limits, mileage expenses and personal allowance should all be discussed openly and clearly defined among the whole team, in order to minimise the risk of ambiguities.
The information available on this page is of a general nature and is not intended to provide specific advice to any individuals or entities. We work hard to ensure this information is accurate at the time of publishing, although there is no guarantee that such information is accurate at the time you read this. We recommend individuals and companies seek professional advice on their circumstances and matters.