To Reimburse or Not to Reimburse: 4 General Rules for Employee Expenses

employee checks phoneMany types of work-related reimbursements are mandated, but an employer still has the option to go the extra mile and go over the minimum required by law. The question is does it pay to do so? Being lavish with your reimbursement helps show an employee that they recognize their sacrifice, but then again, it isn’t practical to give your employees all-expense paid trips everywhere they go.

Reimbursing employees for work-related expenses is a critical element of creating a great workplace. Finding the balance between reimbursement and managing resources is always challenging, and this is particularly true in light of the recent legal decision confirming that California employers are required to reimburse employee cell usage. Where is the line between fair and stingy?

Of course, there isn’t a crystal clear answer, but sticking to some basic principles will go a long way toward boosting company morale. To help drill down to some fundamentals, we spoke to a few human resource professionals and gained some insight reimbursement.

Mind The Basics

While a fair amount of reimbursement is mandated, a lot of it comes down to employer discretion. That said, failing to pay your employees back for a few specific expenses related to your business may lead to some frustration.

UIS College of Business and Management instructor of Human Resources Management Donna Rogers says even covering the basics helps boost morale.

Donna RogersGenerally employers should cover mileage, cell phones, and any travel or lodging related to work. The type of travel reimbursements vary under the FSLA and other regulations depending on whether an employee is leaving from home, traveling overnight or weekends. There are also certain requirements relating to payment of non-exempt hourly employees. Generally employers should always reimburse mileage of employees using their own vehicles for business purposes at the IRS stipulated rate. Mileage reimbursement especially in this economy with gas prices ranging from 3 to 5 dollars a gallon, really helps employee morale. Some employers reimburse at a lower rate thinking employees can write off the rest but while there may be some benefit it is outweighed by the burden and hassle of tracking, etc.

You may pick and choose some reimbursements over and above, but in some cases you don't really have a choice. Lauraine Bifulco, founder of Vantaggio HR, a HR and management consulting firm, points out that the golden state takes a pretty hard line already on reimbursement.

Lauraine BifulcoCalifornia doesn’t give employers much leeway in what they can and cannot reimburse. By law, employers must reimburse employees for all costs related to performing their work that are not paid for directly by the employer.

As there have been numerous lawsuits over the matter, it’s a wise decision for California employers to reimburse employees mileage at the annual IRS allowable rate for all miles driven for business purposes with the employee’s personal automobile. Paying less than the IRS amount places the employer at risk for having to prove that the amount they are paying makes the employee whole for the cost of the use of the automobile.

Cell phones are another major dilemma for employers as many employees prefer to keep a personal phone and use it occasionally or even frequently for business purposes. Some employers in the past have elected to not reimburse employees for business use of their cell phones when the employees either had an unlimited usage plan or if a third party was paying the cost of the personal phone. A recent appellate court in California ruled that this practice violated California law and made it clear that in such circumstances, the employer is required to pay for some reasonable share of the cost.

Pour on Some Perks

Giving employees access to loyalty and reward programs is an easy reimbursement tool that goes above and beyond simply paying back the amount spent. In a scurry to attract customers in today’s economy, many leading service providers have reward programs that can pay serious dividends. If your business is doing a large volume of purchasing with certain providers, you may as well pass those benefits on to employees.

Rogers says that if even if you aren’t monitoring these rewards for yourself, providing this perk for employees may be relatively painless.

An easy perk for employers to provide is allowing employees to utilize reward programs. Many employers don’t really monitor or care about these, but for employees that travel often, it can result in great benefits like free flights and hotel stays. Most companies don’t have the time or department to handle employee travel and leave it to the employees to arrange, so why not include this advantage?

Ben Eubanks of upstartHR, is a speaker, author, and HR professional. He works as an analyst for Brandon Hall Group, a HCM research and advisory services firm. In his professional career he's been on the receiving end of perks that worked well for both the employer and employee in the reimbursement department.

Ben EubanksFor traveling employees there are certain perks more important than office employees. One of the best perks I had while working in a job that required me to travel occasionally was having a mobile hotspot I could use whenever I needed. The company paid for the hotspot and made it available to those of us that traveled, because they understood that the value of having us "plugged in" and working remotely was much more than the cost of providing the service. That's a good example of tailoring the perks/benefits available and offering something staff will really find valuable.

Mike Letizia, is the State Director of California SHRM. With over 30 years experience in the full scope of HR functional areas, Letizia says that some employers are excessively generous with perks and others offer very few, but the most important thing is that by offering perks, you can, at least, stay competitive.

Mike LetiziaWhat expenses and perks a company offers very often depends on the philosophy of the employer. There are some employers that have the philosophy they want to lead the competition and offer the best benefits and perks, others want to match and stay in line with their competitors, and still others for whatever reason decide to lag behind the industry standard and offer as little as possible. If you want to remain competitive doing business in California and continue to attract the best talent and get the best return on your investment in that talent you must look carefully at the industry and geography you are operating in and come up with benefits and perks that are competitive in your marketplace.

Communicate and Respect

It is vitally important for employers to respect their employees in reimbursement situations. If you have employees running around the country making money for you, asking them to reach into their own pockets for the privilege to do so is a hard sell. Of course, providing first class flights and five star accommodations wherever they go is probably not going to happen, but simply making sure that you recognize any sacrifice they make on your behalf shows an appreciable amount of respect.

Rogers says that adopting an overly demanding attitude will very quickly make employees feel undervalued.

I think the biggest thing that can improve morale in companies is having managers that know how to treat their employees as people. They respect their employees and do not act like they own them. There are so many people that are put into management positions with zero training. These untrained or ill-suited managers act like it is the 1970s; demanding without explaining why or educating, and not making employees feel valued. If you treat employees this way you are going to start to losing people. Younger generations like Y and Z certainly will not put up with this treatment. They grew up with a different mentality and are not used to a demanding attitude. There is a difference between a great employee and a great manager. It is the best operator concept- you don't always promote the best operator to manager. The most important things are treating your employees right be respectful and have fun in the office. The more you create that kind of culture the more you are going to get out of your employees.

Eubanks agrees and points out that playing fair goes a long way with people you must work closely with.

Honestly, the things that cost virtually nothing and which also make for a great work environment are not money-related. They include treating people fairly, being open and honest, and providing a work environment that rewards initiative. Employees would gladly forego free coffee or a cell phone stipend if they could get those sorts of "benefits" from their employer.

Flexibility: Meeting in The Middle

employee displays perksSometimes you have to bend a bit to meet in the middle. Having a very specific and non-negotiable reimbursement program in place has its advantages, but taking a “let’s talk about it” approach may go even further toward making an employee feel like a valued team member. If you ask Rogers, the flexibility is something many employees are after, even at the cost of their wages.

Beyond respect, flexibility is critical. There are studies that show that employees, if given the option to make more money or have more flexibility, will take up to approximately 8% reduction in pay to have flexibility in hours so they can attend their kids soccer games, etc.

Letizia notes that being flexible and entertaining employee's suggestions can help cement a great relationship.

Small businesses have a tremendous opportunity to build strong intimate relationships with employees and build a work environment where individuals feel as if their work and suggestions have an actual impact on the success and choices of the company. The empowerment factor is far more motivating than just a few additional perks.

Bifulco says that if you give a bit of slack and be flexible, you might even be surprised by what your employees really want.

The best recommendation is to talk to your employees. Know what they want, what’s important to them, and what will motivate them and make them feel valued. Figure out what type of budget you have as an organization to put towards your benefits and then spend the available money in a way that will be meaningful and impactful for your staff. Sometimes you’ll be surprised that what people want is not what you would have picked!

Paying It Forward

The most obvious tactic to keep your employees working hard for you is showing that their hard work is recognized and appreciated. Clearly this can be spelled out in the form of salary, benefits and bonuses, but proper reimbursement is just another way to show your people that you are looking out for them. So if you cover the basics, let them reap some rewards from all their travel, show employees respect and be flexible, there is no doubt that you can build a reimbursement program that makes your workplace one known for taking care of its workers.