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 employers, we important components for an expense policy, its importance and what kind of expenses can be claimed. Peninsula has worked with thousands of businesses in New Zealand, supporting them in matters of employment relations and workplace health and safety.
Employee expense policy
The employee expense policy should explain documentation, invoicing, approval processes, and define both reimbursable and non-reimbursable expenses. This reduces the risk of overspending and false claims.
You can outline your expense policy and share it with your new and current employees by including it in your employee handbook. It is recommended that employees are given adequate time to review and acknowledge the policy to show their understanding.
Other details that can be included in the policy are:
- Who approves staff spending.
- Methods for maintaining records of company spending.
- How employees submit a reimbursement claim.
- How the business claims for tax deductions.
- The process of investigating false claims and penalties for non-compliance.
Types of expenses
A business expense is any cost incurred by the company during operation and these costs can help reduce tax liability for business owners. Employees may also incur expenses due to the requirements of their role which may be reimbursed by the company.
Specific expenses may vary depending on the industry and type of company but generally include:
- Hotel and travel expenses.
- Motor vehicle expenses,
- The cost of running a business website,
- Maintaining or replacing plant equipment, office supplies or utilities,
- Capital contributions,
- Subscriptions for software packages.
Limits on expenses
Employers have a right to impose limits on staff spending. The purpose of these limits is to reduce overspending, time spent on chasing false claims and to streamline the approval process. Spending limits must be within reason and clearly communicated to employees and those in charge of the approval process.
An employer can impose limits on spending in the following ways:
- The maximum amount of money an employee can spend on an expense.
- The kind of providers employees can choose (for example, certain airlines or hotel chains).
- The amount of notice an employee must give to request the spending.
- Whether employees use company-issued corporate cards or pay for the expense, then ask for reimbursement.
Non-reimbursable expenses
There are a few types of expenses that generally cannot be claimed. Such as:
- Personal purchases and personal travel.
- Normal travel to and from work.
- Fines incurred while driving a company vehicle.
- Hotel mini-bar costs.
- Lost items.
- Expenses incurred by spouses/partners or other non-employees who accompany employees on business trips.
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.
- 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
Having established and clear policies makes your workplaces secure and consistent. We know the troubles business owners and employers face and the support they need for employment relations and workplace health and safety. Our tailored services offer particular insights into your needs and provide advice that helps your business. We are available 24/7, 365 days a year for business owners and employers across New Zealand.