What Is Expense Reimbursement?
How Do Employees Get Paid Back When They Spend Money on Business?
Expense reimbursement is a method for paying employees back when they spend their own money on business-related expenses. These expenses generally occur when an employee is traveling for business but can occur in other work-related situations.
Travel expenses can include lodging, flights, ground transportation, tips to bellhops, meals, and other incidental expenses an employee might experience while on the road.
Other business expenses can include such items as taking clients or prospective employees to lunch, purchasing books or other educational materials that the employer covers or driving expenses to recycle company property.
Types of expenses that an organization will reimburse are found in the company’s business travel, entertainment, and general reimbursable expenses policies in the employee handbook. Become familiar with your company’s policies because your employer can cover expenses as varied as dry cleaning and gym membership on extended trips.
Client entertainment on business trips is another reimbursable expense, but know your company’s policies so that you don’t exceed any spending limits. You want to demonstrate hospitality and politeness without exceeding your employer's budget for such expenditures.
Popular now are company credit cards that are entrusted to people who are senior level employees and to other employees who must frequently travel for business.
Instead of paying for expenses with their own money, employees charge all but incidentals and tips to the company credit card.
This is a convenient approach to expense reimbursement for the employee as the credit card bills document the exact expenses without the employee having to save receipts and fill out travel expense reports.
Filling Out an Expense Reimbursement Report
In both the case of the company credit card use and paying cash, employees will likely have to fill out an expense reimbursement report upon returning from the trip. With the company credit card, they will have to explain less than obvious charges that appear on the credit card bill (much easier than having to fill out an expense report from scratch). They will also charge the company for the additional incidentals they paid for with their own money or credit card.
When an employee pays cash, he or she will need to list, and occasionally justify, each expense for which reimbursement is requested. These are reviewed by accounting as are the statements from the credit card company. An unjustified expense, or one that is excluded by company policy, is not reimbursed—hence, the need to know your company’s policies regarding business travel.
Most companies set a date by which expense reimbursement reports must be filed to ensure that employees are reimbursed and for proper accounting. Employees need to follow these rules carefully as some organizations do not reimburse expenses that are turned in after the deadline. Know your company's rules.
Another method for paying employee business travel expenses is with a per diem.
An Unusual Reader Question Related to Expense Reimbursement
A reader asked, "Our outside sales representatives have large territories (multiple states) and travel routinely, often requiring overnight stays. It was brought to my attention through the accounting department, that a sales rep had taken a pet with them on one such trip and charged the hotel pet fee to the company credit card. She claimed the hotel would not separate out the fee and she had planned to reimburse the company.
"I am dumbfounded and searching for suggestions on how to handle this situation. My HR instincts tell me to write this employee up for misuse of company funds but I am getting resistance from sales management who want me to make a specific pet policy.
"Our use of the company credit card clearly states, 'This card is to be used for COMPANY EXPENSES ONLY.
Personal use of the card could result in forfeiture of the card or termination. In addition, Sales Representatives will be responsible for unauthorized charges.' Have you written about such a topic in the past?"
HR Response: Here's what you need to consider. Did the employee go to accounting and explain the problem that the hotel was unable to separate out the pet charges? Or, was she caught by a careful review of her expenses in accounting?
First, it is difficult to believe that the hotel was unable to separate out the pet charges. Second, if the hotel was unable to separate out the charge for the pet, how did she know what to pay back to accounting?
If she planned to pay for the pet’s charge only if she was caught, and did not voluntarily offer to pay, given your policy, she deserves disciplinary action. This would also depend on how you have addressed similar situations in the past. Have other employees reimbursed the company for various expenses and received no disciplinary action?
Often when you look into a situation, you'll find that there is the policy on the one hand, and how it has been implemented and applied on the other hand. You don’t want to treat this individual differently than other employees have been treated in the past.
Disciplinary action is not in order if other employees have simply reimbursed the company in the past for similar expenses. Remember that I am not an attorney so this is just an HR colleague’s opinion.
Making a pet travel policy is not recommended because that is an example of the company interfering with and overreaching into an employee's personal life. If the employees want to pay for their pet to travel with them, it is not the company's concern.
As long as the pet doesn’t affect the cost of where they stay or their ability to participate in the business purposes of the trip, it is not the employer's business. The employee should, of course, pay any additional fees the traveling pet engenders.
Your travel policy is slightly confusing and could use strengthening in the part about “responsible for unauthorized charges” when the policy has already stated that only company expenses are allowed.
Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment laws and regulations vary from state to state and country to country. Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make certain your legal interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.