A guide to implementing a fair expense policy
A guide to implementing a fair expense policy that works for your business and its employees
Whatever sector you operate in, expenses are a fact of business life. Yet all too often, ineffective expense policies are a source of friction and inefficiency in day-to-day operations. Having a fair and comprehensive business expense policy can be transformative; cutting wasteful admin time, protecting from unwanted or exaggerated claims and boosting morale among staff.
In this guide, we’ll set out how you should approach building or updating your business’s expense policy, and explain some common types of claim that you’ll need to stipulate guidelines for.
Why have a business expense policy?
In businesses of almost any size, managing expenses is a process that requires plenty of resources. Misunderstandings on what can be claimed and how wastes valuable time and causes frustration on all sides. When any expense policy is ambiguous and undefined, employees could be more inclined to test the limits of what they can reimburse, and this exposes your business to potentially fraudulent behaviour.
By having a thorough, practical and fair expense policy you ensure everyone is on the same page from the get-go. With an easy-to-understand, yet comprehensive, breakdown of the different types of expenses that can be claimed, alongside an outline of the processes involved for each, you’ll be giving your employees all the information they need. This will not only reassure them and help to alleviate many common concerns, but will mean your employees get things right first time, easing the workload of any fleet or expense manager.
Through an expense policy, you can manage the expectations of your employees, stating how and when they can expect to be reimbursed for any costs. With a policy implemented, disputes can be reduced and the entire process made more efficient.
For more information about the benefits of a strong expense policy, read our handy guide.
How to create an effective expense policy
Be firm but reasonable
All too often, a poorly-perceived expense policy hampers staff morale and job satisfaction. In fact, in a survey we conducted, 62% of employees told us they are left out of pocket every month as a result of paying for business expenses. If your employees feel left out of pocket, they certainly won’t be viewing your expense policy as fair. And ‘unfair’ policies go hand-in-hand with non-compliance and exaggerated claims. The key is to be lenient, without exposing your policy to misuse.
First and foremost, your employees should never feel that you avoid reimbursing them for expenses stemming from their work. Within your policy, it’s important to appreciate no two individuals within your business will have the same expense requirements, and setting arbitrary limits will only end in frustration for those employees with higher expenses resulting from their role. With solutions like the Allstar Plus Card, you can set individual controls and limits for each employee, ensuring that you continue to support your travel expense policy.
Excluding people from the process of creating or reviewing your expense policy will only build resentment. One way you can ensure your policy is perceived as fair is by allowing employees to feed back on it. When implementing or reviewing your policy, invite staff to provide suggestions, and if possible, later detail instances where these ideas shaped your new policy proposal. This will build a consensus that the policy isn’t merely management telling employees what they can and can’t do, but that it’s an agreement on what’s fair with input from both sides.
While any successful expense policy will clearly outline what your employees’ responsibilities are, it’ll also need to be explicit on the business’ obligations to its employees.
Our research revealed that the greatest area of concern for employees were repayment periods for expenses they paid upfront for. Managing expenses in this way is, of course, commonplace. 78% of our respondents said they are expected to foot the bill for travel expenses before being reimbursed, with 31% stating that this is always the case. But employees are largely unhappy about this. In fact, 80% of those surveyed said that having to pay on-the-road businesses expenses upfront negatively affected their perception of their employer.
To mitigate negative sentiment and reduce the financial burden placed upon your employees, it’s important that the time between spend and reimbursement is kept to a minimum. By setting and sticking to reimbursement dates or periods – such as a guarantee to have expenses repaid within ten working days or on the next payday – you should help keep frustrations and anxieties at bay.
Better still, implement a system whereby employees’ expenses can be paid before or at the point of purchase. 62% of respondents in our survey agreed that businesses should take more responsibility for covering expenses before or during a work-related road trip.
With solutions like the Allstar Plus card in your employee’s pockets, you’ll get full visibility and control over the company’s travel spend, all in one place.
Keep things simple
You should aim to keep the processes in your business expense policy as straightforward as possible for your staff. Not only will they be happier with less of their own admin to keep on top of – freeing up their time to focus on the job at hand – but you’ll see a much higher rate of compliance.
Our survey found that 83% of employees have to change their payment method depending on the type of expense, while 44% stated that having to collect receipts is the most frustrating part of the expense claims process.
The clear message here is that the more integrated and automated your process, the better. Applying a single method of payment across all your expense types, and including automated reporting to do away with the inconvenience of receipt-collecting, are excellent ways to make your policy simpler for everyone. This is something you can achieve with a business expense card. You can also find out more about creating your business expense reports in our guide.
What are the most common expenses employees can claim?
The types of expenses that need to be covered in your policy will depend on the nature of your business, but the most common inclusions are:
Travel expenses are costs incurred from transportation from A to B. This could take the form of rail tickets, an air fare, car hire or taxis, among others. Within your policy, you may wish to stipulate a ‘reasonable’ range of fare costs, as well as any preferred suppliers and booking methods. You may also have guidelines on how far in advance a trip should be booked.
Fuel expenses are a particular form of travel expense. It refers to costs incurred from the purchase of fuel for a private or company car, travelling for business purposes. If employees are provided with a company car, it’s vital that fuel expenses are accurately recorded for tax purposes. With our Allstar Plus card, you’ll find all fuel spend is tracked and recorded on HMRC-approved invoices.
For a more comprehensive fuel payment solution, try the Allstar One card. While not usable for other types of business expenses like the Allstar Plus card,it provides a huge list of benefits for your business, including discounted diesel at thousands of sites and the ability to observe and control expenditure on each card. If your employees use your fleet vehicles for personal travel, you’ll want to separate out their business and private mileage, which is where innovative extras like our Business Mileage Monitor can come in handy.
Secondary/additional travel expenses
These are incurred not because of direct transportation costs, but as secondary expenses resulting from the journey. This would include things like baggage fees, parking and visas. Charges for these will vary greatly dependent on destination, but you can set and control limits for these expenses with solutions like the Allstar Plus card. You should stipulate clearly which of these secondary travel expenses are, and aren’t, covered by your expense policy.
Accommodation expenses are costs involved with providing somewhere to stay overnight, usually in a hotel or bed and breakfast. Room rates will vary greatly by location and time of year, but you might want to include guideline figures on what would constitute a reasonable rate in each region. You may wish to stipulate the conditions in which premium accommodation options are or aren’t permitted, as well as point to any preferred suppliers and booking methods.
Food and entertainment expenses
For long business trips and overnight stays, it’s reasonable for your employees to expect that the business cover at the least some of the cost of their food. You may wish to outline the length (in hours) of trip at which food expenses become claimable, as well as an expectation or limit of what each meal should cost (£10 for a lunch, £30 for dinner, and so on). Solutions like Allstar Plus will allow you to set spending limits for these directly to the card.
Entertainment expenses would include any costs incurred by an employee when hosting and entertaining any clients or their team of employees. While you wouldn’t expect the business to cover personal leisure activity – even when it’s during a business trip – if the activity is in the name of and to the benefit of the business (taking clients to dinner, a team building evening at a bowling alley and so on) then employees would expect they can claim.
It’s worth noting that it may make financial and practical sense to instruct employees to consolidate any food and entertainment costs within their accommodation expenses, where possible. This would include things like adding an evening meal or breakfast to the charge for their hotel stay.
There’s a long list of potential ‘other’ expenses that your employees may incur as part of their work, and these will be particular to your business. Common examples include uniforms, professional membership fees, eye-testing and postage. It’s a good idea to involve your employees in this area, and let them tell you of any ‘other’ expenses they incur that the business might offer to cover. Once your policy is finalised, what is or isn’t accepted under other expenses must be adhered to and flatly applied to all employees, so as to avoid dispute.
In your policy document, you may also wish to list commonly-occurring exceptions, for which claims cannot be made. This would hopefully reduce the frequency of incorrect claims.
For more tips on what to include, take a look at our dedicated guide. If you’re a quick-growing business, read our advice on how an expense policy can be applied in your company’s unique circumstances.
How the Allstar Plus Card can help you build the perfect expense policy
Suitable for businesses of any size*, equipping your employees with an Allstar Plus card gives you total control. You can go online and oversee all your employee’s transactions, setting and managing limits on each and every card. With automated, HMRC-approved reporting and invoicing, your employees will be delighted to do away with the hassle of receipt collecting and waiting for reimbursement. With one simple card usable for almost every type of expense, it’s a fantastic way to streamline your company’s business expense policy.
Find out more about the Allstar Plus card today, and don’t hesitate to contact the team on 0345 266 5101. You can also get in touch by filling in this form, or you can request a callback and we’ll give you a ring at a time that’s convenient.
* Not suitable for sole traders, small partnerships (<4 partners) and unincorporated associations