Managing Employee Expense Reimbursement

Expense Reimbursement

Reimbursement of expenses: a necessity for business travel and other costs associated with work.

It’s not a secret that tracking expenditures can cause challenge for both employers and employees. The tangled waters of receipts, paperwork and mileage rates can seem overwhelming, particularly when companies depend upon manual procedures.

Of course, a cost managing tool will make this process easy, but it’s is always beneficial to set the foundation by having an understanding of how reimbursements to employees are made.

What is Employee Reimbursement?

The process of making an employee pay back expenses incurred during their work. It could include travel costs including mileage, as well as other business-related expenses that an employee paid out from their own pocket.

To achieve this employers usually have guidelines and policies that define what expenses are eligible for reimbursement, and what proof must be provided for employees to receive reimbursement.

If your company hasn’t yet established the reimbursement policy, you should know that it’s worthwhile -it will maximize the tax benefits the employees and you and gives employees guidelines and safeguards to assist them in managing expectations.

The Fair Labor Standards Act (FLSA) does not require employers to provide employees reimbursement for each expense however, it does require employers to pay employees for the expenses associated with their job that are requiredfor employees to do their job. The law also stipulates that when the cost of a cost would put an employee’s salary lower than what is the Federal minimum wage then the employer has to raise the amount paid to the amount.

The basic idea is that employees receive reimbursement for unavoidable expenses that are directly connected to their work in particular when these costs lower their wages lower than their minimum wages. However, it’s not just restricted to just necessities employers may also decide to pay for other types of expenses.

Kinds of Reimbursable Costs

Employers have a lot of freedom when choosing which expenses for employees to pay However, there are some that are typical among companies.


Employees could get reimbursed for gas expenses if they travel in their personal vehicles to travel for work. This is referred to as a mileage reimbursement. The employer usually has the ability to set a specific mileage reimbursement amount which employees can claim as business-related travel. However, an organization may choose to reimburse the actual cost incurred. Every employee should keep track of business-related travel miles and submit them for reimbursement together with any documentation required.

The rate of reimbursement can differ depending on the company, however companies must follow the Internal Revenue Service (IRS) annually announces an average mileage rate which can be used to determine how much taxpayers can deduct qualified transportation costs. Companies can choose to utilize the IRS rates in the form they are published or utilize the rates to establish their own reimbursement policies.


If employees have to travel to reasons of work, they might be eligible for reimbursement for travel. This usually includes meals, lodging transport, as well as any other costs that are required. Certain companies might instead opt for per diems or a per-diem or set a daily allowances for meals and other incidentals, meaning employees don’t need to provide the details.

It’s important to remember that certain organizations restrict the types of travel they’ll cover. For example they’ll reimburse the cost of train or air travel, but not for gas for vehicles that are not company owned (leave the gasoline guzzler in the garage) and Uber rides. Find out the best option in the context of your employees’ circumstances.


The reimbursement of tuition is an excellent benefit for employees looking to pursue their education or increase their skills. It does not have to cost a lot. Companies can decide to reimburse employees who decide to further their education. This can help to cover the cost of their tuition and associated expenses to make investments in their employees’ development as professionals which will encourage them to remain with the company.

Companies with this kind of reimbursement policy must clearly define the courses that can be reimbursed and what they can document appropriately. Some might require the course to be directly linked to the employee’s current or upcoming work responsibilities, whereas others are more flexible.

The employees will typically have submit their academic records along with any other documentation required to their employer in order to get the reimbursement. It could be paid out in lump sums or distributed after the student has paid the tuition. Some companies also set a limit (oftentimes $5,250, to be used for tax-deductible reasons) on the amount of tuition reimbursements they offer each year.

Medical coverage

Health insurance for many is an important factor in choosing which workplace to join, particularly when faced with the challenges of an epidemic. Health benefits are a top priority for employees today more than ever and premiums for health insurance aren’t cheap. The health insurance offered by employers can help reduce expenses and offer a protection for employees.

Are employees eligible for reimbursements to cover health expenses? It’s a question that is frequently asked, and the quick answer is yes in the event that an employer offers this kind of reimbursement as an incentive.

In these situations employers set aside a set amount of money per employee to pay for the cost of their health insurance. The employees can then pick the health insurance plan that is best for them and their families and the employer will pay for the cost of their premium (or some portion from it).

This could reduce the cost of health insurance for employees. It’s an effective way for employers to draw and keep talent.

What Kinds of Costs Aren’t Reimbursable all the time

Beyond knowing which expenses are typically reimbursed Employers and employees should be aware of the kinds of expenses for employees which aren’t covered under the majority of corporate policies:

  • Personal expenses, like grooming or clothing in the event that they are not required to perform the work.
  • The cost of commuting, for example, public transportation or gas prices to employees in no way required to commute for work.
  • Food and entertainment costs except when they are directly connected to the business or were prior to being approved by the employer.
  • The costs associated with moving to the purpose of a job, for example storage or housing fees for temporary accommodation in the event that they are not previously approved from the workplace.

Of course, the costs differ from one organization to the next Certain employers might offer tuition reimbursement, while other might cover gym memberships and other wellness programs or even provide reimbursement to commuters. It’s all about how you decide the best way to provide your staff with benefits.

Process of Cost Management

The typical process for managing expenses comprises the steps listed below:

  1. An employee prepares and submits an expense statement: The employee is able to incur an expense that is related in their employment, like office or travel expenses and then sends expenses to the employer. The report must include receipts, along with the pertinent information about the expense including the date, amount and the reason for the expense.
  2. Management approves report: The manager of the employee scrutinizes the expense report in order to make sure it’s correct and conforms to company policy. If the expense report is approved, the manager signs to approve it.
  3. It is documented in the system of accounting: The approved expense is documented in the company’s accounting system which tracks the financial transactions of all kinds.
  4. The employee is reimbursed: The employee gets reimbursed for the expense that was approved. This could be accomplished through an automatic deposit, a cheque, or another methods employed by the company.
  5. Company analyses reports: The company makes use of the expense data to produce reports and perform analysis to determine areas that they can enhance their expense management processes.

Tax Accounting

The type of plan the company is using the reimbursements for expenses could be considered tax-deductible income for employees, and employers may be required to record it on the W-2 form of the employee.

There are two kinds of reimbursement programs for expenses: accountable programs and non-accountable plans. To be considered accountable, companies need to have the right documentation and satisfy IRS guidelines (opens in the fresh tab).

If a plan for reimbursement is considered accountable, the reimbursements aren’t considered tax-deductible income for the employee. However, if a plan is considered to be unaccountable then the reimbursements will be considered as taxable income, and the employer has to record the amount on the employee’s W-2.

Employers must always consult an expert in tax to make sure that their expense reimbursement program is in compliance with IRS guidelines and is correct in reporting reimbursements for tax reporting purposes.

Representative Records

The reimbursement of expenses for employees can have an consequences for the employee’s records regarding tax, payroll, and compliance. Employers should make sure they’re monitoring, reporting and logging reimbursements in order to keep accurate records of employees and to comply with applicable regulations.

In the case of example, if your company’s expense reimbursement program is not deemed to be accountable, the reimbursements are deemed to be tax-deductible income for the employee. This will affect their gross salary that is subject to payroll tax and W-2.

What amount of time Should a Reimbursement Require?

The timeframe for reimbursements to employees’ expenses is dependent on the policy and procedure, as well as the nature of the expense, as well as any issues or disputes that might be raised during this process.

Certain employers might have a particular deadline for filing expenses, while others might have a rolling deadline. There could be a specific date for when reimbursements are to be made, while other employers might issue reimbursements on an ad-hoc basis.

Disputing a Cost

If an employee expense is not in agreement, this means there’s a conflict between employees and employer regarding the reimbursement criteria for the expense. This could be for various reasons, like an absence of the proper evidence, disagreement regarding the purpose of an expense or an issue regarding whether the expense is within the company’s reimbursement policy.

There should be a plan to resolve the conflict and must respond promptly and provide detailed explanations of what happened.

Advantages of Cost Administration Software

Software for employee reimbursement can transform companies. The appropriate expense management software will help employees and you immediately. The right expense management software help to make the expense payment process easier by:

  • Automation: Saves time by automating tasks associated with the reimbursement process which includes recording costs, tracking mileage and producing reports.
  • Convenience: Employees can effortlessly submit expenses and keep track of the status of reimbursements by uploading receipts as well as other documents right from their computers or smartphone.
  • Accuracy: Make sure that the expenses are properly reported to be tracked, approved and properly calculated to avoid mistakes and disputes.
  • Visibility: Access all expenses submitted and the state of reimbursement, the types of expenses and more, to provide you a comprehensive view of the situation for strategic making.
  • Compliance: Keep conformity to the FLSA as well as other rules pertaining to reimbursement of expenses.

Change how you manage costs and find more time to your schedule by using our expense management software that lets you remove spreadsheets, calculators and signatures using a program that is built right into payroll software. directly directly into the payroll software.