It’s not uncommon for employees to overspend on expenses when they go away for business. This might be down to confusion about what expenses your company allows, a simple mistake or they may have a valid business reason for spending that little bit more, either way you probably want to get a grip of business travel overspend.
A survey of UK employees last year found that those who submit work expenses or have access to an expenses account, spend an average of £117 per month on unauthorised and inflated purchases.
Some cases of over-spending are one-offs. But some employees may consistently over-spend, perhaps even on purpose.
Before there is even a whiff of overspending in your company, you need to reduce the chances of it ever happening by creating and sharing a clear expenses policy.
When there are clear guidelines set out between employer and employee, there is less room for blurred lines and uncertainty.
Alan Price, chief operations officer and employment law expert at Peninsula, says: “This policy can outline to all employees what they can claim expenses for, how each request for reimbursement will be considered and that these rules can be revised, varied or revoked at a later date. It can also help to clarify if any personal use of company funds will be permitted and in which situations, such as using a company car for private use.”
Different types of companies will have different requirements. For example, if your business has expanded beyond the UK, you’ll need to tailor your policy accordingly. Alan says: “If the policy applies to employees based in varied locations different versions may need to be created. For example, it will likely cost more to stay in a hotel in London.”
Dealing with one-off offenders
Though it may be frustrating for employers if it appears an employee is attempting to overspend, approach with care, Alan advises. After all, if it’s an isolated incident, it could be an honest mistake, or the employee may have a valid business reason for the high spend.
Alan says: “Employers should put a system in place that can flag situations where employees are overspending and offer them a chance to explain themselves. Consistency should also be maintained in all decisions; employers should not suddenly crack down on this practice as a result of financial uncertainty.”
Before a one-off infringement becomes a bigger problem, consider if there are deeper issues at hand. Has the employee overspent because they feel underpaid or undervalued? Could you make their business travel more enjoyable – or at least tolerable – by allowing them to bolt some time onto their trip for leisure?
Dealing with persistent offenders
As well as causing financial expense to your company, failing to prevent persistent overspending on expenses can set a bad example for other employees.
Employers have the discretion to decide what is and isn’t acceptable, and how to react to persistent overspending.
It could be that the employee is a valued member of staff and may only require a warning. But submitting fraudulent expenses claims is likely to constitute gross misconduct and entitle the employer to dismiss without notice, Alan says. Before this could happen, an investigation would need to be carried out in order to discover more about the context of the spend and ensure the employee was aware of their responsibilities.
If you’re thinking about clawing back expenses from an overspending employee’s salary, be aware you can’t just do this unless you’ve specified the right to do so in their contract, or the employee agrees to the reduction in writing.
10 tips to protect your company from overspending on expenses
1. Create a clear, up-to-date expenses policy and ensure employees have read it and know where to find it.
2. The policy should make a clear distinction between personal leisure time and business time during a trip, to avoid any confusion.
3. When you hire a new employee, put a deduction clause in their contract to ensure you can claim back overspend lawfully.
4. Ensure staff are properly paid, valued and empowered. That way, they might be less likely to see expenses as something they can abuse.
5. Encourage staff to hold onto receipts at home and abroad.
6. Put a system in place that can flag situations where employees are overspending and offer them a chance to explain themselves.
7. Be consistent. Don’t suddenly crack down on spending on expenses as a result of financial uncertainty, for example.
8. Be transparent. Involve employees in budgeting, or at last make sure they are well aware of the reasons budgeting decisions are being made.
9. Make sure you handle overspend lawfully and in compliance with an employee’s contract, not just in accordance with the stipulations made in your expenses policy.
10. Get the right tools – FairFX’s Business Prepaid Card allows companies to manage card balances and monitor staff spending, wherever they are.