The widespread public outcry over the current MPs' expenses scandal has paved the way for many UK employers to scrutinise their own expenses policies and employee's expenses claims. As the credit crunch bites, employers need to be sure that staff are not wasting company money and that none of their employees are "fiddling" their expenses claims to top up their salaries.
Depending on the nature of their terms and conditions of their employment, if an employee is found to have made inflated or even fraudulent expenses claims, employers may be forced to take disciplinary measures which may lead to dismissal and/or even prosecution.
There are a number of different types of expenses claims which an employee may make, ranging from travelling and subsistence expenses to removal and relocation expenses and of course the tax and National Insurance Contributions treatment varies depending on the type of expense. Expenses which are incurred wholly, necessarily and exclusively in the performance of the duties of employment are generally speaking tax free. Travelling from home to work has been classed a taxable expense.
If you are faced with a dubious claim, it may be appropriate to withhold payment of the expense pending investigation. You must carry out a full investigation to ensure that claims are not improperly withheld and to determine if disciplinary action is appropriate.
Provided you have the employee's written consent, you may deduct from the employee's wages an overpayment made to the employee in respect of invalid expenses claims. However, this action should be exercised in a reasonable manner so as not to breach the trust and confidence between employer and employee.
If you discover evidence of fraud or deceit, you should take disciplinary action, following your company's disciplinary procedures and the ACAS Code of Practice. Any penalty should be proportionate to the seriousness of the offence. Minor breaches of an expenses policy may only require an informal chat, whereas large scale deliberate fraud or deceit could merit summary dismissal for gross misconduct. In certain cases, the employer should even consider criminal proceedings.
- As times get tougher, it is worth reviewing any expenses policies that you may have in place and checking the provisions within your employees' contracts of employment to ensure that your business is in a position to deal effectively with any potential breaches that may arise. You need to have a very clear policy about what your employees can and can't claim.
- An expenses clause within an employee's contract or your Company's expenses policy should make it clear that your company will reimburse those expenses which are reasonable and which are wholly, properly and necessarily incurred by the employee in the course of their employment for a legitimate business use. Moreover, any claim should be subject to the production of VAT receipts or other appropriate evidence of payment.
- Ensure all employees are fully aware of any expenses policy/procedure. If necessary re-circulate the procedure and remind employees of the consequences for non-compliance.
- At a time like this no business can afford to have its systems open to abuse.
- Employers can save a lot of money depending on how organised their staff are. For example, staff must be encouraged to book tickets early and to choose cheaper fares wherever possible.