In reaction to the COVID-19 pandemic, companies have hit the brakes hard on business travel. At the same time, the pandemic has forced employees out of their offices and into makeshift niches in their homes where they try to get some work done. These two developments have strained employee expense management in ways that caught many organizations unprepared.
Organizations commonly have travel policies. They range from “Fly coach, sleep cheap, and no steak dinners” to thoughtful, detailed guides that consider a broad range of factors. Expense policies for home-based workers tend not to be policies at all. Instead, you find a scattering of one-offs and special deals. To no one’s surprise, an ad hoc approach to home expense reimbursement does not scale very well.
Where to start? First, check with your accountant regarding the difference between reimbursements and supplemental compensation. For example, suppose an employee wants to paint the closet in which he is working orange to remind him of the fabric of his cubicle at work, and you agree to pay for the paint. We are not offering tax advice here, but very likely the IRS would consider the payment “compensation.” That means that you would have to run the reimbursement through payroll so that withholding is taken out.
Then you have to decide for what you are going to be responsible. The dynamic between employer and employee is quite different when the employee wants to work from home and when the employee is required to work from home. In the case of office closures, the employee has the advantage of having been “put upon,” never mind that the employer doesn’t like the situation any better than the home worker. Percentages of utilities and internet access subscriptions, furniture, lighting, new paint—a plausible case can be made for a madhouse of subsidies. Be fair but be firm. No environment improvements. No indirect cost sharing like for the electrical or water bill. And definitely not for the mortgage or rent! Establish a single fixed internet access subsidy, or if you wish, a general subsidy, and leave it at that.
The lockdown won’t last forever. Already some jurisdictions are opening. Many organizations are bringing workers back to the office on a part-time basis so that social distancing can be maintained. This adds another wrinkle to the requirements for a reimbursement policy, if you don’t want to be paying a full-time subsidy for part-time remote work. It will be essential to integrate time tracking with expense reimbursement so that payments can be easily and accurately prorated.
When dealing with the work-from-home reimbursement challenge, think Clarity, Consistency, Simplicity, and Adaptability. But most of all, take the initiative to put a plan in place, or you may find yourself buying the orange paint.
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