With the era of the long lunch long gone in most industries, businesses need to keep track of the expenses their employees incur. In this article, we look at the practical steps and policies you can implement to reduce the risk of your employees misusing their expense accounts.

1. Draft a Clear Employment Agreement

Your employment agreement sets out your employee’s obligations upon joining your business. These include acting ethically and putting the business’ needs first. It will also set out the relationship between the employment agreement and your workplace policies.

Although workplace policies do not form part of your employment agreement, each employee is required to abide by such policies, as they may be updated or added to by you.

2. Set Up Precise Expense Policies

Your business should have a number of policies in place that will minimise the risk of employees misusing their expense accounts.

Personal Funds Use

Put in place a detailed policy on the collection and submission of receipts. The policy may state that employees should use their own funds to make purchases and can submit invoices to the business for reimbursement. This will let you monitor and validate purchases made by employees.

You can use apps and online systems to streamline the process, so employees simply need to take a photo of the receipt and upload it with the details of the expense.

Business Funds Use

Where employees are using your business’ funds to pay for expenses, you should take advantage of fuel cards and corporate accounts to manage and track your employee usage.

If you are going to provide employees with corporate credit cards, choose a card that has an appropriate limit, and ensure your employees know in what specific circumstances they can use the cards. You should limit the number of people with access to corporate credit cards.

Travel Allowances and Per Diems

When it comes to your travel and per diem policy, you may choose to have pre-approved limits for certain expenses. These may include:

  • limitations on breakfast, lunch or dinner;
  • a cap on what an employee can spend on client events; and
  • use of specific types of flights, hotels or rental cars.

Make sure the allowances or limitations you impose are in accordance with any modern award applicable to your employees.

If the employee does not comply with these limitations, they should only be reimbursed up to the stated limits. If you have different limits for different employees, have their manager or team leader approve their expenses.

3. Enforce Your Policies

Policies are only useful to a business if employees are aware of them and if you enforce them. Therefore, educate your employees on your workplace policies and clearly explain that if they do not follow the proper processes and rules, they may not be reimbursed. 

You may also consider taking disciplinary action against an employee for policy breaches. Depending on the degree of misconduct, you may:

  • give them an informal warning;
  • provide them with a formal written warning; or
  • terminate their employment for serious misconduct if the breach is severe (e.g. committing fraud or spending thousands of dollars over the limit).

If you have clear policies in place, you can easily point to the breached rule when an employee does misuse their expense accounts. You can set this out in your reasons for their performance management or termination. Without a clear policy to refer to, you may find it harder to prove performance issues or serious misconduct. This can be problematic if the employee decides to make an unfair dismissal claim.

Key Takeaways

Prevention is much better than a cure when it comes to enforcing expenses policies. Therefore, it is important to ensure that you have documented and practical protections in place for your business. Setting up and enforcing clear guidelines will make expectations clear to employees. This will also reduce the risk of misuse.

If you need assistance with drafting or updating your policies or dealing with an employee who has misused their expense accounts, get in touch with LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

Edith Moss
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