The COVID-19 pandemic threw the business world into a great deal of chaos. Restrictions meant many businesses were forced to either shut down completely or implement unexpected remote work strategies on the fly. If you were one of these businesses, one thing that might have gotten overlooked was a revamped reimbursable expense policy.

Consider work-from-home expenses and be clear about your policies

If your employees were once required to do their jobs in your physical office space, but are now doing the majority of their work from their own home, they might be incurring expenses required to perform their tasks that wouldn't necessarily have been an issue in the pre-pandemic world. There's a good chance some of these employees have wondered if they are entitled to reimbursement for some of these expenses, and it can be an awkward subject to bring up with an employer. As that employer, you can avoid such conversations by updating your policies and distributing them to employees so they understand exactly what will and will not be reimbursed.

Depending on the business and the roles of work-from-home employees, certain expenses might need to be reimbursed.

"Expense types have changed as a result of working from home," says Appzen's Avant Kale. "Employees are not claiming classic travel and entertainment (T&E) expenses – but are claiming new types of work-from-home-related expenses. These include one-off items such as office chairs, external monitors, and desks; subscription costs such as Internet usage; and COVID-specific items like hand-sanitizer and face masks. Many organizations were slow to adapt expense policies to embrace this change – but adapt they must."1

Ultimately, you will need to make the decisions about what are considered reasonable expenses, but do so as quickly as possible so you can implement a clear policy.

Ask for feedback and listen to it

Keep in mind that pandemic-driven adjustments are still relatively new for everyone. Most people will understand that big decisions needed to be made in a hurry in the interest of safety and, in many cases, business survival. There's a good chance your current policy isn't perfect. That's why it's a good idea to ask for feedback from employees. Find out if they think your policy is fair or if they have any concerns. Take this feedback to heart and consider it as you update your policy.

Reevaluate over time

As time goes on, come back to your policy to see if it still makes sense. Once the nation gets past the pandemic and things get back to normal, your policy may need to be adjusted — for example, if the need for working remotely is no longer as pressing. Have discussions with staff as you consider changes and get a sense of what employee needs are at the time. Again, take these into consideration as you make policy adjustments.

Consider the tax implications

Beyond discussing which expenses you and your employees consider to be fair and reasonable, you should also remind them that working from home can affect their taxes. They should consult their CPA or other tax professional before filing taxes for 2020.

According to Stephen Fishman at Nolo.com, "The tax law permits employers to reimburse employees for legitimate job-related expenses, including home offices that meet the requirements for the home office deduction. To qualify for the home office deduction, the employee must regularly and exclusively use a portion of his or her home for work – -it need not be a whole room. And the home office must be for the employer's convenience. Employees forced to work at home due to the coronavirus qualify."2

In closing

Having a policy in place can clear up confusion and help you avoid awkward conversations with employees that strain the employer-employee relationship. You should also research applicable laws and/or discuss with your attorney what you are legally responsible for.

1. https://www.appzen.com/blog/four-ways-for-finance-teams-to-avoid-employee-disengagement-during-covid/

2. https://www.nolo.com/legal-encyclopedia/can-employees-get-reimbursed-for-work-at-home-expenses-incurred-due-to-covid-19.html

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank. Nevada State Bank is a division of Zions Bancorporation, N.A. Member FDIC