Establishing a Company Policy for Work from Home Expenses

Claire Milligan, SVP and General Manager, Tallie

Many organizations are now into the second week of working from home. Week one was the week of “how can we get our employees to effectively work from home?” Now that’s (hopefully) been achieved, leadership teams need to assess how to align their processes and policies for what could be a prolonged period of supporting their teams in their home offices. For those who are able to transition their workforce to work-from-home, a new question arises: what expenses should we be paying for?

For U.S.-based companies prior to 2018, the answer was fairly simple: if an employee chose to be a remote worker, they were afforded the opportunity to deduct some of their unreimbursed home costs on their IRS tax return. However, since 2018, this opportunity has been limited only to independent contractors and not employees. Therefore, when employers ask their employees to work from home, they may also be asking them to incur additional costs out of pocket.

Policy Recommendations

We believe that a more human workplace can start with the CFO. Your decisions in the next weeks and months can positively impact your company culture and create a real sense of connection with your employees. A new company policy on work-from-home expenses might be the right place to start. Here are some factors for you to consider.

One-Time Equipment Purchases

An employee’s office desk might have one or more monitors, a laptop, a keyboard/mouse and more, but their couch in the living room might only have a laptop. When thinking about one-time equipment purposes to establish a viable home office, you’ll need to balance the need for employee productivity with controlling cash outlay and proper capitalization of assets. Given the current atmosphere of immediate shift to work-from-home, we’re seeing a significant rise in manager encouragement and approval of home office equipment purchases without any particular limits, which can be frustrating and concerning for finance teams.

Recommendation: At a minimum, it would be prudent to institute or remind/reinforce existing policy of pre-approval for any equipment purchases that exceed your typical asset capitalization threshold. This will allow you to keep major equipment purchases on your asset table, tracked for proper depreciation and retained as company property at the time when your team returns to office life.

Implementation Tips: If you don’t have pre-authorization or purchase requisition workflows in place, expense and accounts payable solutions are an ideal way to automate and ensure compliance for these important processes. Additionally, you could earn some employee goodwill by funding authorized purchases on a pre-paid virtual card to ensure that employees do not have to wait for reimbursement. For any assets already purchased, you can work with your IT team to establish a basic intake process using Google Forms, Slack, Microsoft Teams, or other centralized communication tools.

Office Supplies

The first few days of home office work might be focused around making sure we’re all connected, meeting and following up with each other through our laptops. Yet we’ll reach a time when a broader set of tools such as highlighters, Post-Its, printer paper, etc. become more necessary and employees will look to finance teams for guidance on what can and should be purchased.

Recommendation: With employees making purchases individually, organizations don’t benefit from the typical volume discounts of office supply orders, which means cost controls are a very good idea. Consider establishing a monthly or quarterly spend limit across all office supply purchases, per person. A good method of identifying the exact limit would be to take your total office supply budget and divide it by each individual employee. Extending the timeframe for the spend limit will allow your employees the flexibility to make purchases of a higher individual dollar amount less frequently.

Implementation Tips: Communication is as important for this policy as expense software configuration. A proactive message to your employees notifying them of the budget available to them in light of any controls you are adding to your company financial plan will empower the team to make their own thoughtful purchase decisions and feel like they have a stake in affecting your overall financial performance.

Data, Internet and Phone

This is where it gets tricky. Under previous IRS guidelines, employees could write off the portion of these services used for business purposes in their tax returns. Because of this, it is typical to see an expectation among employee populations that a similar portion of their internet or phone bills should be reimbursed by the company. Yet, employees’ cost basis may not actually rise if their existing plans offer bandwidth or data rates at levels comparable with their needs for home-based work.

Recommendation: It’s smart to first review your company’s cost position holistically for the next year to determine whether you can shoulder the burden of partial payment of all internet and phone bills for all employees. With experts offering a variety of timelines for quarantine, you should be cautious about implementing policies or programs that you cannot sustain over time. Depending on the outcome of your review, consider instituting a very clear policy that ranges between specific fractional portions of bill payment at the most generous to a policy of demonstrated evidence increase in cost due to business activities at the most restrictive. Remember, you may have flexibility in your T&E budget that can be contributed to this line item.

Implementation Tips: For these types of expense policies, managerial or additional accounting review will be critical for policy compliance, as the exact receipt from the vendor must be compared to the fractional cost that is charged back to the company by the employee. Consider adjusting approval chains in light of any new policies that require stricter scrutiny.

Digital Connectivity Software

If you don’t already have company subscriptions to tools like Dropbox, Google Hangouts, Zoom, WebEx, Slack, Microsoft Teams, or others, you can be certain that your employees are seeking out contracts with these products as we speak. Fostering connection with each other is incredibly important for productivity and these tools are critically important. That being said, it’s your fiscal responsibility to ensure these costs do not balloon with ‘shadow IT’ purchases.

Recommendation: Your company has asked for its employees to work from home so it is your responsibility to provide them with subscriptions to the proper tools to perform their jobs. Concurrently, these subscriptions should never be contracted by individual employees or departments, and a clear expense policy can easily be implemented wherein no expenses will be approved for individual or team subscriptions to digital connectivity software.

Implementation Tips: Quickly but thoroughly review software options with your IT partners and make single purchase decisions that cover your whole company. Ensure all team members have access to these systems as quickly as possible. Simultaneously, you may consider granting employees a grace period during which any individual subscriptions to these systems must be terminated and access migrated to centralized company accounts. Provide a clear cut-off date, beyond which expenses for digital connectivity software will not be approved.

Discretionary Culture Stipends

Each company strives to create a specific cultural environment in their office space, whether it’s about optimizing for high performance or creating a familial bond. Without this space to gather, organizations risk losing the culture they have fostered, and the employee loyalty that it creates. At this time of uncertainty, a little goes a long way to let your employees know the company’s culture continues no matter what.

Recommendation: Consider using a small amount of excess funds set aside for office events, internal corporate events, food budgets or otherwise for specific employee stipends that foster your organization’s culture. Perhaps your company appreciates and recognizes employees who have acquired new skills or classifications? Proactively create an expense stipend for online learning to reinforce this key cultural aspect. Perhaps your company regularly volunteers together in the community? Establish a donation matching program to keep the community-assistance spirit alive.

Implementation Tips: If you do choose to implement a discretionary stipend to foster company culture, you should offer it as opt-in to your employees. Not only does this reduce the cost overall, but it allows you the opportunity to recognize the employees who have taken advantage of it, which cascades the cultural impact across the organization.

Emburse Can Help

Above all, we want to partner with each of our customers through this uncertain time. Each of the Emburse solutions offer a variety of ways to customize expense policy benefits. We also offer a number of solutions for organizations that are transitioning to work from home, including virtual, policy-backed employer-paid cards for employees to purchase equipment and supplies.