Employees at work

Business Guide: Updating your expense policy for a hybrid workforce

The COVID-19 pandemic has created some permanent changes to the way we operate our businesses.

This includes a move to ‘hybrid’ working with some employees being office-based, some working from home while others combine the two.

Webexpenses research recently found that 84% of users have been home working since the pandemic hit. It’s a major change that businesses have had to handle with minimal preparations.

For finance teams, it means making sure that employee expense policies are reviewed and updated to handle all of the challenges posed when managing the costs of a hybrid workforce.

What is a hybrid workforce?

A hybrid workforce refers to any business whose employees include a mix of home and office workers. There are a wide variety of models that are being used to manage the COVID-19 restrictions. These include:

  • Remote employees having to book office time
  • Scheduled rotation between the office and remote work
  • The setting of company days for remote work
  • Limits placed on the number of people in the office

Along with these new working modes, there’s a new set of terminology developing to describe the various approaches. This includes:

  • All-remote: Business that has no physical offices with all roles being remote.
  • Hybrid remote: Business which has a mix of office-based and remote workers.
  • Remote first: Business which primarily operates remotely, but retains the main office.
  • Background: The switch to hybrid working

A global survey of businesses, carried out within the first months of the pandemic, found that more than a third (37%) of businesses had switched to a hybrid workforce model.

The breakdown for the individual nations was:

  • Canada: 40%
  • UK: 39%
  • US: 37%
  • Australia: 36%
  • Global: 37%

All of the recent analysis indicates that this shift to hybrid is permanent. Particularly noticeable has been a rapid increase in sales of tools and software for remote management of employees.

So what should you review on your expense policy?

The shift to hybrid working requires an employee expense policy to be reviewed, updated and adapted. While the temptation may be to simply add sections to cover remote working, the move to a hybrid model will benefit a more thorough review, looking at:

Clarity on roles and ‘bases’

To effectively manage a hybrid workforce you need to be clear on how and where each employee is permitted to work. If these conditions have changed since the pandemic, the changes need to be effectively recorded - ideally as part of the employment contract.

While a hybrid worker may be permitted to switch between home and office work, it’s important to identify where they are based. This is key information for handling employee expenses and the correct processing of mileage claims and tax liabilities.

Adapting management process

Traditionally, the purpose of an expense policy has been to keep control of ‘out-of-office’ costs - whether it’s an airport coffee, a plane ticket or overnight accommodation. With a hybrid workforce, it’s no longer this simple and needs a more nuanced approach.

It becomes important for finance teams to have accurate information on a claimant’s location and job status when checking and processing a submission. This kind of data can be automatically logged against users within cloud-based systems.

Reviewing tax implications

The move to hybrid workforces makes the complexities of expenses and tax system even more of a headache. This is particularly the case for US businesses where individual states have different requirements when it comes to tax rules and T&E reimbursements.

With many employees relocating due to remote work, finance teams need to make sure they are complying with the relevant rules. Care also needs to be taken with various temporary tax rules, introduced in response to COVID-19, imminently coming to an end.

Balancing home vs office

It’s important to make sure that an expense policy is fair and equitable, irrespective of where the employee is based. Without this, there’s the risk of creating a two-tier workforce with one side viewed as receiving preferential treatment.

A practical example of this is when a business provides office-based perks to workers such as free drinks or subsidised meals. It’s worth looking at ways to balance these kinds of benefits with a matching allowance for remote workers.

Assessing travel expenses

Travel between a person’s home and place of work is not normally considered a valid business expense. But what happens within a hybrid workforce when the ‘place of work’ is often a person’s home?

Managing this requires a clear policy and guidance on travel expenses for remote workers, particularly when they are claiming for trips to a company office. This is another reason why identifying a ‘base’ location for each employee becomes so valuable.

Guidance on home office kit

Claims from remote workers for home office equipment is a new form of expense for most workers and employers. Without proper controls, the costs incurred can be substantial.

An effective strategy is to provide workers with a guide to what can be claimed, together with some typical examples of acceptable costs for various items such as chairs and additional monitors. A policy should also make clear who owns these items.

Increased use of allowances/stipends

There are some aspects of hybrid working which are always going to be difficult for finance teams to manage. One of the problem areas is the management of claims that relate to the day-to-day expenses of a remote office - electricity, phone, heating etc.

Rather than trying to untangle which elements of these bills are business-related, a more pragmatic approach is to agree on a monthly general allowance/stipend to cover a range of home office-related costs.

Hybrid workforces: A fresh approach to expenses

The long term shift towards hybrid will require a similar change in financial management. Processes and policies that worked for an office-based business will struggle to manage the increased challenges of flexible working.

Digital tools will play a vital role in helping finance teams to manage these changes. Cloud-based management and real-time tracking allow a business to monitor expense irrespective of where an employee is operating - whether it’s an office, home or a mix of the two.