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Ask the Expert: Employee Remote Work Expense Reimbursement

Ask the Expert with Axcet HR Solutions' HR Consultant

Employers had an extremely challenging year in 2020. Ensuring employee and customer health and safety, monitoring employee health and notifying of potential exposure, evaluating availability of leave, using remote hiring practices, pivoting workforces to remote operations, and making hour and wage adjustments due to impact on business are all new issues and practices necessitated by pandemic conditions.

Each of these in itself generates a slew of questions and actions. For example, managing a suddenly remote workforce brings up remote monitoring and training, issuing company-owned equipment, technical and security issues, and productivity challenges. What's more, employers (and employees) may be wondering what responsibility, if any, employers have when it comes to reimbursing employee remote work expenses and how to do so.

Who Enforces Telecommuting Expense Reimbursement?

According to the Society for Human Resource Management (SHRM), the only federal requirement for reimbursement for remote work expenses is where the expenses would lower employee wages below minimum wage. This falls under the Fair Labor Standards Act. Employers with remote workers earning minimum wage or close to minimum wage with regular business-related expenses need to pay close attention to this to avoid violations.

SHRM recommends a written telecommuting expense reimbursement policy. There are some states that require reimbursement for necessary work-related expenses, so employers should be sure to know state laws where they do business and have remote workers. One example is that California requires employers to reimburse remote workers for cell phone service when they use their personal phones for work. In January 2019, Illinois amended the Illinois Wage Payment and Collection Act requiring employers to reimburse necessary expenditures that employees incur that benefit the employer.

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What Expenses Would Be Reimbursed?

Sungevity Human Resources Director Michael Trust advises reimbursing on a reasonable and legal basis to avoid the cost of litigating the issue. He reminds employers that the costs of reimbursing reasonable work-related expenses are more than likely less than the costs to maintain real estate and facilities for an on-site workforce.

Stephen Fishman, J.D., writing for legal topics site Nolo.com, reminds employers that even if not required by law, reimbursing work-related expenses is a good thing to do for morale and productivity to support their workforce during the unusual challenges posed by the worldwide pandemic. The tax law allows employers to reimburse work-related expenses, including home office expenses that qualify for the home office deduction. Fishman notes that employees sent to work from home because of the pandemic qualify to be fully reimbursed tax-free for home office items such as computers, internet service, and a portion of maintaining the home office.

An accountable plan is required for these reimbursements to be eligible as tax-free and to make sure the employees are reimbursed for work-related and not personal expenses. The employee must follow recordkeeping and verification rules for the expense, submit the expense reimbursement request and receipts in a timely manner, and return any overpayments in a timely manner.

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What Does a Telecommuting Reimbursement Policy Look Like?

Your company can implement a telecommuting reimbursement policy that is just a list of things that the company will pay for, or make reimbursement for work-related items part of an overall telecommuting policy. ThinkHR recommends being specific about what will be reimbursed and what will not be reimbursed, so that there is no confusion or any surprises for employees. An alternative to reimbursing for equipment and supplies is providing supplies and issuing company-owned equipment and providing, which the employee is responsible to return upon request or leaving the company.