Duck ponds and mortgage payments – the employment law implications of expenses policies

Citation

James, S. (2011), "Duck ponds and mortgage payments – the employment law implications of expenses policies", Human Resource Management International Digest, Vol. 19 No. 3. https://doi.org/10.1108/hrmid.2011.04419cab.001

Duck ponds and mortgage payments – the employment law implications of expenses policies

Article Type: Employment law outlook From: Human Resource Management International Digest, Volume 19, Issue 3

Expenses policies

The long-term repercussions of the stories in the media which exposed allegedly extravagant expenses claims made by Members of Parliament for garden ponds and grass cutting, second homes and kitchen utensils rumble on, and should focus the minds of employers on their own organization’s expenses policy and practices.

An expenses policy will normally be found in an employment handbook, the contents of which will not form part of the contract of employment, and should set out the procedure that an employee must to follow before expenses claims will be reimbursed. An employer will have to decide whether it wants to put a limit on the type of expenses that can be incurred and the financial limits it wants to impose, and make sure that this policy reflects its practice and/or requirements in respect of all types of expenses that are likely to be incurred by a member of staff.

It may want to take responsibility for paying some of the larger costs that might be incurred by staff, for example, hotel accommodation, air travel and some client entertainment. This will mean that the employer may be able to negotiate bulk discounts, or outsource the service to a specialist business, will have control over larger expenses before larger bills are run up, and avoid staff having to pay out substantial amounts of their own money on company business.

Clear limitations

Expenses policies should be drafted very clearly, setting out the limits of an employee’s authority to spend, and when/if specific authority for expenditure should be sought in advance. Such a policy will usually include details of a specified form to use to claim repayment, and state that only reasonable and legitimate expenses incurred will be reimbursed, often then going on to set out what the organization will consider to be reasonable. Employers can also use a policy on travel expenses in particular, to reinforce commitments to reduce environmental impact, for example requiring staff to use public transport rather than taxis where this will not significantly increase journey time, or by subsidizing travel cards or season tickets.

Common provisions will include time limits for submitting claims, to encourage staff to file their claims regularly, maximum spend provisions for hotel accommodation and meal allowances, details of what will be sanctioned for the entertainment of clients, for motoring and other travel costs, and the need to provide VAT receipts or other supporting documents.

Recovering payments

In addition, employers need to ensure that expenses claims are checked when they are submitted as a matter of routine. If expenses claims go unchecked, it will be more difficult to obtain evidence from the employee or to take disciplinary action further down the line – receipts may be lost, and memories fade.

If an employee has been accidentally overpaid, those overpaid expenses can usually be deducted from the employee’s salary by virtue of section 14 of the Employment Rights Act 1996, which gives permission for sums to be deducted which are “reimbursement of the employer in respect of an overpayment of wages, or an overpayment in respect of expenses incurred by the worker in carrying out his employment”. Employers also often include a specific clause in the employment contract allowing this kind of deduction.

If a mistake comes to light only after an employee has left the organization, the employer could potentially try to claim the money back from the employee through a claim in the civil courts. However, unless the sums involved are very large, the legal costs involved in litigation may well make this a pointless exercise. This means that employers should always check there are no expenses claims outstanding on termination of employment before making a final salary payment, so that any adjustments needed can be made while this is still a relatively easy exercise.

Fraud

The position is clearly very different however if an employer suspects that the employee has submitted a dishonest claim. Where serious questions are raised about the merits of a claim, there may need to be a disciplinary investigation to discover the facts and whether there is a case to answer at a disciplinary hearing.

Where misconduct is made out, any sanction imposed should reflect the seriousness of the offence. Minor breaches of expenses policies which turn out to have obviously been made in error – totals added wrongly, a Mars Bar or late-night curry added on, or receipts submitted twice – may only require a chat between employee and manager, whereas deliberate fraud could result in dismissal without notice for gross misconduct. In certain cases, particularly large-scale fraud, the employer should also consider criminal proceedings.

Whistleblowing

Finally, bear in mind how the issue came to light? If an employee made a “public interest disclosure”, also known as whistleblowing, about what they genuinely thought was a dishonest colleague, then they may have legal protection from reprisal. Employees who have “blown the whistle” may fear ostracism, criticism, poor appraisals, victimization or even dismissal. The Employment Rights Act 1996 contains provisions which give specific protection against dismissal or any other detriment to workers who disclose information which tends to show that “a criminal offence has been committed”.

Sarah JamesAssociate Professor at Dickinson Dees LLP, Newcastle upon Tyne, UK. She can be contacted at: sarah.james@dickinson-dees.com

Acknowledgements

Copyright © 2011 Dickinson Dees LLP. All rights reserved.