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How to Reimburse Employees for Business-Related Expenses

There may be a time when an employee needs to make a payment for a business-related expense. This includes expenses such as uniforms, travel, equipment, business meals, and more.

So how do you reimburse employees for these expenses? It is important to understand between the various kinds of expenses and at what point and how the employer is expected to reimburse employees.

FLSA

The Federal Labor Standard’s Act (FLSA) minimum wage and overtime requirements for non-exempt employees might require timely reimbursement to satisfy compliance. Under the FLSA all work-related expenses paid by the employee that would bring their pay below the minimum wage (or cut into overtime pay) must be reimbursed by the employer. Additionally, the FLSA requires the reimbursement to occur no later than the next regular payday.

Uniforms and work-related equipment

When it comes to uniforms and work-related equipment, states have their own requirements about how to handle these situations. For example, some states require employers to reimburse employees for the full cost and maintenance of required uniforms and tools. It is important to note that some states have a list of exceptions for certain tools and equipment.

If the state has no regulation, then the employer defaults to following the FLSA rule. This means that they only need to reimburse employees if the cost of required uniforms/tools when that cost lowers the employees pay below the minimum wage.

Vehicles

Some states require full reimbursement for vehicle expenses caused by work-related reasons. When reimbursing employees for vehicle expenses, some employers use the IRS standard mileage rate. It is optional and includes the fixed/variable costs of operating a vehicle. This includes deprecation, insurance, repairs, tires, maintenance, oil, and gas. Adjustments to the rate typically occur annually. Employers can also simply calculate the actual cost to their employees and reimburse them that way. If your state does not have any vehicle reimbursement requirements, your obligation falls back to the FLSA standards.

Travel

Like the two categories listed above, some states require employees to be reimbursed in full for business trips and their’ related expenses. California, for instance, requires reimbursement for all reimburse employee expenses paid by an employee while performing job-related duties. During the time of travel for business reasons, this would include things like lodging, meals, and transportation. However, employers may set reasonable limits on business travel expenses and list what type of travel and lodging is eligible for reimbursement. These limits should be reasonable and communicated with the employee ahead of time. States that don’t have full reimbursement requirements also fall under the FLSA standards.

To maintain compliance, it is always helpful to check with your local jurisdictions to ensure you understand all that is necessary for compliance. Additionally, speaking with a trusted professional or partner can help your organization make well-informed decisions.

Moreover, your organization should be documenting and organizing information regarding all expenses incurred by your employees. Keeping track of everything can give you a better idea of how to handle each case.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.