Editor’s Note: ‘Simplifying the Expense Claim Process for Remote Employees’ is a guest article written by the Spenmo team.
The COVID-19 pandemic has somehow permanently redefined the way everyone works. While most Singaporean workers prefer telecommuting due to work-life balance, some organisational processes are affected and have become more complex. Remote work arrangements made manual employee expense claims a lot longer and more difficult. The tedious process also led to outrageous submissions which companies often fail to track efficiently. From chasing down physical receipts to reconciling them with reported data in spreadsheets, manual reimbursements can be an expensive hassle for the entire organisation.
Thus, digitisation can help prevent expense claims from hurting your employees’ experiences and your entire organisation’s financial decisions. Business owners should conquer the challenge of utilising the best digital solution applicable to create seamless expense claims.
Allowable vs not allowable expenses when working from home
Expense reimbursements can be very confusing on the part of an employee. At some point, it can also be very expensive on the part of the employer if the spending is fraudulent. The last thing you want is to pay off an expense claim that does not comply with the company’s policies.
The Inland Revenue Authority of Singapore (IRAS) provided some guidelines on the allowable and non-allowable employee expenses which are not reimbursable by the company but can be deducted from the employee’s income to reduce his tax payments.
Expenses incurred while performing your duties
This spending may include electricity. This is because working from home requires the use of gadgets and appliances to facilitate the performance of an employee. Computers, mobile phones, and air conditioning units consume electricity and are essential for remote staff.
Expenses not reimbursed by the employer
Not all spending can be covered by the company. Some expenses like a subscription for professional advancement may not be approved for company reimbursements; however, they may be submitted for tax deduction purposes.
Expenses that are not capital or private
Some expenses like currency exchange fees or travel expenses can also be submitted for IRAS tax deduction eligibility review.
Non Allowable Expenses
To prevent the submission of non-eligible claims, the IRAS identified some wrongful claims:
Expenses incurred for social purposes and maintaining goodwill
When employees decided to hold a lunch together virtually to foster camaraderie amid the pandemic. They ordered food online and spent their own money on it. The expense is not allowable.
Expenses incurred for meeting potential clients
Trying to close a deal is difficult during these times. After all, employees may need to spend on food and travel just to make their pitch to a potential client. All the spending related to this purpose is not allowable.
Payment instead of notice paid to employers for failing to serve sufficient notice period before leaving a job
Let’s say an employee leaves his job way before the agreed notice period and the company asks him to pay off the days or months with abridged services. In that case, the employee cannot reimburse the said expense.
How to claim for work from home expenses
A few months after the onslaught of COVID-19 in Singapore, the government already allowed employees to reimburse telecom and electricity bills. However, employees should take note that although monthly charges incurred during the work-from-home setup are allowable, those capital expenses like installation fees will not be accepted.
To get a clearer understanding of how tax deduction, take a look at the sample computation below.
Employee Reimbursement vs. Prepaid Expense Advances vs. Payroll Advances
Expense claims emerge from three ways in which employers and employees spend their money in advance:
Work-from-home schemes allow employees to spend their own money. It also allows them to pay off any company-related expenditures, which their employer then reimburses upon approving the expense claim. Examples of these are expenses related to travel and the purchase of supplies or tools essential to the employee’s work.
Employee pays from his own pocket → Company will reimburse
Prepaid expense advances
Company provides money in advance → Employee uses for work-related purchase
Prepaid advances are incurred when a company provides money in advance, in anticipation of incoming costs. Most small and medium enterprises in Singapore make use of virtual corporate cards; employees can use these cards for expenditure on company-related stuff employee wellness, Facebook ads, transport, and freelance services. Business owners can customize the settings and limits of each card depending on the employee’s roles and responsibilities.
Company provides money in advance → Employee uses for personal purposes and repays through salary deduction
In essence, a payroll advance is a form of short-term loan provided by the company and paid by the employee through salary deductions. Some companies allow for small repayment amounts deductible from the employees’ paychecks. However, other organisations would deduct the entire amount from the next salary cutoff.
Should you consider employee advances for your business?
Business owners are responsible for financing work-related expenses. However, they are not responsible for providing money to their employees for personal use. However, not all employee’s financial status is the same as some are living from paycheck to paycheck, especially in this time of global health crisis. Providing employee advances can be beneficial in fostering a more productive workforce however, can result in financial damage if advances affect the company’s liquidity.
Ways to simplify expense claims
Simplifying expense claims may seem impossible especially if you think of receipts, invoices, and other supporting documents which need to be kept. Business owners who wish to trim down fraudulent or unnecessary repayments can consider the following to make reimbursements cost-efficient, time-saving and reliable.
Identify recurring and one-time expenses
Recurring expenses are expenses that the company pays for regularly. Supplies and utility bills come regularly and the company will need to finance them to facilitate a smooth business operation. Identifying recurring and one-time expenses can help the finance team manage the company’s funds more efficiently. They could allow funds for recurring expenses and prioritise the budget for these. One-time expenses include installation fees that company funds pay against.
Use virtual cards for digital and big-ticket payments
Business owners who are hesitant in employing digital solutions fear the challenge of privacy and security especially when using virtual cards and allowing employees to use them for purchasing. If you only choose the right corporate virtual card provider, then these will not only help track company spending but will also help in evaluating items which the company spends on. Virtual cards save the employees from spending their money while establishing their confidence in their employer. Virtual cards can set limits for spending and can provide real-time access to expenditures.
Get an easy-to-use software for smoother company expense management and reimbursement processes
Digitisation of the expense claims process can be very useful to the employer and employees. With the use of software, everyone in the company can easily track their spending habits and verify the data provided for claims. With the vast array of software available, business owners no longer need to waste money as finance teams endure long hours of verification of employees’ claims.
Expense claims are crucial to a company’s financial stability. Businesses that consider automation can effectively eliminate any fraudulent claim, errors in information, incorrect reimbursements and wasted time on manual processing. Digitising this process helps you see real-time data and it helps with faster decision-making especially for a company with remote employees. Expense automation services and software are available for companies to explore and maximize.
As more and more companies shift to remote working, a lot of business owners continue to see gaps in its implementation in their own organisation. Join us in our upcoming webinar with the topic, How to Successfully Implement Remote Working in Your Company. Our guest speakers, Mohandass Kalaichelvan, CEO at Spenmo, and Gordon Ng, CEO at Talenox, will be discussing best practices and trends in a remote work setting in 2021. Click the link below to register.
Expense claims are crucial to a company’s financial stability. Fraudulent claims, errors in information, incorrect reimbursements and wasted time on manual processing can be eliminated should business owners consider automating.