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This Expense Policy template covers:
who is responsible for making decisions about expenses, processing and approving expenses claims, and answering questions about expenses
the employer’s approach to expenses, including optional sections on:
how staff are expected to reduce costs
the employer’s commitment to environmental sustainability
which categories of expenses the employer will cover, including:
details about each category of expenses covered
limits for particular expenses, and
if you cover entertaining expenses, information about compliance with anti-bribery laws
how staff should submit expense claims
what happens if a staff member abuses the provisions of your Expense Policy
There’s no legal requirement for employers to have an Expense Policy in place. However, managing staff expenses can be difficult as there are various tax and reporting requirements that you must keep on top of. Having an Expense Policy in place can help you to manage these requirements whilst communicating clearly with your staff about what expenses they can claim.
Staff (or employee) expenses are sometimes referred to as staff (or employee) benefits. Both are essentially the same thing for the purposes of reporting and paying tax on these payments. This Expense Policy treats expenses and benefits the same and simply refers to ‘expenses’.
For more information on expenses, read Employee expenses and benefits.
As an employer, it’s almost entirely up to you what kinds of staff expenses you’ll pay for. Some (but by no means all) of the categories of expenses you may choose to include in your Expense Policy are:
travel costs (eg travel tickets, congestion charge costs, and parking costs)
meal costs
accommodation costs and other costs associated with being away from home for work
the costs of training courses
equipment costs (eg costs of IT equipment and devices required for working from home)
subscription and membership fees (eg for subscriptions to online databases)
clothing or personal protective equipment (PPE) costs
counselling costs
medical or dental costs
entertaining costs (ie the costs of entertainment, such as dinners, for current or potential clients, partners, or collaborators)
Entertaining expenses are costs incurred for the purposes of maintaining or developing a business relationship with potential or existing clients, partners, or collaborators.
You must be aware of anti-bribery laws if you cover entertaining expenses, as there is a risk that any entertainment your business offers (eg nice dinners or outings) could be considered bribery (ie illegally incentivising people to do business with you). The general principle to abide by when deciding which entertaining expenses are honest and legal is that expenses should be reasonable, proportionate to purpose, and incurred in good faith. They should be connected to a legitimate business activity (eg discussing a collaboration agreement) and should be no more lavish than needed. If you indicate that you cover entertaining expenses, this Expense Policy will include a clause explaining these anti-bribery law considerations.
You can make an Anti-bribery policy to set out in more detail how your business avoids engaging in bribery. For more information, read Workplace anti-bribery rules.
You will have to pay tax and National Insurance contributions (NICs) on some types of staff expenses. Similarly, you must keep records of some types of expenses and make reports to HMRC. There are specific rules for different categories of expenses. Some categories have exemptions. If an exemption applies to a particular type of expense you generally won’t need to pay tax on expenses within that category.
Exemptions are sometimes available when expenses within a particular category are kept below a certain level (eg £5 per night for incidental overnight expenses incurred during travel within the UK). It is, therefore, a good idea to check any exemptions available when you’re setting limits on expenses in your Expense Policy.
The UK Government provides guidance on tax and reporting requirements for different categories of expenses and on how to report, pay tax on, and record your staff expenses.
For more information, read Employee expenses and benefits.
You should generally pay staff money following successful expense claims via payroll. This creates a record of your payments and ensures that you’re always being clear and transparent about your staff expenses payments.
You can also use payroll to pay taxes and NICs due on your expense payments. This is known as ‘payrolling’. To use this method, you’ll need to register to do so with HMRC before the start of the tax year.
For more information, read Employee expenses and benefits and the Government’s guidance on payrolling.
The appropriate way to handle overspending on expenses depends on the situation. Sometimes, if there’s a good reason for additional costs being incurred, the best thing for an employer to do is to cover the additional expense. Staff members may have expenses that they must incur in order to perform their jobs. If such expenses go over expenses limits for a good reason (eg because a flight was cancelled and a staff member had to find last-minute accommodation) it’s often fair to the staff member to cover additional costs.
This Expense Policy template includes a clause stating that expense claims in such instances will be dealt with on a case-by-case basis and that the employer has discretion to approve them or not. This allows you to be a compassionate employer, whilst also allowing you to refuse any requests that you believe are truly unreasonable.
If you believe that a staff member is abusing their entitlements under your Expense Policy you can take disciplinary action against them. You should follow a Disciplinary procedure to help you follow employment laws when carrying out any disciplinary proceedings.
Making an Expense Policy online is simple. Just answer a few questions and Rocket Lawyer will build your document for you. When you have all of the details prepared in advance, making your document is a quick and easy process.
To make your Expense Policy you will need the following information:
Employer details and expenses
What is the employer’s name?
Who is responsible for expense claims?
Which categories of expenses can staff claim for?
Travel expenses
Do you want to detail which travel expenses can be claimed? If so, what rules do you want to include?
Do you want to set specific limits on travel expenses? If so, what are the travel expenses limits?
Accommodation expenses
Can staff claim the cost of meals when they're away overnight for work? If so, do you want to set specific limits on these meal costs and, if so, what are the limits?
Do you want to detail which overnight accommodation costs and related expenses can be claimed? If so, what rules do you want to include?
Do you want to set specific limits on overnight accommodation costs? If so, what are the overnight accommodation cost limits?
Training expenses
Do you want to detail which training expenses can be claimed? If so, what rules do you want to include?
Do you want to set specific limits on training expenses? If so, what are the training expenses limits?
Equipment expenses
Do you want to detail which IT equipment and device costs can be claimed? If so, what rules do you want to include?
Do you want to set specific limits on IT equipment and device costs? If so, what are the IT equipment and device costs limits?
What other types of equipment can employees claim for?
Do you want to set specific limits on equipment costs? If so, what are the equipment expenses limits?
Subscription and membership expenses
Do you want to detail which subscription and membership fees can be claimed? If so, what rules do you want to include?
Do you want to set specific limits on subscription and membership fees? If so, what are the subscription and membership fee limits?
Meal allowances
Do you want to detail which meal costs can be claimed? If so, what rules do you want to include?
Do you want to set specific limits on meal costs? If so, what are the meal cost limits?
Entertaining expenses
Do you have an Anti-bribery policy in place? Is it available online?
Do you want to detail which entertaining costs can be claimed? If so, what rules do you want to include?
Do you want to set specific limits on entertaining costs? If so, what are the entertaining expense limits?
Other expenses
What other categories of expenses will you cover?
Do you want to set limits for each category of expenses? If so, what limits are in place?
Reimbursement
Will staff be paid back (ie reimbursed) for expenses after they've been incurred and/or paid in advance for expenses that they plan to incur?
To claim expenses, should staff:
Submit a claim in writing after incurring an expense?
Submit a claim via an online expense claims platform? What is the name of the platform?
Submit a claim using an expenses claim form after incurring an expense? Is the expense claim form available online?
Using a different method?
Non-compliance
Is a Disciplinary policy or procedure in place and, if so, is it available online?
Other points
Do you want to set out how staff are expected to reduce expenses? If so, how should staff reduce expenses?
Do you want to include a commitment to environmental sustainability in your Policy?
An Expense Policy communicates an organisation’s approach to staff expenses, so that staff can make expense claims in a clear and compliant way. As a result, this Expense Policy template covers:
Statement and purpose of the Policy
This section provides an overview of the Expense Policy and sets out why it is important for the employer and to whom it applies. It also clarifies that the Policy is non-contractual and can, therefore, be amended by the employer when necessary.
Roles and definitions
This section identifies who is responsible for assessing and processing expense claims. This is also the person who staff members should contact if they have any questions about claiming expenses.
This section also clarifies what certain terms used throughout the Policy (eg ‘covering’ or ‘claiming’ expenses) mean. This ensures that everyone reading the Policy understands what it means.
The employer’s approach to expenses
This section explains that the employer will cover all reasonable expenses incurred by staff members in accordance with this Policy. It also encourages staff members to minimise expenses where possible. Where relevant, it also includes a commitment to environmental sustainability and encourages staff members to select the most environmentally friendly options when incurring expenses.
Expenses that may be covered by the employer
This section sets out the expenses that are covered by the employer. For each category of expenses, this section provides details on what is considered reasonable and, where relevant, will provide expense limits.
Submitting an expense claim
This section details how staff members should claim for expenses they incur. It also explains how payment for expenses will be issued by the employer and within what time period it should be received by staff members.
You can edit your document if you want your Expense Policy to include further or more detailed provisions. However, if you do this, you may want a lawyer to review or change the Expense Policy for you, to make sure it complies with all relevant laws and meets your specific needs. Ask a lawyer for assistance.
Make sure you comply with your tax, National Insurance, and reporting obligations when covering staff expenses
Employers must pay tax and National Insurance contributions on certain categories and types of staff expenses. Similarly, they must keep and submit records on certain categories and types of staff expenses. Some categories of expenses are exempt from these requirements. It’s important to follow these requirements. Paying out expenses using payroll can help you to do this. For more information, read Employee expenses and benefits.
Understand when to seek advice from a lawyer
If you’re unsure about how to understand and follow your Expense Policy, it’s a good idea to Ask a lawyer for assistance. Also consider asking for advice if:
you need assistance complying with tax and recording requirements
you’re concerned you may be breaking anti-bribery laws with entertaining expenses
you’re covering expenses for staff members based outside of England, Wales, and Scotland
