In the United States, expense reimbursement is only required in a couple of cases.
1. In the event an employment contract contains expense reimbursement, an employer is responsible for expense payments.
2. When employees pay for business related expenses, they are kicking back money to their employers. These kickbacks must be subtracted from an employee’s wages to accurately calculate minimum wage. If employees are not paid at least minimum wage, free and clear, the employer is in violation of the FLSA.
However, some states have their own laws surrounding expense reimbursement. Those states include: Illinois, California, Massachusetts, Montana, Pennsylvania, New York, Iowa, and the District of Columbia. Illinois was the newest addition this year.
Illinois Expense Reimbursement Law
The new law in Illinois states that employers must reimburse all “necessary expenditures”. This mean, “all reasonable expenditures … required of the employee in the discharge of employment duties and that inure to the primary benefit of the employer.”
In Illinois, unlike California, employees need to submit the expenses they wish to be reimbursed within 30 days of incurring the expense.
If employees do not comply with the employer’s policies, the employee need not be reimbursed. For more information on the new law, check with Epstein Becker Green.
Create an Expense Reimbursement Policy for the Employee Handbook
Create reimbursement policies and add them to the employee handbook. The policy will state the following:
- The acceptable time period for which employees may submit expenses. Less than 30 days is not acceptable according to the new law but 30 days or more is fine.
- The method used to submit expenses for reimbursement.
- The maximum allowable amount for travel expenses.
- The type of technology-related expense, such as phone and internet, that are reimbursable. Be sure to list the percentage of the bill that is reasonable to reimburse.