Who Should Be Responsible for Remote Work Expenses?
Even before the 2020 global health pandemic caused much of the world to work from home, some companies had already allowed employees to work partially or entirely remotely. Rapid advances in technology for high-speed wireless connections, communication, data storage, and mobile device accessibility prepared the business world for what was to come. A smoother transition from in-office work to remote work due to COVID-19 was able to be performed almost anywhere.
Many workers thrust into remote working situations ask, “What expenses should my employer pay if I work from home?” Remote workers often have different and additional expenses compared to on-site workers. Will your employer pay for your internet service? Will they provide home office furniture or a computer? Each business and circumstance is different, but some basic guidelines, legal restrictions, and tax implications factor into creating and implementing a remote employee reimbursement policy.
What Is a Remote Employee Reimbursement Policy?
Your employer furnishes the necessary equipment, furniture, and other items required to complete your job duties in a traditional office setting. Your company also reimburses you for work-related costs such as cell phone costs, and food and gas while traveling. Many people working from home have employees wondering what their company’s employee reimbursement policy means for remote workers.
In most circumstances, employers do not reimburse remote workers for job-related expenses. Employee reimbursements for remote working costs may increase productivity, staff engagement, and company morale, but they are benefits that are generally not mandatory.
Remote Expenses That Can Be Reimbursed
Different positions and industries require varying types of equipment and resources to complete a remote job. The following are examples of the kinds of expenses remote workers may be able to get reimbursed for from their employer:
- Internet connection services;
- Landline or prepaid telephone service;
- Mobile phone service;
- Home office furniture, such as desks and chairs;
- Computer, laptop, and accessories;
- Computer software and online subscriptions;
- Additional equipment such as printers and scanners.
Some employees prefer to offer remote employees a stipend to cover job-related costs instead of direct reimbursement of specific expenses. Stipend payments are made immediately, and no receipts or proof of purchase is needed. They are reported as income to the IRS and are subject to a 30% tax withholding.
Laws and Regulations Regarding Work-From-Home Expenses
Some employers are required by law to reimburse remote workers for job-related expenses in these unusual times. The Fair Labor Standards Act (FLSA) dictates employees are to be treated by their employers. The federal statute was passed in 1938 and has been amended and updated ever since.
Under the FLSA, employees must be reimbursed for expenses that drop an hourly wage below the federal minimum wage. Some states also require employees to be compensated for specific costs incurred while performing their job, including internet service and cell phone expenses.
The federal Tax Cuts and Jobs Act states that individual taxpayers are no longer allowed to deduct business expenses that their employer has not reimbursed. This means that any business expenses not recovered through a stipend or reimbursement cannot be recovered.
Reimbursements and Taxes
Work-related expenses and the employer reimbursement of those costs have tax implications for remote employees. IRS Code Section 139 stipulates that during the current global health crisis, “qualified disaster payments” made to employees to cover home office expenses incurred as a direct result of the pandemic are not taxed.
When the business world returns to standard practices after the crisis has subsided, employers and employees will need to pay closer attention to federal and state tax regulations regarding expense reimbursements. Because remote work sometimes forces employees to file taxes in different states, remote workers must know and follow their state's tax laws relating to employee reimbursements.
Employees working remotely in a different state than the office location could result in tax consequences and burdens, depending on the state’s tax laws regarding remote work. A remote worker’s home may be treated as an office location by the IRS and could be subjected to additional income taxes from their home state. Some states are offering pandemic-related time-sensitive exceptions, while others are providing no such exceptions.
Why Should Businesses Reimburse Remote Workers?
Whether to reimburse work-related expenses for remote workers is most often left up to the employer. Remote freelancers and independent contractors are typically responsible for expenses needed to complete the job or project tasks. Companies forced to have employees work from home likely provide them with computers and other equipment. Reimbursements and stipends are distributed to cover out-of-pocket expenses that the company would typically take care of through regular on-site business operations.
Much of the business world resisted the notion of remote work. Owners and managers feared employees working from home would negatively impact employee productivity and lose a sense of control over the business’s daily operations. A recent survey by HR and workplace benefits consulting firm Mercer showed that productivity from remote workers is the same or higher during the pandemic compared to in-office work before the crisis.
Combining a satisfied and productive remote workforce and the overhead and operational savings of employees working from home have businesses shifting their approach to remote work. Even if it is not required by law, it is good business and a smart practice to keep remote workers happy and engaged. Reimbursing remote employees for job-related expenses improves overall morale and attitude and propels them to work even harder and produce higher rates.
Remote workers and their employers experience significant savings with teams working from home. Needs and expenses for remote staff are often different from those for on-site employees, and both employees and businesses look for ways to save even more money. Shopping around and taking advantage of sales, deals, and promotions can help reduce costs and savings even further.
The following are examples of ways to cut costs in a remote working environment:
- Bulk computer or laptop purchases;
- Free phone deals;
- Discount home office furniture;
- Bundling home communication systems.
Remote Work is Here to Stay
The pandemic is showing the business world that remote workers perform the duties of their jobs at least as effectively working from home as when they are physically in the office. Implementing an employee reimbursement policy for remote work-related expenses that are typically covered when working in an office increases work productivity and job satisfaction.
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