Working from home expenses: what you can and can’t claim

Manoj Ganapathy
Manoj Ganapathy

September 2 ∙ 6 minutes read

Your once spare room is now your office. Your commute is now the length of your hallway. You’re finally allowed to bring your dog to work. 

Back in March and in a race to halt the spread of COVID-19, businesses all over the world shifted to working from home almost overnight. Something that was unthinkable at the beginning of the year, people were told not to go to work but stay at home with many companies mandating it. So despite the ongoing global debate around working from home, the pandemic forced employers to adopt homeworking on the biggest scale imaginable. 

Large technology organisations, who have embraced remote working for years, were some of the first to make the switch. Pre-existing infrastructure such as office chat groups and remote access to critical tools helped them to transition. In fact, these same organisations have since declared that their workforces can continue to work from home, even after the crisis settles and it’s safe to return to the workplace. 

It’s a notion shared by many with a survey by the Chartered Institute of Personnel and Development (CIPD) revealing that employers expect the number of people ‘working from home regularly’ to rise to 37%, compared to the 18% before the pandemic.

There are clearly many benefits to it. It’s often cited as a perk on job adverts but it does have its downsides, including the impact on personal finances. Your employees’ financial wellbeing starts with making sure you, as an employer, aren’t putting unnecessary financial pressure on your staff. And increased household bills as a result of being forced to work from home could be considered as such.

So what are your employees entitled to claim for? To help, we’ve put a short guide together below.   

UK “homeworking” expenses employees can claim

In the UK, shortly after the lockdown in March, the chancellor raised the working from home claim allowance to £6 per week. This is to cover household bills incurred as a result of being asked to work at home by an employer and is tax-free. Typically this is added to the employees monthly salary.

You can find further details via HMRC or the MoneySavingExpert.

In addition, employees can legitimately make claims for expenses incurred for any equipment, service and supplies needed to do their jobs. For instance, if they use their phone for business and can itemise those calls, they are entitled to claim for those business calls. Or for equipment such as office furniture. But they can’t claim for items used both personally and for business such as rent or broadband. 

How have US companies helped their employees?

Nearly half of the American workforce recently entered their sixth straight month of working from home due to the coronavirus pandemic. According to Stanford University back in June, 42% of workers were working from home. And in a recent survey by Aon, more than 20% of companies reported helping to pay for their employees’ home-office equipment.

Across the US, many companies have been very generous in their approach to home working and offered staff home working allowances to purchase new equipment. 

CNBC reported that e-commerce company Shopify and social media giant Twitter would give its newly remote employees $1,000 to set up their new home office. Jobs marketplace Indeed said it would reimburse its employees up to $500 for standing desks, chairs or lighting in their home. Online textbook company Chegg paid its remote workers’ monthly internet bill and gave them $500 for home office furnishings. 

But what is an employer’s actual obligation to reimburse expenses incurred as a result of employees working from home?

Under the Fair Labor Standards Act (“FLSA”), an employee is entitled to reimbursement of expenses incurred on the employer’s behalf if that expense brings the earnings of an employee below the federal minimum wage.

Several states have expense reimbursement laws in addition to this such as California, Illinois, and Montana, which require employers to reimburse employees for all “necessary expenditures or losses” or “business expenses” incurred in order to fulfil working duties. Other states including Alaska and Arkansas require reimbursement only if equipment purchased by employees for work-related purposes “cannot be used during normal social activities of the employee”.  

Why expense tracking is more critical than ever

Although most companies will have seen a significant decline in employee expenses due to enforced working from home, the above represents an altogether different volume of expense claims not normally experienced by employers. As a result, employers must vigilantly track the types of expenses their employees are incurring for business-related purposes not only in the interests of reimbursing employees promptly but also in the financial interests of the business. 

This is especially true if your business is still using manual processing and forms for employee expense claims, expenses management and expenses reporting. Not only is this more difficult for employees working at home, but it’s costing you more than you think in fraudulent claims and a lack of visibility on what’s being spent and why. 

All this contributes to a significant business risk with cash flows potentially impacted if you can’t predict how much you owe in expenses and when the claims will come in. And all at a time when spend is being scrutinised like never before.

Leveraging technology apps to support home working expense claims

It’s not just helping set up employees’ with the right equipment that supports efficient and effective home working. Businesses that hadn’t already moved to the cloud may have found it harder for employees to work remotely, with on-prem systems perhaps hard to access. 

IDC reported that spending on cloud infrastructure increased by 2.2% during the first quarter of 2020, as the pandemic took hold around the globe. Against a 16.3% decline in spending on non-cloud related IT investments during the same period, 2.2% growth is not insignificant. In fact, Salesforce recently announced higher than expected growth for second-quarter revenue attributing it to a rush in companies upgrading technology during the work from home shift. 

So if it’s difficult for your employees to make these working from home claims whilst working from home, or you’re struggling to track spend in real-time, perhaps it’s time to consider upgrading your expense management processes and procedures too.

Some of the references in this post have been updated since it’s original publish date in September.

Manoj Ganapathy

Manoj Ganapathy