Extra Cost of Employees

“I pay my employees well but a few are mentioning I should be reimbursing them for different things. Besides wages, am I supposed to pay them for anything else?”

Your HR Survival Tip

If you ask the Internal Revenue Service (IRS), California’s Department of Industrial Relations (DIR), the federal Department of Labor (DOL), or the Courts, you will find they all agree you may owe your employee for more than just time worked. The answer comes down to the fact that it should not cost your employee a penny to work for you or to do their job.

Where those pennies are being spent by employees depends on the job they have, equipment/tools needed to do the job, and their workspace. When using an employee’s personal property, you will be legally expected to pay for that convenience…even if it doesn’t actually cost the employee more. Examples include:

• Personal cell phone — If you haven’t provided the employee with a desk or cell phone, you must reimburse for a percentage of their monthly plan based on company use. Even if they have an unlimited plan, your company benefits so you need to calculate a fair reimbursement. However, you won’t owe anything if they choose to use their personal cell phone over a company-provided cell phone or access to a phone at their desk.
• Mileage — If an employee is using their personal vehicle to run errands or go to different job sites within the day, you should pay them for mileage. The simplest method is to use the IRS mileage rate because it covers everything. Mileage does not include their commute between their home and the first/last job site of the day. Also, you probably owe for their time whenever you owe them for mileage.
• Expenses — If employees must buy supplies or equipment to do their job, you need to reimburse them. This includes things your remote employees need, such as internet service, cell phones, laptops, monitors, and office supplies. However, you aren’t obligated to buy office furniture since they should already have an office setup for remote work. You also are not required to reimburse for equipment that isn’t necessary to do the job, such as a printer.
• Logo wear — If you require employees to wear shirts, hats, or other items of clothing with your logo, you must provide sufficient quantities to last a workweek…and reimbursement for the cleaning of those items. Yes, that’s a little-known requirement. You cannot require the employee to pay for the logo wear but may request a deposit that must be returned when the employee returns the items.

Look carefully at each position in your company to determine whether you owe reimbursements to employees in those positions. The change of the tax laws has made it more difficult for employees to claim those expenses on their income tax forms, which means they will be looking to you to make them whole. Reimbursing employees becomes critical if those expenses result in an employee making less than minimum wage in any pay period.