Business with Employees’s Home Expenses
While the pandemic is coming close to an end, many businesses are still facing the reality that their employees have to work from home. Most of these businesses are even contemplating closing their offices in San Diego because they are saving money by having everyone work from home. But this means that your employees might need to pay for some of your business expenses out of pocket. This means that you will need to pay them back for these expenses. So what is a reasonable work-from-home business expense? And how does Reimbursement work in California?
The California Labor Code mandates that employers pay “any required costs or expenses” incurred by employees when performing their duties. These expenses could include the purchasing of a desk, computing equipment, and a chair, as well as reimbursement for services like power, Internet or broadband, and phone service.
Before you sign any reimbursement checks, you should do some research to ensure that your money is being spent appropriately. You should look into the type of work your employees are doing to determine if the expense is necessary. For example – your IT team might need faster broadband to do their job.
In regards to utilities, your employees must give you sufficient information in order for you to decide what proportion of the bill is used for work purposes. That can be a difficult task: if they work 40 hours out of 168 hours a week, a worker will request that you pay 24 percent of the Internet bill. But what if the bill also covers their television or smart devices? These plans could include the employee’s family or friends.
As a general rule of thumb, your business is not responsible for expenses that your employee will already need to pay in order for them to live. These items include:
- Rent or Mortgage
- Car Payments
And in regards to purchasing items for an employee’s home office, here is a quick list of items that you can reimburse an employee for:
- Computer Equipment/Hardware
Employees must promise to surrender them if they are discharged or return to the company office, and they should be labeled with asset tags. Employees should pay the depreciated value if they intend to purchase these things later.
In San Diego, business expenses are reimbursed by accounts payable rather than payroll. They shouldn’t be mixed in with salaries, so employers can provide separate checks or fees.
Payments to workers for remote-work utility costs like Internet will be treated as nontaxable cost reimbursements if the employer can explain how the sum was calculated. Some monthly payments, however, such as a car allowance that a traveling salesperson may use against any sort of vehicle regardless of cost, are certainly still taxable as wages.
Health and Safety
Even when employees work from home, California law requires employers to have “a healthy and clean” work atmosphere. A good telework agreement should involve language requiring remote employees to keep a secure working atmosphere and allowing them to designate a workspace—whether it’s a room or a place inside a room, such as a dining room table.
Whether you are contemplating keeping your employees in a remote atmosphere or looking forward to the day that everyone can return to the office, it is important to keep everything I have mentioned above in mind. You want to make sure that your business is spending it’s money in the right places.