Few employees have had a happy experience when it comes to getting their expenses back. Research released this week by Unit4 now shows that while companies are happy to complain about late invoices they are just as guilty of stiffing their own staff.
The research looked at workers across Europe and North America asking them information about their job, employer and expenses that the incur. It then went on to ask about how regularly they claimed back their expenses, the amounts claimed and whether they often failed to claim things back.
The result of this research is that Unit 4 estimates in companies save around €14 billion per year by not paying staff what they owe them. This number is separate from other costs that companies withhold money for such as extra work done at home and unpaid overtime in the office.
Unit 4 say that in the UK the amount of money unclaimed around expenses is believed to be approximately £1 billion. One of the problems with unpaid expenses is that it is money that would otherwise end up back in the economy reducing debt and increasing retail sales.
We were given access to the data in order to see the details as to who claimed what, when they claimed and why they didn’t claim. It was extremely interesting.
Why was money not reclaimed?
It is often easy to blame software as the reason why expenses are not reclaimed despite the fact that most accounting software vendors have made expense claiming very easy. Many now provide the option to photograph receipts on a mobile phone and then submit them to an employer. Despite this, around a quarter of employees still blamed the expense process although the key here is process which does not necessarily mean the software itself.
Other excuses included the value being too low, losing receipts or forgetfulness. The ability to photograph receipts is solved by the use of apps that allow you to photograph them as mentioned above although that doesn’t mean that all companies will accept a photographed receipt.
Who is making the claims?
The format of the data we had meant it was not possible to do some types of analysis such as how much money is owed to those who work part-time, are students or who described themselves as disabled, the overall picture is not a good one for UK companies.
More than half of those questioned across Europe and just under half of those in North America described themselves as middle management. Surprisingly the number of self-employed people ranged from 5-13% across the various countries. The reason for surprise here is that it is often far harder for a self-employed worker to claim expenses as they are seen by bigger companies as a cost of doing business.
When it came to industry, the majority in all countries worked in what Unit 4 called Commercial which includes retail, hospitality, the service industries and the media. The next largest grouping was those working in non-commercial jobs such as education, healthcare and charities. Those working in the building industry made up one fifth to just over a quarter depending on countries another surprise as again this is an industry where expenses are rarely paid.
The vast majority incur their expenses either weekly or monthly but around 10% have expenses that occur every three months with other having the occasional half-yearly expense. When it comes to reclaiming those expenses the majority claimed back monthly although the number claiming immediately ranged widely from 20% to 42% with employees in Germany the most likely to claim as fast as they spend.
What was the money spent on?
It will shock nobody that travel both in country and overseas came out top. It was followed by lunch, dinner and accommodation. These are probably the staple expenses for most companies and are also the expenses most likely to be capped in recent years as companies have looked to crack down on their own costs. Most companies enforce the lowest possible ticket prices and hotel rooms on staff but do allow them to upgrade at their own cost where they want to.
Since the introduction of the Bribery Act in the UK and its counterpart in other countries, the amount of money spent on gifts and entertainment has dropped considerably. Despite this over 20% of employees in Germany and the USA claimed for or attempted to claim for gifts.
IT departments will not be surprised that the average number of people saying that they claimed for equipment was one third (33%). This could easily be attributed to corporate contributions for Bring Your Own Device (BYOD). If so, they it demonstrates a disconnect between expenses and other budget items. It is not unusual for some expenses to be changed from expenses to other budgets for internal accounting although employees will still see them as expenses.
Employees are not suppliers
Even when money is claimed the time taken can vary widely from a few days to as long as two months. This equates to the average time it often takes companies to pay invoices and suggests that they are treating expenses as a supplier invoice.
This is a complete failure of process and suggests that companies need to rethink how they treat their employees.
The impact of unpaid expenses claims
The most obvious impact of unpaid claims is employees being short of money. In the US up to 37% of employees found themselves short of money while it dropped to 23% in the UK and 20% in Canada. It should not be a surprise therefore that many employees felt that employers were taking advantage of them.
It is not just the employee that is affected here. Most countries are currently suffering from austerity programmes imposed by governments. Being short of money due to unpaid expenses also has an impact on already stretched family budgets creating stress for employees.
The end result is not only that employees disengage from their work but that it creates significant resentment towards employers. Such resentment means that industrial action is more likely, productivity drops and the company is adversely affected across all of its operations.
On average, around 10% of employees said expense issues had a negative impact on their view of employers. Only the very laid back workers in the Netherlands reporting negative views as low as 2%.
Conclusion
This is an interesting report and the raw data makes for interesting reading especially in terms of how companies treat employees. There is never a case for delaying expenses but the internal complexities of expense processes, often introduced to prevent fraud, are having a negative impact.
Companies need to find a better way to handle the expenses of their staff rather than ending up gaining a significant fiscal boost by taking money away from their staff. In the past reports on theft at work have linked employee belief that they were “owed” by their employer to their behaviour. Judging by this report companies should be grateful they have any fixtures and fittings left inside their buildings.
The final word on this goes to Kara Walsh, Chief Human Capital Officer at Unit4 said: “The one thing that creates sustainable competitive advantage and long-term strength for a company is the workforce. The people are the company. Research shows that employees who are engaged significantly outperform those that aren’t.
“While employee engagement is driven by many factors, the companies that provide a caring and open workplace environment will win today’s war for talent. With recruiting costs running approximately 1.5 times annual salary, the ability to engage and retain valuable employees has a significant impact on an organization’s bottom line.”
