Remote work is here to stay. The shift came as a surprise, but perhaps even more surprising was the overwhelming positive opinion of it. It will remain embedded into the fabric of many professional organizations in the decades to come. As remote work becomes common, employers need to adapt their notions of workplace perks to support new norms and compete for talent. As a result, business expense management is evolving rapidly.
Employers will see diminished value in the dollars they have historically allocated towards office-oriented perks like commuter benefits, in-office meals and office space infrastructure. While these benefits will still likely matter to employees, as there will continue to be some components of an in-office experience, they will matter less. Therefore the office perk must be reinvented in order to drive in order to drive employee engagement and retention. Today we are seeing companies considering offering home utility and internet stipends, one time payments for home office furniture and electronics, as well as stipends for at home meals and food delivery.
Whether these are a temporary stop gap until office life resumes, or a part of a longer term strategy to engender company loyalty in a world with more remote work, supporting the administration of these perks - including their tax implications - places new requirements on business expense management software. The IRS has very clear guidelines on employee fringe benefits. It is clear that most iterations of remote-oriented perks (with utility reimbursement a potential exception) are taxable to the employee, which puts the burden of tracking new perks onto the employer.
"Remote work is here to stay. The shift came as a surprise, but perhaps even more surprising was the overwhelming positive opinion of it"
With the additional tracking and tax compliance burden, there is an even more acute need for expense management software. For example, look at the implementation of these benefits. Many employers are considering single-purpose virtual credit cards to give their employees a monthly food delivery or office supply stipend. By using a segregated virtual card an employer can control the budget and track the spending. This avoids a complex system of receipt submission and employee reimbursement. When the virtual credit card is embedded within an expense management software, all of the spend data can be easily exported and shared with the payroll department, ensuring the proper tax treatment for the reimbursement. One big challenge with directly giving employees stipends through the payroll process is that employers do not know the exact cost of the items that employees want to purchase (i.e. meals, furniture), which leads to administrative problems or overfunding on the part of employers. Software workflows paired with smart financial tools are crucial to help employers retain visibility and administer benefits in a cost-effective manner.
It is worth noting that by using an expense management software to administer new remote work benefits, employers also increase the positive connection employees feel between their employer and the benefits. Simply sending an additional stipend via payroll will be less noticed by many employees when compared with the alternative of using a specific credit card provided to them via an expense management software. The repeated interaction with the software reminds employees that their company is offering this innovative and generous perquisite.
Modern finance and human resource organizations must adapt to the changing workplace dynamics brought on by the COVID-19 pandemic. They can use expense management software and related financial services to help engender company loyalty, while remaining cost efficient and tax compliant.