The cost of living has been increasing across the UK since early 2021, and inflation is already at a 40-year high. This is being felt across the entire country and placing additional stress among individuals who are finding it increasingly difficult to afford day-to-day necessities.
This financial stress is also extending to the workplace, particularly among those who are subject to out-of-pocket expenses. Learn more about this current crisis, as well as how employers can ease their employee’s financial burden by swiftly dealing with out-of-pocket costs.
Table of Contents
- The Current Cost-of-Living Crisis in the UK
- Why is it Important to Minimise Out-of-Pocket Expenses for Employees During This Time?
- How You Can Avoid Your Employees Being Out of Pocket for a Long Time
- How Automated Expense Management Software Can Help
The Current Cost-of-Living Crisis in the UK
According to the annual Minimum Income Standard study, soaring inflation and energy costs will leave millions of low-income individuals thousands of pounds short of what is believed to be the minimal amount required to live with “basic dignity” this winter.
According to the study, a single adult on the national minimum wage who works full time (and doesn’t have dependents) would make over £7,000 less than the £25,500 they would need annually to maintain a minimally reasonable quality of life—and that's even with the government's current cost-of-living support package taken into account.
By the end of the year, the Bank of England predicts that inflation would climb to 13%. Analysts predict it may rise even further in the first half of 2023, however, as the cost of energy, food, and fuel continue to sky-rocket.
For instance, household electricity costs grew by 54% and domestic gas prices soared by 96% between July 2021 and July 2022. This is due in part to lower than usual natural gas output and a resumption of global gas demand when pandemic restrictions were eased. The current Russian invasion of Ukraine is also having a significant impact on these rising costs.
So, what does this mean for the average worker within the UK? For many, the cost of living is starting to far outweigh their income. Employees are now under more financial stress than ever before, and some are unable to keep up with the basic costs associated with survival – such as keeping a roof over their heads, putting food on the table, and keeping their homes warm.
Why is it Important to Minimise Out-of-Pocket Expenses for Employees During This Time?
When it comes to their finances, employees are feeling the pinch now more than ever before. Therefore, it’s particularly important that employers ensure they aren’t being stretched even further by out-of-pocket work expenses.
Out-of-pocket expenses are costs that an employee pays for themselves, rather than via the business, and which they are later compensated for. However, this does not mean that employees are eligible for repayment for every expense they cover. To keep things fair and straightforward, you must establish a corporate expense policy to outline what constitutes as a reimbursable expense.
Just some of these common expenses may include:
Business related phone calls
Advertising or marketing costs
Company vehicle maintenance or repair
Office stationery
Work-related training, education, or conferences
On-the-job transportation costs
Meals or beverages consumed while travelling for business
Accommodation necessary for work-related travel
How You Can Avoid Your Employees Being Out of Pocket for a Long Time
Thankfully, there are some things you can do as an employer to ensure out-of-pocket costs aren’t causing undue stress to your employees.
Firstly, encourage your employees to actually submit their expenses—and on time. According to recent research, employees from small and medium-sized enterprises in the UK are losing out on £140 million a year in unclaimed work expenses.
If employees take weeks or even months to provide their expense or mileage reports, this creates a bottleneck in the compensation process. Enforcing a deadline will encourage your employees to submit their expenses as soon as possible.
Secondly, you should ensure you have an easy-to-understand and simple expense policy in place. Over one-third (38%) of employees don’t bother claiming back expenses because their company’s process is either too complex or takes too long.
This policy should outline the step-by-step process for submitting expense reports, as well as other vital information, including:
Expenses that are claimable (i.e., category and amount)
Deadlines for report submissions
Required expense details (i.e., transaction date, merchant name, amount to be reimbursed, and a description of the transaction)
Expected timeframe for payment
The repercussions of late expense submissions (i.e., delayed reimbursement or tax obligations)
Finally, you should use automated expense management software to dramatically speed up both the submission and approval process for out-of-pocket expenses. We explore this more within the next section.
How Automated Expense Management Software Can Help
Expense management software, like ExpenseIn, not only allows employees to submit expense reports in real-time—thus avoiding delays—but it also includes features such as automated expense policy enforcement.
ExpenseIn substitutes time-consuming spreadsheets with the ease and accessibility of an app. It has a real-time receipt scanning feature that automatically extracts all of the critical information from receipts, saving tedious manual extraction. It also notifies employees about common expense errors before submission, allowing them to quickly correct any problems and speed up approval.
Additional features that improve expense repayment timeframes include automatic mileage calculations, approval notifications, expense reports, automated email reminders, and seamless integration with popular accounting software, such as Xero and QuickBooks.
Now is certainly not the time to have employees waiting several days (or months) to have their out-of-pocket expenses paid back. The cost-of-living crisis is affecting the whole of the UK, and it’s up to employers to prevent adding extra financial burden to their workers during this time.
Through taking advantage of ExpenseIn, you can ensure your employees are never out of pocket for their work-related costs.
