Remote Employees and Reimbursement

Reimbursing your employees for work-related expenses is nothing new, but the practice was primarily limited to on-site employees. However, with the arrival of COVID-19 and the pandemic that forced people into an unparalleled shift toward the remote-work lifestyle, the question of whether or not remote employees should be reimbursed for their business expenses is gaining attention.

According to the Society for Human Resource Management, a survey conducted by software company Nulab’s State of Remote Workers found that “nearly 1 in 3 workers have had to purchase equipment to help with remote work. However, 37 percent of respondents were told they would not be reimbursed for expenses related to working remotely.”

Expenses related to remote work may include work-related necessities such as internet access, computers, printers, stationery, additional phone lines, mobile phones, and electric bills.

What the FLSA says about expense reimbursement for remote employees

According to the Fair Labor Standards Act, employers are not required to reimburse their employees for any remote-work expenses that the employees incur. However, the one exception is that employers must pay for their remote employees’ expenses if said expenses will either cause employees’ pay rates to fall below the federal minimum wage or reduce their overtime compensation.

In other words, if you give your employees the supplies and the tools that they need in order to successfully work from home, then you cannot require your employees to pay for the cost of those items if the cost of reimbursing you would lower their wages below minimum wage or cut into their overtime pay.

The states’ takes on the matter

Certain states in the U.S. have made it a requirement for employers to reimburse their employees for work-related expenses. The six states that have mandated reimbursement of expenses for remote employees are California, Iowa, Montana, Massachusetts, New York and Illinois.

Let’s look at California as a prime example. In the state of California, employers are required to reimburse their remote employees for any necessary yet reasonably priced work-related expenses. That said, employers do not have to reimburse remote employees if they make unnecessary or unreasonably high-cost purchases, even if those expenses pertain to work.

As an example, the California Employers Association offers clarification as to whether an employer must reimburse a remote employee for a high-end office chair. According to the CEA, since “an employee can perform their job duties at home on the couch, using a chair at their kitchen table or even on their bed (not recommended), an employer would not generally be responsible for furnishing an office chair.”

However, if the employee in question requires a physical accommodation and needs to work from a specific type of chair, then the employer might have no choice but to reimburse the employee for the high-end office chair. In the states where the reimbursement of work-related expenses for remote employees is required, the items that are generally covered by these state-mandated requirements often include computers, printers, copiers, internet services, mobile phone fees, and other items relevant to an employee’s job performance.

Keep in mind that the reimbursement of remote-work expenses generally only applies to employees who are required to work remotely, not employees who have chosen to work from home. However, state laws vary, so make sure you check the laws in your state to learn more about the rules that are applicable to remote-work expense reimbursement in your area.

Even so, industry experts are recommending that employers reimburse both on-site and remote employees alike for any and all relevant business expenses, even if local or state laws do not require them to do so. Reimbursing your employees for purchases they made for the sake of excelling at work is simply a great business practice, and employees appreciate employers who do so.