No expenses spared
David Vine, March 24, 2011
Most employees in the UK are not inherently dishonest. Many, if asked, would say they do ‘an honest day’s work’.
But the GlobalExpense Benchmark Report 2011 has found that a staggering £1.3 billion is being lost by UK businesses due to fraudulent and out-of-policy expense claims. Why are businesses still ignoring the perils of fraudulent and unmonitored expenses? Towards the end of last year, GlobalExpense decided to probe further and conduct research around these 'expense offenders'. It seems there are four main reasons why employees exaggerate their expenses. The first reason is they don't feel like they are paid a fair salary. The second is when they do a lot of unpaid overtime. A third reason is when employees are not reimbursed for all of the costs they have incurred. Finally, employees are more likely to exaggerate expenses when the mileage rate paid by the employer doesn't cover the actual car and fuel costs.
Perhaps the question for an HR team is how to strike the right balance with disgruntled employees and ensure that all staff are complying with the expense management policy of the firm. I stress all staff, because our research unearthed that double standards prevail in a wide range of UK companies, regardless of size. Our report revealed that the average expense-claiming employee is showing more restraint, claiming £1,698 in 2010, £90 less than in 2009. Yet the average expenses-claiming manager claimed £18 more. Managers were also 30% more likely than employees to make claims that didn't comply with company policy.
Any new or updated policies must be communicated clearly, so that managers have no excuses when they are found to be exaggerating their own expenses. After all, if managers are not seen to be abiding by the rules, there is little hope that those more junior will comply with policy either. Employees tend to get frustrated when the claims they are making are fair, but not in policy. It is important for HR directors to address this frustration by ensuring certain anomalies are factored into the policy. For instance, there tends to be a high number of out-of-policy hotel claims. This isn't because most employees are staying at the Ritz. It is more likely that they are staying in airport and central London hotels, which are far more expensive than elsewhere. Perhaps the same could not be said for the number of outlandish expenses, which are slipping through the net. These included a porn film on a hotel invoice, for which the description of purchase given was 'argument with the wife', a £1,200 claim for lap dancers at Stringfellows, £58,000 for a PR event for media and £4,000 for prep school fees.
When you consider that the report found that nearly £1 billion was lost to firms' out-of-policy claims, surely there needs to be greater clarity regarding the 'no-goes' of expense claims? Does the answer lie in organisations imposing blanket bans on expenses? I have seen a number of organisations implementing a ban, thinking this will solve the problem. However, I don't believe enforcing blanket bans will solve any problems. They are more a symptom of an unmanageable and unwieldy system. HR directors must advise managers to tailor the policy in the best interests of the business. Client entertainment can be fundamental to generating new business and wooing prospects. If employees are unable to entertain prospects or clients due to strict policies, winning or retaining business may become more difficult. One may not initially think it, but expenses are incredibly emotive. Employees are spending their money and they want it back. Our research shows that if employees feel aggrieved or are not reimbursed quickly, they may seek retribution and be tempted to exaggerate their expense claims.
I believe HR teams across the UK have an even greater part to play in helping organisations take greater control of their employee expenses. At the same time, they need to get buy-in from all staff over the policy, to ensure the bottom line can be significantly reduced in the future.
David Vine is the CEO of GlobalExpense, an expenses management company
The GlobalExpense Employee Expenses Benchmark Report 2011 drew on 11.2 million expense claims made by over 308,000 UK-based employees between 2006 and 2010.