The nuts and bolts of hybrid working: Expenses and compensation

The pandemic has led to huge increases in the numbers of remote and hybrid workers and the trend looks set to continue. A 2021 report by McKinsey revealed that nine out of 10 executives plan to embrace hybrid working post-pandemic.

Yet with many people continuing to work remotely – and possibly living far away from the office – employers must now consider whether their approach to employee compensation and expenses needs to change.

“Expense costs for hybrid workers might include things like travel to attend the workplace or other sites, telephone, broadband, heating and lighting costs and any increased insurance premiums,” comments Anna Schiavetta, employment law solicitor at Howarths.

“So, employers need to consider what expenses they are willing to reimburse, if any. They may choose to contribute a specific sum towards an employee’s homeworking expenses or reimburse actual reasonable expenses incurred. Alternatively, they might decide not to provide a contribution or make any reimbursement at all.”

Make it clear

Whatever employers decide, it’s vital they create or update their hybrid working policies to ensure the rules for claiming expenses and business travel are set out clearly. When developing these policies, there are a number of key ramifications for employers to consider, such as whether employees need to have a designated office as their base, even if they spend the majority of their time working remotely; and how this may impact expense claims when either travelling to the office; or travelling for work when starting from home and not their designated workplace.

“To be legally compliant, employers are required to specify the employee’s place of work in their contract of employment,” advises Schiavetta. “Whether it’s the employer’s address the employee’s home address, or even both, employees need to have a specific place of work, so this must be considered when implementing home or hybrid working.”

Kate Palmer, HR advice and consultancy director at Peninsula, adds that employees who work from home but have to travel as part of their duties and responsibilities, for example, to visit a client, should be expensed from their first location – home – to their work-required destination.

“That being said, where hybrid workers spend part of their time at home and part in the workplace, travel to and from each is unlikely to be included in any expenses. Instead, the travel would be considered as part of an employee’s normal commute, so any costs incurred would be their own.”

However, Schiavetta warns: “If an employee’s place of work is their home address, they could theoretically claim for the commute to and from an employer’s office as part of a hybrid working agreement, and any other commute required for business purposes. Whether or not they are entitled to do this will depend on the wording of the employee’s contract and the employer’s expenses policy.”

It’s therefore important to ensure employment contracts and expenses policies specify which travel expenses the employee can claim when working from home as part of a hybrid working arrangement, to avoid any uncertainty or errors, she adds.

From remote to very remote

One other implication to consider is when an organisation decides to widen its geographical net for recruitment, and how this impacts the expenses they can claim if they don’t live anywhere near their designated workplace.

“Employees can be based from home if there is no work base in close proximity, but employers must carefully think through the impact of employing someone who is located far away from the office, and what the implications might be for travelling should the employee be required to visit offices regularly,” remarks Hannah Copeland, HR Business Partner at WorkNest.

“It will be best to agree the terms of the employment up front and put everything in writing, so both the employee and employer are clear on what they can and can’t claim.”

Andrew Mawson, founder and managing director of Advanced Workplace Associates, adds: “We can see a time when a contract would simply state that if the employee wants to be a home worker, then the salary negotiated should include all expenses associated with working at home. An infrequent visit to a central office – say once a month – may be a small cost compared to the savings in time, cost, and wear and tear for the employee.”

Another issue may arise if an existing employee decides to move a long way from their base office. In this instance, does their entitlement to expenses for visits to the office and for business travel change?

“Given that this would essentially be the decision of the employee – and unless agreed otherwise with the employer – the employee would continue to be bound by their existing terms and conditions of employment,” comments Copeland. “Entitlement to expenses and business travel would not change and any additional costs created by the move would be borne by the employee, given their choice to move.”

Policies are better than a case by case approach

With the sudden changes to remote and hybrid working, borne out by the pandemic, it would appear that employers are currently dealing with these issues on a case-by-case basis. “This is not necessarily the best approach, however, and leaves the door open to potential employee relations issues,” warns Copeland.

Palmer envisages some amendments to expenses policies going forward, to account for all these changes. “There will likely be an increase in demand for bespoke expenses policies, so there are clear terms and conditions relating to the ever-growing number of remote and hybrid workers.”

Communication is key, adds Schiavetta. “Communicate your company’s position on reimbursement of expenses from the outset and ensure that this is consistent with any written policies or provisions in contracts. This will avoid any uncertainty for employees, later down the line.”

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