In today’s evolving workplace, where companies operate across remote, hybrid, and in-person models, supporting diverse employee needs is essential. HR leaders are increasingly prioritizing dynamic employee well-being—physical, social, and emotional.
One of the most impactful ways to support your team is through employee reimbursement programs, which empower employers to cover personal expenses that enhance work-life balance. Every occupation type incurs completely different costs. On average, in-office workers spend around $40 a day between their commute, lunch, daily coffees, parking, etc. Conversely, remote and hybrid employees may spend more on technology upgrades, high-speed internet, or home-office setups.
In this article, we will explore the different types of employee expense reimbursements and how your business can leverage Lifestyle Spending Accounts (LSA) to effectively support employees.
Here’s what we’ll cover:
- How to Establish a Consistent Employee Reimbursement Policy
- Common Types of Employee Reimbursements
- Best Practices to Reimburse Employee Expenses
- Tax Considerations for Employee Reimbursements
- Simplify Your Employee Expense Reimbursement
How to Establish a Consistent Employee Reimbursement Policy
Ensuring fairness, transparency, and compliance starts with a clearly defined reimbursement policy. Establishing a consistent list of eligible expenses is key, but it must also account for various working conditions. Remote employees won’t need commuting reimbursements, while in-office workers may not require home-office technology.
Investing in employee education reimbursement ensures employees grow while enhancing the organization’s talent pool. It’s a win-win—employees gain valuable learning and career advancement opportunities, and employers benefit from a more skilled workforce.
It’s important to set a spending limit that will reimburse employee expenses while not allocating unused funds. In fact, according to Espresa Benchmark and Trends Report, 64% of clients offer LSA funding under $1,000 annually, with amounts as low as $500 driving engagement rates comparable to higher levels. As long as employees perceive value in those funds, you’ll notice a boost in engagement. Identify the most-used reimbursements and allocate funds accordingly.
Common Types of Employee Reimbursements
While commuting benefits and home-office funds are essential, covering expenses beyond work can be even more impactful. Offering funds for employee education reimbursement or gym reimbursements for fitness memberships can make a big difference, easing additional financial burdens and boosting overall satisfaction.
Employee tuition reimbursement
Investing in employee education reimbursement ensures employees grow while enhancing the organization’s talent pool. It’s a win-win—employees gain valuable learning and career advancement opportunities, and employers benefit from a more skilled workforce.
In an education assistance study conducted by Bright Horizons:
- 93% say their employer’s tuition assistance program helped them develop the skills they needed to advance within the company
- 85% report becoming more effective employees
- 84% say tuition assistance influenced their decision to join the company
- 71% rated tuition stipends as one of the best benefits offered by their employer (excluding health care)
- 56% wouldn’t pursue further education without employer support
Fitness Reimbursements
Gym reimbursements are a popular perk, especially when paired with an LSA, allowing employers to allocate funds for physical wellness activities. Common expenses include gym memberships, sports equipment, workout classes, and weights.
Well-Being Reimbursements
Well-being reimbursements, like fitness stipends, cover a broader range of wellness expenses. Beyond fitness memberships, well-being reimbursements can include benefits like meditation apps, yoga classes, or even bodywork appointments. These benefits appeal to more employees, as not everyone enjoys or can access traditional physical activities. By offering broad wellness options, employees can be happy and fulfilled beyond their physical health.
Best Practices to Reimburse Employee Expenses
Navigating the logistics of expense reimbursement can turn a valuable benefit into an administrative nightmare. Lengthy approval processes, employees fronting costs, and miscommunications are common challenges that deter employers from offering these perks.
To simplify, employers can consolidate solutions and set clear guidelines for eligible expenses. An integrated marketplace is an ideal fix—it keeps employees informed of their available funds, ensures all purchases are eligible for reimbursement, and eases administrative burdens. Partnering with a benefits provider that streamlines the process is key, as regulating these problems internally can be both time-consuming and costly.
Tax Considerations for Employee Reimbursements
Employee expense reimbursements can get tricky with taxes. Some are tax-advantaged, while others count as taxable income. Most stipends, especially those for personal use, are considered taxable income by the IRS. Since the rules can be complex, it’s crucial for both employees and employers in the U.S. to refer to IRS guidelines to ensure compliance.
Are Employee Expense Reimbursements Taxable?
While we now know some stipends and reimbursements are taxable, it’s important to understand the difference between tax-free and taxable expenses. Business-related expenses are generally not taxable, along with medical expenses covered through a qualified plan like HSAs and FSAs. Navigating the complexities of employee reimbursements and taxes is essential for smooth operations, so it’s important to reference government entities like the IRS as needed.
Simplify Your Employee Expense Reimbursement
Traditional employee expense reimbursements are excellent tools for improving employee engagement, quality of life, and productivity. However, they can lead to administrative challenges if not managed effectively. Consolidating all point solutions into a single benefits platform can streamline operations significantly.
LSAs are the ideal solution for implementing employee reimbursement programs, providing a defined amount of funds, clarifying eligible expenses, and minimizing time spent communicating between leadership and employees.
Discover how Espresa can deliver the benefits your employees want while saving your organization countless hours and headaches. Contact us today to schedule a demo!
How to Score Top Talent with an Inclusive Employee Benefits Strategy
