Work From Home Workforce Expenses To Consider
Advancing technology coupled with the raging coronavirus pandemic forced nearly all businesses to close their physical offices, requiring employees to work from home. The massive change left many employers evaluating the best they can do to achieve a smooth transition. If your employees are partially or fully operating remotely, you should consider some employment terms that weren’t stated in the employment contract.
Among the many questions to expect from your employees is reimbursement for work from home expenses, such as WiFi or Internet service utilized for work purposes. A simple Google search on this topic may leave you overwhelmed with many opinions around this topic on the internet. Unfortunately, only a few websites site actual legal and IRS guidance. The guide below outlines some crucial elements to consider when dealing with the work-from-home workforce.
Does the State Require Employers to Reimburse Their Remote Teams for Home Internet Usage?
There is no straightforward answer to this as requirements differ by state. Generally, some employers provide support to their remote teams voluntarily, while others do so involuntary to avoid legal issues. For legal assistance, below is a guide outlining various state laws and how they may affect employers. Note that this is just informational, and you should consult with employment lawyers for specifics.
● Alaska – In Alaska, employers should compensate employees only if the equipment purchased by employees is exclusively for work-related purposes and shouldn’t be used during other social activities.
● California – The state provisions require employers to reimburse employees for all reasonable expenditures or losses incurred directly from their duties. Unlike what most websites claim on the internet, state laws don’t indicate the specific percentage that employers should reimburse.
● District of Columbia – Employers should cater to their employee’s cost of purchasing and servicing tools required to complete work-related tasks.
● Illinois – Employers should reimburse remote workers all the necessary expenditures or losses incurred that directly relate to services provided for the employer.
● Iowa – Companies should reimburse their remote teams within 30 days after the employee provides a written justification or expense claim.
● Massachusetts – State laws don’t specifically require employees to be compensated for remote work expenses but prohibit businesses from shifting operational costs to employees, especially if the costs subject employees to earnings below the minimum wage.
● Minnesota – The state abides by FLSA minimum wage provisions and requires employers to compensate their remote teams for all business-related expenses, including consumable supplies and equipment required to support remote work.
● Montana – Employers should indemnify their remote workers for business costs that employees incur as a direct consequence of direction from the employer or in the course of discharging their duties.
● New Hampshire – Employers should compensate employees for any incurred expense incurred within 30 days after employees submit the expense claim.
● New York – There are no specific laws on employee compensation in New York. However, a clause in their employment laws recommends punishment to any employer who withholds pre-agreed payments, benefits, or wage supplements to employees. Upon conviction, the employer will be guilty of misdemeanor charges.
● North Dakota – Employers should indemnify employees for employee expenses or losses incurred as they discharge their duties.
● Pennsylvania – Employees should claim an allowable but uncompensated business expense as they file state taxes.
● South Dakota – State laws in South Dakota require employers to reimburse employees if they incur any company expenses or loss accrued in the process of discharging company duties.
Should Your Employees’ WIFI Stipend Be Taxed?
Internet reimbursement for your remote team is taxable only on specific occasions. For instance, it can be taxed if you pay the additional money for home internet usage in their paycheck. However, the IRS publication has guidelines on its “Non accountable plan” about this. Nonetheless, employers can find some tricks to reimburse their employees for WIFI untaxed. The IRS calls this “Accountable plan” and has some guidance on it. Generally, to compensate your remote team without being taxed, employees should substantiate that you are paying them for internet charges, which can simply be done by providing a receipt. However, this must be payment for the internet used for remote work and should be submitted within a given period.
Does the Employer Pay the Full Costs or Split with Employees?
Quantifying the costs incurred, especially for the internet, is quite tricky. In most cases, internet costs come as fixed packages. Therefore, agreeing to split these costs is subject to negotiations. The fact remains that employers should identify and reimburse internet costs if they are quantifiable. In summary, while there are specific state laws guiding reimbursement of remote teams, there are no federal laws that make it a requirement to reimburse employees for remote expenses except in situations where the expenses significantly lower employees’ wages to levels below the minimum wage. However, regardless of the presence or lack of legal obligations, employers should provide support for their remote teams, be it in the form of stipends or loaning them equipment.