Canadian HR Reporter

CANADIAN HR REPORTER April 18, 2016 8 NEWS through an automated system, it pops out a cheque at the end of the day, there's not a human to check the actual legitimacy of expense." As an example, one company saw employees funneling ille- gitimate expenses as corporate retreats, adding up to tens of thousands of dollars. It took two to three years before they were caught and by then the damage was done, he said. "When there's a human there checking it, it's a lot harder to slip through the cracks." e senator's travel policy pro- vided for reimbursement of "rea- sonable expenses incurred while travelling." But "reasonable" can be a grey area as clients may be taken out for expensive meals un- less there's a policy and procedure that limits the per diem amounts, said Chambers. However, employers shouldn't over-regulate as the system may become too arduous to enforce and understand, he said. "Certain jobs, a lot of sales po- sitions, there's that expectation they're supposed to take clients out for meals and you kind of have to play it by ear and trust the salespeople that they're not going to abuse the system." Senators were also required to "exercise due economy in the se- lection of travel options" but for most employers, if there isn't that established procedure, that can be abused, said Chambers, citing one case where executives were fl ying back and forth to Germany in fi rst class and though the com- pany couldn't aff ord the cost, the expenses were funneled through as no one was checking. "You kind of have to look at 'How necessary was the trip, was it a fundamental trip...?' things of that nature. But most of the or- ganizations we work with strictly fl y economy and that's the way it goes, there's not many organiza- tions that allow fi rst-class travel anymore," he said. The way technology is now, many meetings can be done by Skype or the like, said Chambers. "Your average PC now comes with almost everything you need to do a web conference now so you don't need necessarily to fl y there to do the face-to-face meetings anymore," he said. "There's certainly more at- tention given to the cost-benefi t analysis of whether travel is a le- gitimate expense anymore… as time goes on, the costs of travel increases but the cost of technol- ogy decreases." But in-person meetings should not be discounted, such as with remote workers, said Gagliardi. "Sometimes face-to-face does have an added value — you don't want your employees to feel com- pletely isolated," he said. "For those that do want to do cost-ben- efi t analysis, you have to consider that the cheapest way is not always necessarily the best way." The senators' administration rules allowed senators to travel for a mixture of purposes, both personal and business, with the incremental portion attributable to the private purpose covered by the senator. at's a common ap- proach seen with employers. "We've had a few circumstanc- es where people have booked a business trip and then they tack on their vacation at the end of it, and that always gets into a murky area and there's never a clear way of doing it," said Chambers. "I don't fault the (employee) for wanting to do that but, at the same token, why should the em- ployer have to foot the bill for the entire thing?" he said. "(In- cremental costs) might be the way to address it, approach it on a case-by-case basis, either have a blanket policy saying you can't have personal days tacked on or if you allow it, you assess it on case- by-case basis." But an employee can only make sound decisions if the employer has set clear guidelines, said Gagliardi. "For example, for travel, an em- ployer can say the employer will pay for the lowest cost economy fair on a fl ight. If an employee chooses to upgrade… and pay the diff erence out of pocket, that's one thing. If the employer is paying additional fees that are consid- ered not reasonable, that would be more of personal nature, that where it gets a bit tricky." Of course, with any expenses, documentation is extremely im- portant and the more that can be provided to support the expense, the better, said Chambers. "It plays into both hands — it helps the employer know that the expense is a legitimate expense but it also allows the employee to safeguard that they're not going to be questioned on that expense, so I think more is always better." e majority of Canadian em- ployers use a manual system, said Filipski, who is based in New York. " e best-in-class approach we see in the market is a marriage of automation and traditional manual checks and balances. Ef- fi cient automation can capture information electronically from travel itineraries, corporate card charges, photo receipt capture and even from airlines, hoteliers and car companies directly." is allows the system to "tri- angulate" trusted transactions and fl ag others entered without documentation for an additional level of audit, he said. "Automated systems can also flag common areas of expense fraud such as mileage reimburse- ment 'padding.'" While automated solutions may be more expensive upfront, manual systems are more time- consuming, prone to error and costly over time, said Filipski. "With manual systems, receipts can go missing or become so worn that they are illegible, expendi- tures can be misdated or double- claimed and personal items can sometimes be confused with legitimate ones. Transcription errors are easy and serious fraud can be very diffi cult to track down. Spreadsheet-based systems also do not lend themselves to easy reporting, making data diffi cult to analyze and management less likely to fi nd specifi c cost savings from vendors." Legal considerations As for issues around expenses that might lead to dismissals, case law generally deals with the bigger problems, not a few illegitimate meal expenses, for example, said Chambers. "You can't necessarily fire somebody for cause for one or two minor expenses that are inap- propriate, but in that case… where there were 10s of 1000s of dollars of illegitimate expenses, it's very clear cut, you can just terminate with cause," he said. "If… there's fi ve or six meal ex- penses that shouldn't be in there, that's going to create a pattern of conduct that's certainly going to raise some red fl ags. Whether or not you get to the threshold you have just cause to terminate the person, that's debatable." e courts basically look at the nature of the employment rela- tionship, whether there's a huge level of trust employed by that relationship, said Chamber. " e slightest bit of dishonesty will be punished severely whereas if it's not a huge trust issue, one or two incidences of dishonesty probably aren't going to be just cause." As for an employer being paid back illegitimate expenses claimed by employees, Chambers said he tries to get restitution as much as he can through the civil process as opposed to the crimi- nal one. "That being said, we've had cases of significant misappro- priation where we've involved the police and then they take over the case and do the investigation and decide whether or not charges are going to be laid. Normally, that leads to restitution, not normally 100 per cent of the dollar but you might get a percentage of your re- covery back," said Chambers. "It really comes down to the amounts. If it's a clearcut case of theft, you're better off to involve police and have it done by way of restitution and if it's a more murky area, it's probably best to deal with it as a civil matter." Procedure prevents abuse EXPENSES < pg. 1 Obeying the rules There are several ways HR and management can enforce expense management, according to travel management fi rm Concur: Enlist employees in managing spend: Help employees understand why savings matter in the fi rst place. Share with them the effect of travel on your company's bottom line and how incremental savings can change the company's fi nancial trajectory for the better. Demand more from data: When companies understand travel and expense data trends, they're in a better position to effectively manage fi nances. More visibility into travel and expense trends gives companies more control, which enables greater savings. Set goals: Set a company-level goal that everyone can work toward and benefi t from to build a team mindset and get employees sharing best practices and motivating their colleagues to save. Allow employees to personally share in the savings: When there is a direct incentive tied to cost-sensitive behaviour, employees tend to go above and beyond to seek out ways to save. Set examples at the top: The importance of leadership as active participants in cost savings cannot be emphasized enough. Recognize achievements: Whether that means sending out companywide emails with stories of above-and-beyond savings, honouring top savers at a company event or granting special perks to the teams that make the biggest impact. Reward people: Use contests and award prizes or bragging rights to the departments or divisions that most quickly adopt the tool. Review policy: Every six months, ask employees to review and sign a copy of the travel policy that explains how to book travel with the tool. " ere's certainly more attention given to the cost-benefi t analysis of whether travel is a legitimate expense anymore... but sometimes face-to-face does have value."

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