| | The inaugural Employee
Expenses Benchmark
Report 2007, released
by employee expenses
service provider
GlobalExpense, shows
that British
organisations are
frittering away around
£1.3bn on employee
expenses as a result of
lax managers and
employee expense fraud.
The report is the
largest ever research
into this area (based on
over 3.53m individual
expense claims by over
60,000 employees from a
wide range of UK-based
organisations) and is
definitive – being based
on what employees
actually claimed (as
opposed to what they
said they claimed) and
the payments actually
made by employers.
Approved unusual
employee expenses claims
ranged from lap-dancers
to hostesses, from
condoms to cat food,
replacement lingerie to
Valentine's presents.
One sleepy manager
approved a £570m claim
for a £4.70 bridge toll!
Based on its
research, GlobalExpense
calculates:
? Across the UK
economy (private and
public sectors) around
£5.2bn was paid to
employees as expense
claims. However, 15%
(about £800m) of this is
for payments approved by
managers that are "out
of policy" (i.e. for
items or levels
disallowed by their
employers' expenses
policies so payments
should not have been
made).
? GlobalExpense
estimates that each year
four million employees
claim expenses from
their employer. Separate
research for
GlobalExpense revealed | |
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| | employees are unaware of
them and because
managers don't bother to
enforce them. The extra
costs of
higher-than-policy
claims can quickly add
up, particularly in
areas such as hotel
accommodation where over
20% of claims are
outside policy.
"For many
organisations, employee
expenses is a black
hole. They have no idea
how their employees'
spending measures up to
others, making it
difficult to judge if
too little, or too much,
is being spent on any
one area or by an
employee. The report
provides insights on
where companies should
focus attention to make
sure that profits are
not being lost. It will
also help them to
compare costs with
similar organisations,
by size or industry
sector."
Unusual employee
expense claims recently
received by
GlobalExpense include:
a receipt for £1,000
from Spearmint Rhino for
'Client Entertaining'
(approved by the
employer); a claim for
expensive lingerie
because the employee had
'lost' hers (approved by
the employer); a claim
where a man wanted to be
reimbursed for a
Valentine’s day gift
(not approved by
employer); a claim for
'Durex Play' – expense
type 'Daily Allowance'
(approved by the
employer); a claim for a
book called Ever Dated
a Psycho? In justifying
it, the employee said it
was “a book for my
psycho ex”.
A toll claim was
approved for over £570m
by a sleepy manager – | |
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| | the employee entered the
VAT number instead of
the actual amount of the
receipt. (The error was
intercepted by
GlobalExpense and the
correct amount of £4.70
was paid to the
individual).
Other claims of a
sexual nature, include
one for over €400 for a
'hostess in
Greece'(approved by the
employer) and another
for condoms. The
employee categorized the
expense type as 'Tools,
Test and Other
Equipment' (approved by
the employer).
Lastly, a tin of cat
food was claimed under
the 'Restaurant Meals'
category by an employee
(approved by the
employer).
The report identified
a number of trends and
statistics:
? Entertainment
claims are less generous
at large businesses with
average costs of nearly
£66 compared to £103 and
£99 at medium and small
firms respectively.
? In 2006 the average
expense-claiming
employee requested
payment for 35.9
separate items as
expenses. Their average
approved claim was
£49.87, and they
received £1,668.88 in
total for expenses.
? The average
employee who claimed
expenses will have
received £313.26 in 2006
for hotel accommodation,
£209.60 for
entertaining, and
£644.01 for business
travel.
? For the typical
company, around 40% of
items claimed by
employees are under £10.
Around 45% of claims are
for between £10 and
£99.99, and at least 12%
are for items worth £100 | |
|
| | and over.
? In 2006, the
largest single approved
claim by an employee was
for £30,781 to cover
training and conference
costs for a team.
? The largest total
claimed by an individual
during 2006 was £142,709
– more than six times
the national average
salary of approximately
£22,500.
? 20.5% of mileage
claims do not have a
valid receipt, meaning
businesses cannot claim
back the VAT. A business
with 190 employees
claiming an average of
5,000 miles could be
losing about £9,000 in
unclaimed VAT. This will
come straight out of a
company's profit. In
sectors with margins of
10%, this would require
around £100,000 of sales
simply to cover the
cost.
? Business travel
expenses – air fares,
rail fares and mileage –
is the largest expense
category accounting for
around 40% of claims by
value from 2004-2006,
followed by
accommodation (typically
hotels) accounting for
around 20% of claims.
? The number of
claims for business
class air fares has
fallen by a quarter and
first class by over 10%.
? Women are more
likely to spend more on
hotel accommodation
(£157.02) than their
male colleagues
(£148.44). But a man is
a better bet for a good
meal as they typically
spend a third more on
entertaining than women
and make twice as many
claims.
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| | that a quarter of them
believe it is acceptable
to exaggerate their
expense claims (although
most employees that
think inflating their
claims is acceptable
only feel small
exaggerations are
warranted). This means
that of the £5.2bn paid
as expenses last year,
£585m was attributed to
expense fraud by
employees (about 11% of
all expenses payments).
? GlobalExpense
estimates that the
combined cost to UK
businesses from approved
"out of policy" claims
and other expense fraud
is about £1.284bn –
about £500 per
expense-claiming
employee.
GlobalExpense is the
UK's largest payer of
employee expenses. It
analysed payments of
over £156m between 2004
and 2006, based on over
3,530,000 individual
expense claims by over
60,000 employees from a
wide range of UK-based
organisations (covering
approximately 1.5% of
the UK workforce). It
covered all categories
of expense claim
including those incurred
by UK employees while
overseas in 152
countries.
David Vine, managing
director at
GlobalExpense, said:
"Sometimes company
expense policies don't
reflect reality and need
to be updated. But far
more frequently they
aren't followed because | |
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