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Why Reimbursements Suck

Many companies still take a reimbursement-first approach to benefits. Here's why it's smart to reconsider that strategy.

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Most of us have dealt with expense reimbursements at some point in our career, and few of us would rank it as a positive experience. There’s the need to keep track of your receipts, spend the time submitting them for approval, and then comes the frustrating part where you wait sometimes weeks for the funds to show up on your payroll.

So why do employers continue with this practice? Many companies still administer benefits or stipends by requiring employees to submit expense reports for gym memberships, professional development courses, or a new desk chair. Some feel that asking employees to front the costs before reimbursing them protects them against fraudulent expenses. But these situations are rare and after a period of back-and-forth, most expenses are approved. There’s not much upside, but a whole lot of downside in the form of administrative burdens and negative effects on your company culture. 

Below are a few reasons to reconsider your approach to reimbursements. 

They don’t create an equitable experience

Financial challenges are the largest source of stress for many employees. Asking employees to place the initial burden of a company-related charge on themselves isn’t exactly an ideal experience. U.S. employees are letting their employers borrow $1.6 billion per month interest-free through expenses, according to a 2018 report from Conferma Pay. We suspect these metrics have only increased due to supplies needed for remote work and inflation. 

This enormous financial burden is particularly difficult for employees of lower socioeconomic status or those with significant student loans where expenses can place a considerable dent in their monthly finances. It can also create a diversity problem with recruiting and retention at your organization because only those in good financial standing or who have additional financial backing from family or a spouse can comfortably work there. The worst part of all this is that there’s still a stigma to discussing financial challenges, so many employees may not speak up or voice their concerns out of embarrassment. 

Today’s workforces care more deeply about diversity, equity, and inclusion than ever before. In fact, a recent survey from CNBC and SurveyMonkey found that 78% of employees said it’s important to them to work at a company that prioritizes diversity and inclusion, and more than half (53%) said it was “very important” to them. Employees want to work at organizations that not only say all the right things but also put actual effort into creating equitable and inclusive programs. It’s easy to overlook expense reimbursement processes in discussions of workplace equity, but it’s one area that can have a major impact on your employees’ well-being.

All of this contributed to Crisis Text Line’s decision to prioritize a card-first approach to benefits. Creating an equitable employee experience was top of mind for Crisis Text Line as they built their flexible benefits program with Benepass. Megan Schulze, People Operations Partner at Crisis Text Line, noted:

“We have a lot of Justice, Equity, Diversity and Inclusion (JEDI) initiatives, and asking someone to pay $650 upfront for professional development is a big blocker to being able to use their perks."

They place an administrative burden on both employers and employees

No one enjoys the administration behind expenses. Employees must keep track of receipts, photograph or upload the receipts into an app, create a report, and then hope that their report is reviewed in time to pay their monthly bills. Finance teams must go through these same reports for hours, carefully tracking and matching all expenses before granting the funds. Industry metrics indicate that finance teams spend about 20 minutes reviewing each report. Multiply that by the number of employees submitting expenses per month, and you will quickly realize the hours wasted. 

They lead to low engagement rates

The policies behind expenses can also create a headache. For example, let’s say you offer a wellness program that requires reimbursements. Unless the definition of each wellness pillar is incredibly clear, there might be confusion regarding expense approval. Does a nail salon appointment count as wellness? What about a haircut or a candle? Uncertainty may lead to low engagement rates across your perks programs, not to mention a less-than-stellar employee experience. 

It’s also burdensome for employees to keep track of receipts and submit expense reports. This often distracts them from their daily tasks. Because of this administrative burden, employees may also consider it more difficult than it’s worth to make purchases and engage with their wellness program.

There’s a better way

Reimbursements are often not an intentional choice by employers but rather a default because they are unaware of better options.

Instead, employers can opt for a card-first approach in their benefits strategy. With Benepass, employees receive pre-funded credit cards that give them the freedom to spend however they wish. Employers set the contribution amount and cadence, but they only pay for the amount employees spend. This leads to cost savings at the end of the year while providing the employee with 100% of the benefit.

Well-administered corporate wellness initiatives attract and retain top talent, reduce healthcare costs associated with burnout, and increase employee satisfaction. Programs like this often have engagement rates of over 80%. Benepass allows employees to take advantage of our card-first approach while still having the ability to submit expenses for reimbursement, giving them even more spending options. 

The takeaway

Don’t let the headaches of reimbursements spill over onto your employee programs. Reimbursements might seem tangential to the actual meat of your programs, just a small step in the process that employees will happily do to access their benefits or other company offerings. But the reality is that if they’re a core part of how employees access these programs, you might as well consider the meat poisoned. Choose an alternative if you want equitable programs that both employees and administrative teams will love. Reach out to us here or at sales@getbenepass.com to learn more about the possibilities with a card-first approach to benefits. 

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Benepass Team

Our team is committed to sharing stories that help People teams do their jobs and empower employees to get the most out of their benefits.