A roadmap for employee expense reimbursements

Without a well-oiled expense reimbursement system, companies can easily lose track of what employees spend in the field, from picking up last-minute supplies to traveling on toll roads. Not only do poor reimbursement processes cause compliance risks and employee resentment, they also make job costing inaccurate. When reimbursements aren’t mapped to specific jobs, they distort project expenses and profits.

In this article, learn how employee expense reimbursement works, which allowable expenses are most common, and how to manage the repayment process. 

What is employee expense reimbursement, and what does it involve?

Employee expense reimbursement means paying back employees for business-approved costs they covered with their own funds. As long as the expense was work-related and authorized, the company repays the employee so employees aren’t footing the bill. Here’s how the process typically works.

Purchase

The reimbursement cycle begins with an approved business-related purchase that employees make with their own money. There’s a wide range of accepted expenses in construction, including fuel for a personal vehicle, parking fees, and safety materials. For each of these costs, the employee holds onto a receipt and ideally notes key details, such as the associated activity, job, and the purpose of the transaction. 

However, people often lose receipts or forget transaction details, leading to a drawn out investigation to find sufficient evidence. That’s where a platform like Miter makes such a difference. Miter knows which jobs each employee is on and suggests the right jobs and cost codes to ensure reimbursable expenses are properly tracked. 

Request

After organizing all the information for their reimbursable expenses, employees submit their reimbursement requests. Many companies have employees submit a physical expense report and stack of receipts, often on a monthly basis, but contractors are increasingly using software like Miter Reimbursements to improve the reimbursement process for field employees and for the finance team. Modern expense management software enables employees to snap a picture of a receipt and submit reimbursement requests immediately from their phone, minimizing lost receipts and capturing transaction details needed for comprehensive job costing. 

Approval

Expense submissions move to a higher authority, like a project manager or foreman, for final approval. They’ll check the request for accuracy, then decide whether to approve, deny, or kick back the reimbursement. If it passes, the accounting team takes over to review each request for compliance and verify that it has all the proper documentation.

With expense management software like Miter Reimbursements, finance teams can create customizable spend policies with conditional rules. This allows automatic approval on expenses that meet specific criteria, like amount thresholds and purchase categories, and instant routing on those that need manual review.

Reimbursement

Once reimbursements are approved, a report is sent to the accounting team. They confirm the amount and issue the payment. Then, the employee gets their reimbursement either as part of their next paycheck, as a separate check, or through ACH. 

Report

The reimbursement enters a company’s GL, ideally with the proper cost codes and job numbers for more accurate records. Platforms like Miter send this data straight into accounting software automatically, saving finance teams hours each week and improving job costing accuracy.

Why does expense reimbursement matter in construction?

In construction, work doesn’t take place at an orderly office desk. Crews are constantly on the move, which also means they’re consistently spending money to fuel up their cars and stock up on supplies.

If companies don’t set a reimbursement policy with a clear submission process and payment expectations, they risk stalling operations and weakening team morale. Beyond supporting employees, reimbursement in construction matters for:

• Employee fairness: Asking teams to act as the company’s bank puts unfair strain on your employees. When contractors reimburse employees promptly, they build trust and avoid resentment.
• Preventing delays in the field: A strong, clear reimbursement policy empowers employees to act quickly rather than constantly second-guessing purchases. This confidence reduces delays and keeps projects moving forward.
• Cost control and job spend visibility: Correct expense categorization ties purchases to specific projects, resulting in more accurate estimates and better bidding. Tracking reimbursements also ensures field spend gets captured before it distorts your job costs and margin reporting.
• Compliance with wage laws and tax rules: There are strict federal and state-specific policies related to handling job reimbursements, meaning contractors risk legal exposure if they don’t have a reimbursement process. Miter makes it easy to set up and apply reimbursement policies and connects reimbursements to payroll for seamless payments, helping companies stay compliant with workforce laws.
• Better documentation for audits: Reimbursement receipts are vital during audits. These records create a defensible paper trail proving reimbursed expenses were legitimate and properly authorized. This carries added weight in construction, where prevailing wage audits include extra scrutiny around reimbursements to ensure they weren’t used to inflate or misclassify compensation.

What expenses are companies required to reimburse? 

Employees shouldn’t foot the bill for company purchases, and expense reimbursement laws help ensure they don’t. At a federal level, unreimbursed business expenses that reduce an employee’s take-home pay below the federal minimum wage of $7.25 per hour create a potential FLSA violation, but the FLSA doesn’t require reimbursement beyond that threshold. 

Because this protection is limited, many states have created their own reimbursement rules. Some require companies to reimburse employees for all necessary expenses, while others only require businesses to follow their own written policies. Check local regulations to see which rules apply. 

Even if repayment isn’t mandated, it’s good business practice to reimburse employees for any expense that’s necessary, reasonable, and directly related to job duties. Doing so builds trust between companies and their teams; employees know job-related costs won’t eat into their paychecks.

Common examples of reimbursable expenses

Here are the types of reimbursements contractors can expect to pay:

• Travel to and from jobsites: Whether it’s fuel, tolls, or parking fees, any costs that take team members to and from jobsites may qualify as reimbursable expenses. While some companies process each travel expense separately, it’s also common to issue fixed daily funds called per diems for mileage and other incidental expenses.
• Job-related materials and supplies: Field crews often need to pick up extra supplies to keep jobsites productive and safe, like high-visibility vests and protective eyewear or caulk and tape measures.
• Lodging and meals during overnight travel: When projects are far enough away from home, companies cover the costs for a hotel. These overnight stay expenses also include meals (either per diem or from individual receipts), parking fees, and tolls.
• Training and professional development: Many contractors pay for educational programs and certifications that refine their teams’ skills and maintain compliance. These may include safety training like the OSHA Outreach Training Program or license renewals.
• Admin-related expenses: Managers frequently pay for office supplies or shipping costs. And if leaders use personal devices for work, companies may offer mobile data stipends.

6 expense reimbursement policy best practices

When creating an expense reimbursement policy, keep these six best practices in mind.

1. Set clear expectations.

A strong policy begins with transparent rules. Here are a few to consider, plus examples:

• Which types of purchases are eligible for reimbursement: e.g., fuel for work trucks and certain safety equipment are allowed.
• What cost thresholds are for different types of expenses: e.g., employees can spend up to $150 on gas and up to $200 on tools.
• When to seek approval before making a purchase: e.g., ask a manager for any tool purchase over $200 and any other expense over $100, even in approved categories.
• How to submit reimbursement requests: e.g., submit a receipt and include details like the purchase date, vendor, amount, job, and purpose.
• How the approval process works and what to expect: e.g., most reimbursements are processed within one to two weeks and are paid out via ACH or included in the next payroll cycle.

With this information in hand from the start, workers can make confident purchasing decisions aligned with company policy.

2. Make expense submissions effortless. 

To increase the likelihood of compliance, clearly explain what documents employees need to fill out and how to submit expenses. Consider using mobile-friendly tools to make submitting reimbursement requests simple. Taking a photo on a smartphone and texting it in is much easier than saving physical receipts, printing and filling out forms, and delivering a stack of paper to the office.

3. Set clear approval workflows.

Prevent bottlenecks by defining who has the authority to approve what in the reimbursement process. For example, foremen or superintendents can verify small field purchases, while project managers need to approve higher costs.

4. Code expenses correctly.

Accurate job costing depends on every expense – including reimbursements – being tied to the right job and cost code. Without a reliable way to make that association, reimbursements aren’t properly tagged, leading to inaccurate job costs.  

5. Standardize payout methods and timelines.

Whether contractors roll reimbursements into routine payroll or separately pay out expenses via checks or direct deposit, stick with one payout method so there are no surprises. Clear expectations and consistency help build trust and avoid back-and-forths on payment ETAs.

6. Review and refine the process regularly.

Schedule a routine time to analyze the reimbursement system for any patterns or efficiency gaps. Pay close attention to issues like slow approvals and project overspend, then use these insights to inform policy and process changes.

Streamline expense reimbursement with Miter.

Don’t make managing expense reimbursement more challenging than it has to be. Miter gives field workers the power to instantly submit out-of-pocket expenses and mileage logs by submitting receipts via text and tagging costs on the go. 

Miter offers total control through fully customizable policy-based approval workflows. Once reviewed and approved, each reimbursement gets paid via payroll, ACH, or manual check, while the data for these expenses flows directly into accounting systems enabling precise job costing.

Explore Miter Expense Management to streamline reimbursements and per diems. 

Frequently asked questions

Are employee expense reimbursements taxable?

It depends. The IRS separates expense reimbursements into two plans: accountable (non-taxable) and non-accountable (taxable). To qualify for a tax-exempt accountable plan, companies must meet four criteria: 

• Business connection requirement: Employees must make the purchases while on the job, and expenses have to relate clearly to the business. 
• Substantiation requirement: Workers have to precisely track their spending through receipts or invoices. 
• Return of excess requirement: In cases where employees receive cash in advance, they must return the remainder to the employer. Otherwise, those funds are taxable. 
• Reasonable time requirements: Employees must submit receipts within 60 days of purchase and return excess funds within 120 days. 

Miss any of these criteria, and reimbursements will fall into taxable, non-accountable plans.

How are approved reimbursements paid to employees?

While there isn’t one way to send approved reimbursements to employees, common methods include adding them to a regular payroll cycle or using separate payment methods, such as direct deposit or checks.

How does the approval process work for reimbursements?

First, an employee submits an expense report with their receipt and job code for reimbursement consideration to their immediate supervisor or project manager. After approval, this expense report moves through a company’s accounting department for proper filing and a final compliance check.