When Employees Pad Their Expenses

Most people at least know someone who has padded his business expenses and filed for "creative" reimbursements on their expense accounts. In some cases, employers do not have much oversight. And in cases with which I have been familiar, often the employers don't care or turn a blind eye, thinking it's a better way to offer raises without having to pay the additional taxes and benefits. In fact, if anything, it's a tax write-off.

Padding your business expenses can be regarded as a hallowed tradition with some employees. Having worked in show business for quite some time I have seen some real eye opening indulgences written off on expense accounts. Things that could be considered business friendly, if at all, in only the loosest interpretation.

According to an article in Fresh Business Thinking...."Ernst & Young’s Fraud Investigation & Disputes Services team has released research showing employees consider the fiddling of expenses as more serious than stealing physical company property (20%), drinking during work (13%) and breaching of licensing arrangements (10%). Only using drugs at work (33%) was considered the more serious of these offences.

Despite recent high profile prosecutions the research of 1000 middle managers found the exposure to risk remains high, with only one in five expressing zero-tolerance of intentional overstatement."

So overstating business expenses is quite a consideration. The Ernst and Young Report reiterates what I noted earlier, that once upon a time, padding expense accounts was overlooked as a viable means of offering pay raises without dealing with the various taxes. But now, after the economic recession, the practice warrants greater scrutiny. Even middle level employees have been getting into the act, increasing their personal incomes through fraudulent business expenses.

It should be also be noted that larger amounts of money posted on expense accounts could indicate bribery and kickbacks. Bribery is embarrassing and, worse, illegal. All sorts of laws against it. Which is why it fails to brighten the day of any employer who discover, after the fact that its employees have been caught in a bribery scandal. When breaking headlines blast this type of malfeasance all across the various news media platforms, you can rest assured business will suffer.

Still, thirty six percent of the UK businessmen would overspend on their accounts if it meant developing new business.

Padding business expenses has always been a two way street, largely for the reasons cited. Largely, because nearly everybody is doing it. Only one in five respondents to the survey claimed they have a zero tolerance policy. And who knows if they are telling the truth? Twenty-five percent openly said they would tolerate over-billing on expenses as long as it is not out of control. And seven percent would accept claims that were more than $150.US dollars.

Now this survey was conducted in the UK. So the question is, are the employees with the UK companies more flagrant, or if there was a similar survey conducted in the United States would policies toward expense padding be more liberal or more constraining? I think you can figure out that one all by yourself.

Comment by Jerry Albright on July 20, 2012 at 9:58am: Can I ask (in a friendly, inquisitive way....) - what this has to do with recruiting?

Comment by Gordon Basichis on July 20, 2012 at 10:17am: Sure. I write about the world of background checks, which can reflect on recruiting. Such issues as criminal records, civil lawsuits, lying about education, or lying about one's expenses are potential concerns for human resources managers, staffers, and recruiters. Recruit the wrong person, only to discover such little glitches in their histories after the fact, after they were hired, and let's say the employer may not find your recruiting efforts as appealing as they once considered.

This happened recently to one recruiter. Moved forward with someone, even arranged for the prospective employer to pick up travel expenses for the candidate and his wife for an interview in India. Only to discover several of the aforesaid glitches in the candidate's resume. I will let you guess if the employer retained the recruiter the next time they hired.

But then what you read, or what you consider relevant is certainly your call.

Comment by Joshua Lee on July 24, 2012 at 12:06am: To Gordon's defense, any valid "business topic" has something to do with recruiting and I think as professionals we should all learn and enrich our overall understanding of the global market place from a larger perspective. Secondarily, staffing agencies have a heavy sales culture which includes business expenses. Sometimes this includes lavish dinners, lots of business lunches and weekends for really tough to get highly sought after clients.

Padding business expenses is both a cultural thing, often acceptable within a tolerable level, and also an ethical question of what we are saying about what we value most (honesty vs. dollar generating customers).

It's a gray area and I don't think there are real answers. The truth is, just like anything in life, the more valuable you are to your employer, the more they are going to be willing to tolerate, not only in business expenses but in other areas as well.

Comment by Valentino Martinez on July 24, 2012 at 2:48am: Gordon,

Important subject matter. BTW--it's not just employees who pad their business (travel) expenses. Some job applicants do as well. Some by greed and some by supposed entitlement and/or precedent.

When job candidates are being pursued by multiple employers and have trips that overlap as they visit multiple employers (happens a lot in college recruiting)—they can experience variations in what are allowed travel expenses with some, but not with others.

Also, as a corporate Manager of Recruitment and University Relations, I did have the occasional situation where an aggressive hiring manager, or retained executive recruiter, made travel arrangements for a candidate and sent me the bill after the fact. I’ve seen “expenses” e.g., First Class travel, luxury rental car, exotic wine, etc., that I had to get executive level approvals for payment because the expenses were outside of what we typically allow for job interview related travel.

Job interview related expenses are budgeted for and therefore are scrutinized for justification, accuracy, amount and approval. Employees who pad their expense claim(s) can be required to reimburse the employer and be fired depending on the severity. And while job applicants are typically told in writing what expenses will be pre-paid upfront by the employer, e.g., air travel and hotel room and tax, and that receipts will be required for reimbursement of out-of-pocket expenses like: taxi, parking, and meals (with limits)—there is always that one job candidate who didn’t get the message and causes some problems.