When an employee has a flexible working arrangement, the lines can become blurred for expenses payments.

For example, you would not be obliged to cover high speed internet for the employee’s family home but you may like to contribute to boosting the internet to a higher speed or to an unlimited broadband plan. So where to draw the line?

The quantity and specifics of home office expenses you are required – or obliged – to pay will often depend on the circumstances of the work and the home office situation. Here’s what you can do as an employer to establish some boundaries:

Talk to your employees about their home office set-up

Communicate with your employee(s) about their home office set-up and what is needed to make it a workable, ongoing location for carrying out their duties.

Determine what costs are incurred to carry out work from home

Determine what costs are incurred through the obligations of their work and whether these costs are necessary to perform the work. Inland Revenue has a set of working from home determinations. There is a useful flow chart on this document which can help to determine which and how much expenses should be paid.

Create a plan to cover home office expenses

Once you have some answers around these specifics, create a plan. This should include which expenses will be covered, whether they will be one-off or continual, and contributed each pay cycle or reimbursed when required.

Document any changes in a working from home agreement

Your plan should be made in consultation with your employee and should be clearly documented with any variations to their employment agreement and/ or working from home agreement stated.

One of our clients, who recently made the permanent move to home-based offices, offered his employee the following tax-free allowances under IR Determinations EE001 and EE002:

EE001 (Employee use of telecommunications tools and usage plans in their employment)

  • $5.00 a week.

EE002 (Payments to employees for working from home costs during the COVID-19 pandemic)

  • $15.00 a week from 1 April 2020 until 17 September 2020.
  • A one-off furniture and equipment allowance of $400.

 These allowances are in addition to the employee’s normal salary.

It was made clear in the Flexible Working Arrangement that the employee was not required to account for how the allowances are spent. However, they are required to observe the company’s Health and Safety Policy, including the Safe Workstation Set-Up and the Working from Home Self-Assessment Checklist. Part of this meant the employee was responsible for ensuring they had a comfortable workstation and chair.

This is a good example of a clear proposal for reimbursement of telecommunication and furniture needs.

If you need help managing people who work from home in your business, or determining the intricacies of your specific working from home arrangement, we can help to advise and create a plan. Get in touch with us: 0800 04 FLEX or