If an employee advances money, is it legal? The payroll of a company’s employee is made up of a variety of items, most of which are salaries. However, there is another type of non-wage payments that have the function of either advancing or compensating the employee for a series of expenses that he/she may incur in the development of his/her work activity. These payments are per diems and expenses, which may be for accommodation, travel and mileage, and meals.
What the legislation has made clear is that the employee does not have to bear these expenses since they are incurred as a consequence of his work activity, (for example, a trip of an employee to a mandatory training given by the company in one of its headquarters).
There is still a very important question that may give rise to controversy. We refer to the question of advancing money to the company, i.e., the employee pays the expenses and then passes them on to the company, but the advance is made by the employee.
If an employee advances money, is it legal?
The Workers’ Statute (ET) does not contain an express mention of the concept of per diems or employee expenses. The most similar is found in Article 40.6 regarding the allowances and expenses incurred by the employee for travel, overnight stay or meals when, due to economic, technical, organizational or production circumstances, the workers must travel outside their locality for a temporary period of time.
Therefore, all matters relating to per diems are open to collective bargaining. The following fundamental issues will be fixed in each agreement:
- The model of compensation or payment of expenses incurred. There are two models: the per diem model and the justification model.
- In the case of choosing a per diem model, the quantification of the amount of each per diem, regardless of the actual price of the service.
As regards the moment of determination of the payment of the expense or per diem, whether before or after it is accrued, it will vary from one agreement to another, so that an employee may advance the money to the company by paying this cost at the company’s expense, provided that the agreement so allows it. If nothing is said, the company will pay the per diem or justified expenses in the next paycheck.
In which situations an employee may advance money
The employee will always advance money when the company’s expense management model is an expense justification model.
This means that there is no fixed amount per item, but the employee must cause the expense and pay for it out of his own pocket and then pass it on to the company. The company will only pay the cost effectively justified by the employee who will present the corresponding invoices issued in the company’s name.
Mileage and advance gasoline money
The mileage for travel in the employee’s own vehicle covers the expense generated by the employee when this mileage has been generated in the performance of work duties that do not necessarily have to be performed outside the workplace.
The agreement will determine the exact amount to be paid for each kilometer of travel, estimating that this amount will cover not only the gasoline consumed but also the wear and tear and amortization of the vehicle due to its use.
In this type of expenses, it is usual to pass the expense on to the company once the trip has been made and with the periodicity that is determined (normally monthly). A good way to carry out this management is through the notification of expense notes.
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For Personal Income Tax purposes, the amount of exempt mileage is 0.19 euros per kilometer.
Per diems and advances
Per diems in general include all items related to expenses for work performed outside the work center.
They are the extra-salary payments mentioned at the beginning. Per diems are expenses for overnight stays, breakfast, lunch and/or dinner, which are assigned a fixed amount as agreed in the collective labor agreement.
The employee will be paid the amount of the per diem regardless of whether the amount justified is higher or lower than the amount of the per diem.
Normally companies establish as per diem amounts the amounts that the tax regulations have established as exempt from Personal Income Tax. These are as follows with regard to food expenses:
- If it is in Spain: €26.67 if he/she does not sleep outside and €53.34 when he/she sleeps outside the workplace.
- If it is outside Spain: 48.08 € if you do not sleep outside and 91.35 € when you sleep outside.
Apart from this concept will be the amount of the overnight stay.
Advancing money on business trips
Business or business travel may include all of the above. A trip for work or business reasons can have different causes:
- Meeting with a client with a commercial purpose to establish or strengthen business relationships, either individuals or representatives of companies.
- Meetings with representatives of other companies where collaboration on joint projects or corporate transactions are being considered.
- Travel to training centers, for example for training programs for middle management of a company.
- Travel to institutional events such as a shareholders’ meeting.
- Attendance at team meetings for the purpose of analyzing results and establishing strategies or action plans.
Business or work trips may include mileage if the trip is made in the employee’s own vehicle, or expenses involving the use of means of transportation. These trips will also accrue expenses for meals and lodging if an overnight stay away from the work center is required.
In all these cases, as long as the agreement allows it, it is legal to advance the money for a business trip. For the purposes of deductible VAT and tax exemptions, our recommendation is to have all work expenses for travel, overnight stays or meals justified.
Expense management, essential in these cases
Personnel departments play a crucial role in ensuring that your company’s profit and loss account is not diluted by the cost of employee per diems and expenses. When you have to manage the per diems and expenses of a large number of employees, if you don’t keep a rigorous order, the volume of paper can get out of control.
Fortunately, new technologies make our lives easier in many aspects and in terms of human resources, the XPENDOR application has arrived to control the expenses of employees who advance money.
In XPENDOR we offer a 360 digital environment that can be accessed on the mobile or through the web portal, which provides a series of very useful functionalities for expense management:
- Report expense receipts.
- Review the supporting documents and expenses reported.
- Manage expenses.
- Post expenses.
- Manage the reimbursement of the employee’s advance.
It is time to take advantage of the benefits that the digital revolution offers companies in this area, managing in an easy, simple and intuitive way the expenses of the company’s staff with the XPENDOR application.