Handling employees' personal purchases on company cards
Adding a fee may be legal, but better to set limits, firm up policies
Your Business Credit
Dear Your Business Credit,
I am wondering if, as a company, we can charge a surcharge to our employees to manage and collect personal charges to corporate credit cards from them? Are there any laws that allow or prevent this? The best answer is to cancel them all, but many of our staff work remotely and we are a 24-hour service repair business. We can't really run the business totally without the cards. – Victoria
Issuing business credit cards to employees can bring many conveniences to a company, but as you've discovered, they can deliver their share of hassles, too.
It does appear that you can add a surcharge fee, based on what I learned from Myriam Gilles, professor of law at Cardozo Law School in New York City.
"There are no laws that affect your ability to charge an administrative fee of some sort to your employees for the convenience of using the company credit card for personal charges," Gilles said in an email. But think carefully about how much you charge, she says. "Whether there are labor or employment laws that bar you from marking up your costs, or that force you to disclose the practice fully, is a separate issue."
If you are planning to add a fee, get advice from an employment lawyer in your state about how to create a written policy. Make sure your policy takes into account state and local laws.
There are some simpler solutions to consider. Limiting the number of employees who have corporate credit cards is one. Do all of your remote workers really need a company credit card on an ongoing basis? If some use their card infrequently, it seems reasonable to limit the cards to those whose job duties entail substantial business expenses, such as, for instance, drivers who need to get their trucks serviced regularly. You may have remote office employees, though, who don't really need a credit card.
You might also set tighter credit limits on employees' cards, given that your workers seem to have room on the card for extras. Business fleet fuel cards, for example, let you set limits for specific types of spending, such as hotels or restaurant meals, and to block particular types of purchases.
Make sure you issue a written policy that explains to employees which charges are approved and which aren't – and the consequences of violating the policy – and have them sign it. Having your human resources team hold a training session on using the cards can reinforce your policy.
Of course, you will need to make sure your employment lawyer reviews the policy to make sure the consequences you impose for making personal charges do not put you in violation of employment laws in your state. For instance, you may not be able to fire someone without issuing a series of formal written warnings.
Chances are your employees are using the cards for personal purchases because they don't want to ring up two transactions at the checkout. Still, there's always the possibility that you will hire someone who tries to steal from the company by misusing a credit card. Requiring employees to submit original receipts for their purchases can help you spot unauthorized charges for personal purchases, given that the receipts will provide more detail than a credit card statement alone. I'd suggest that in addition to having your finance department review and approve the charges, you or another top manager spot-check the finance department's reviews to provide an additional level of scrutiny.
Whatever you invest to have a lawyer advise you to come up with a good policy on corporate card usage will be money well spent, compared to the costs you may incur if an employee goes on a spending spree and can't pay the bill. As I discussed in a previous column ("Handling employee abuse of business credit card"), your company will very likely be on the hook for the bill if that happens. Better to be nit-picky than sorry.
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
Published: April 18, 2016
- The best business credit card for fair credit – If you're starting a new business and need a business card but past credit problems leave you with only fair credit, what are your options ...
- Help, I'm an unauthorized authorized user – No one has a right to make you an authorized user on their card, since it can badly damage your credit ...
- Business credit card can damage your personal score – If you have authorized use of a business credit card, it could show up on your credit score and if the company uses up a lot of the card's limit, this could negatively affect your score ...