The days are numbered for using employees as a credit line

Why Traditional Expense Systems Are Failing Employees – And How Embedded Finance Fixes It

Most UK employees are paying business expenses out of their own pockets – and waiting weeks to be reimbursed. It’s a broken system that’s harming employee finances, wellbeing, and trust.

A new model is needed. One where company-funded expense cards replace the outdated reimbursement process. And thanks to embedded finance, HR and expense management platforms can now offer this directly within their software.

In this article, we reveal the latest expense management data from 250 UK employees, explore the real impact on financial health, and show how embedded finance can finally eliminate out-of-pocket spending for good.

Employers have an unofficial overdraft, a credit line that comes with no interest: their employees. The vehicle for this sleight of hand? The traditional employee expenses system.

So what is the current expense system? Aren’t there many variations out there, each with their own methods of reporting and approvals? Well, the issue is almost all of them share the same status quo:

Employees are paying with their own money for expenses, and they’re asking their employer to reimburse them.

It’s a simple process in theory. But in reality it’s complex, chaotic, and often unfair. 

We spoke to 250 UK employees about their experiences, and the results were quite stark:

• 81% of employees have experienced being out of pocket for over a month
• 63% say they claimed expenses but their employer failed to reimburse them..
• Two thirds report some impact on their financial health due to employers’ handling of expenses.

Before we dive into the research, if you’re considering adding expenses management capabilities into your software, feel free to see how we gathered our the research findings in the guide below. There’s bit more info on precisely how our embedded finance solution helps you deploy quickly, also.

In an age where employees are swapping 20th-century company loyalty for a savvy eye on the hiring market, it’s downright bad business.

Over a quarter of employees in the UK plan to change jobs within the next six months, according Randstad’s Employer Brand Research 2024 report

61% of UK employees were more worried about the cost of living in 2024 compared to 2023, according to research by Health Shield.

According to a Weavr survey, two thirds of UK employees reported some impact on their financial health due to their employers’ handling of expenses. 12% said they experienced a negative impact on their personal financial health “often” or “all the time”.

According to Weavr research, not paying for business expenses out of their own pocket would make a “significant difference” to almost half (47%) of UK employees in the younger-generation (aged 16-34). 

This can and should change, if HR platforms get involved

With the right tech stack, HR and employee expense management platforms can save employers and employees from this situation of incurred-debt – and win back employee goodwill in the process.

It just requires a new model for expenses and expense management, one with company-funded cards at its heart.

83% of UK employees told us having a company-funded expenses card would make a difference to their personal cost of living, and 77% said this would improve their job satisfaction.

We’ll explore in detail later. But first, we should take a closer look at the problem.

Employees are out of pocket

The most universal frustration with the current state of expenses is that there is a delay – often a significant one – between when an employee pays for an expense and their reimbursement.

81% of the UK employees we surveyed have experienced being out of pocket for over a month. 13% say this happens “often” or “all the time” with their expenses claims.

If you’re the exception to this widespread rule, you’re one of the lucky ones.

The effects of delayed reimbursements aren’t fun. As an employee, your cashflow is being restricted by a process outside of your control – sometimes tying up hundreds as a result. For some, that might mean they can’t go on a spur-of-the-moment weekend break simply because a reimbursement (or several) hasn’t yet arrived in their bank.

Or for others, like the third of UK workers who live month-to-month without spare cash, it might mean making decisions on which bills to be a little late paying, or learning to live with a broken washing machine until next payday.

The solution shouldn’t be to apply for a bigger overdraft or cover emergencies with a credit, and risk getting further into debt or into it for the first time. The issue is you have become your employer’s unofficial overdraft.

Maybe the delay is down to a confusing – some might say, deliberately obtuse – company expenses policy. Maybe the employer is simply inefficient. Maybe it’s just that this model of borrowing from employees is fundamentally flawed. If 81% of employees are on the raw end of the deal, it’s more than an isolated problem.  

Some employees will be able to shrug and say “That’s just the way things are,” but others will feel it acutely. If, say, Claire is worried the money she needs to make the balance payment to her tour agent will have to go on a credit card or come out of her overdraft  –  since several hundred pounds of expenses she’s owed are still stuck somewhere in an opaque company process – it’s quite an emotional issue.

Let’s hear what two employees, Rachel and Leila, had to say about the impact of being out of pocket:

No it’s not normal, we just all act like it is

In one Reddit thread, a user asked: “Is it normal for companies to expect employees to pay expenses out of pocket?”

“I’ll preface this by saying that the company will pay expenses back a week later. With that being said, between materials and fees I’ve been expected to carry hundreds of dollars of debt weekly on behalf of this company. They refuse to issue company credit cards. I’m not really in a position to be separated from that money for an entire week.”

“Furthermore, I was chastised by management for not letting my expenses ‘stack up’ before claiming them. My boss told me it was too expensive to keep paying me these lesser amounts of money, and that I should hold off for a while.”

One response to the Reddit user’s question was: “You are not a business’ line of credit.”

And some employees are out of pocket permanently.

When reimbursement is a waiting game, some employees are going to be able to take the temporary hit, but often the hit is permanent.

63% say they claimed expenses but their employer failed to reimburse them. 

• 25% of these employees have lost over £100
• 4% experienced personal finance losses of over £500 in the last year alone

Again, it’s not always a occasional problem. 11% of all employees say this failure of reimbursement happens “often” or “all the time”. 

It’s a rampant issue among field workers, who depend upon the expense system to do their work. 76% of UK field workers say they have lost money permanently due to their employer’s failure to reimburse them.

This can get pretty vicious and high profile

When once-Twitter laid off half its employees, those who were laid off were still owed thousands of dollars. According to Fortune, a few were owed up to $4,750 in travel expenses – which they’d paid up front with American Express cards, and they were now facing late payment fees.

There’s plenty of other cases in big tech. Bloomberg Law reports that, after a court case, Amazon paid almost $1 million to California workers who alleged they weren’t reimbursed for expenses incurred during the pandemic. 

At times the contention can seem like employers are just waiting for employees to make one mistake so they can dismiss them. It’s a common issue of discussion in big tech, and there are plenty of examples. One UK salesman, who accidentally put a packet of cigarettes and a lotto ticket on a company card, was unfairly dismissed and later got a settlement of €18,000 for six months lost pay.

And often it’s not as blatant a mistake as cigarettes. In the UK, it’s all too easy to violate expense policy without knowing, since most are based on the HMRC rules for which expenses are deductible – and these are rules so convoluted that the HMRC have 59 pages of guidance to explain them. It’s not exactly a frictionless employee experience.

Some employees are failing to submit expense claims, and who can blame them?

75% of employees say they failed to submit expenses claims for business purchases they paid for personally. As a result, 25% have lost over £100 in the last year.

Those who need to make the most expense claims are also the most likely to miss certain claims, with 40% admitting to this at least “sometimes.”

It would be easy to point the finger at employees here and say, well do your paperwork then. But seriously, have you seen the paperwork involved, even if it’s all digital these days? One near-viral Tweet, highlighted by The New York Times, is a video of someone breaking into a broken down car with screwdrivers and other tools. It’s labelled, “This is what it feels like to submit an expense report using SAP Concur.”

If the majority of employees (75%) are failing to submit claims, losing money as a result, it’s a problem we should ascribe to the system, not the people we’re failing.

The picture elsewhere in the world:

Although our own survey concerns the UK, the image is similar elsewhere. 

According to a survey of employees in U.S., U.K., Germany, Singapore, and Australia, by San Francisco-based digital adoption company WalkMe:

Half of all staff around the world entitled to business expenses are reportedly not claiming them. 

A third of employees around the world blamed their company’s cumbersome expense reimbursement process as a reason for not submitting a claim.

Germans claim the most stress from claiming expenses, and Americans leave the most money on the table at an average of £24,000, annually giving up $2bn total in free subsidies to employers. 

All this impacts company reputation and employee health.

It’s probably no surprise, based on everything above, but two thirds of UK employees report some impact on their financial health due to employers’ handling of expenses. And 36% say expenses are bad for their mental health.

The good news is anyone who can put a stop to this kind of stress is going to be in an employee’s good books. 85% say a robust expense process is critical when discussing their company with prospective employees.

The lack of clarity factor 

Over 20% of employees say they struggle to track the status and payment of expense claims.

When asked about which parts of the traditional expenses claim and reimbursement procedure are not clear, “Tracking a claim’s approval status” was the area most commonly cited as “Not clear at all” (6%)

Business SaaS and expense platforms have been working to fix all this:

There have been almost-there efforts from platforms to offer solutions to this, such as instant reimbursements and pre-approval processes

But these functions still come with limitations:

• They still require the use of the employee’s money. 
• They still require an employee to perform admin for every single claim. 
• They still come with a complex set of expense rules for someone to memorise and interpret. 
• They still fall shy of giving employees the autonomy they need to feel empowered.

What employees actually want: company-funded expense cards

83% of the UK employees we surveyed say having a company-funded expenses card would make a difference to their personal cost of living.

If that wasn’t persuasive enough, it’s even more pressing for the younger generation. Almost half (47%) of employees aged under 35 say it would make a “significant difference” to their cost of living not to have to pay for business expenses out of their own pocket

The benefits of that card are pretty all encompassing:

• Employees are never out of pocket
• Their cashflow anxiety disappears
• Expense management inefficiencies disappear

The top-cited improvements from younger-generation employees (16-34) were “Not needing to understand complex expenses rules” and “never being out of pocket for work purchases”

This is all a net benefit for employers too, and they’ll see the difference in employee engagement and retention. 77% said having a company-funded expenses card would improve their job satisfaction. 

It’ll also strengthen company cultures that place an emphasis on employee autonomy and innovation. 38% of UK employees said it would “very much improve” job satisfaction (at 38% of UK employees surveyed) if they experienced “Trust from my employer to give me a company card”. 

Fintech platforms have been trying to muscle in:

In the absence of joined-up solutions from business banking, standalone fintech solutions have been stepping in. These eliminate the need for employees to use their own cash to cover expenses and include names like Spendesk, Soldo, Ramp, and Bill.com . 

These fintechs offer cards linked to company funds, that employees can use in a way determined by their employer who can set spend controls – and they go a long way to solving the issues with employee expenses.

But critically, they exist outside the main finance, administration, and HR SaaS ecosystem.

As a result, they don’t link up neatly with existing expense management processes and employee management data. As a result they depend on the employer being willing to take on additional tech complexity and engage in more swivel-chair administration. 

For end-customer businesses and end-users, too, it makes more sense to segue into new expenses processes inside the products they already use for expenses and accounting

And if you’re building HR or expense management software, you won’t want employers using a third party fintech system either. You’ll want a system of your own. One you can embed in your platform so customers can stay within your app rather than switching tracks to an external provider.

And the way you’d do that is with embedded finance. 

Now is the time for B2B SaaS companies to change everything

Embedded finance has made financial features – such as company-funded expense cards and spend controls – possible for non-financial SaaS platforms. 

And according to research Weavr carried out in early 2024, embedded finance is already in the pipeline for over 70% of SaaS companies.

This is a critical moment for HR and expense platforms to adopt the technology and begin to see the benefits. Embedded finance offers you:

• A way to keep users in your platform
• A key differentiator that’ll put your feature list head and shoulders above competitors
• A way to gain revenue from every transaction (should you so desire).

By offering company-funded expense cards, you’ll finally put employee money back into employees’ pockets. And that should earn you considerable goodwill in the market.

The good news is you don’t have to become a fintech to offer the slickest financial expense experience on the market. If you want to learn how to adopt embedded finance – and be savvy about it – check out our embedded finance solution for expenses management. Or if you’d like to run your own research, grab our behind-the-scenes guide via the form above.