New Federal Reimbursement Requirements

Reimbursement

As of July 9, 2023 federally-regulated employers will be required to reimburse employees for reasonable work expenses. These reimbursement changes have been a long time coming – they were first introduced in October 2018, they were passed into law in December 2018 and they will finally come into force on July 9, 2023. There are a few things that employers need to do to be ready for this change.

Reimbursement Requirement

As of July 9, 2023, federally-regulated employers must provide reimbursement for reasonable work expenses, unless the employee is required to pay the expense under a collective agreement or an agreement between the employee and employer. This requirement will apply to expenses that are incurred on or after July 9, 2023.

For reimbursement to be required, there are four conditions that must be met:

  • The employee does not have to pay the expense as per a written agreement or collective agreement
  • The employee must have paid the expense out-of-pocket
  • It must be work-related, and
  • It must be reasonable

What is a Work-Related Expense?

Reimbursement is only required for work-related expenses. The regulation includes factors to consider in determining whether or not an expense is work-related. Those factors are whether:

  • the expense is connected to the employee’s performance of work;
  • the expense enables an employee to perform work;
  • incurring the expense is required by the employer as a condition of employment or continued employment;
  • the expense satisfies a requirement for the employee’s work imposed by an occupational health or safety standard; and
  • the expense is incurred for a legitimate business purpose and not for personal use or enjoyment.

What is a Reasonable Expense?

Reimbursement is only required for reasonable expenses. The regulation includes factors to consider in determining whether or not an expense is reasonable. Those factors are whether:

  • the expense is connected to the employee’s performance of work;
  • the expense is incurred to enable an employee to perform work;
  • it is incurred at the request of the employer;
  • any amount of expense is incurred beyond the amount necessary to enable the performance of the work;
  • the expense is one that is normally reimbursed by employers in similar industries;
  • the employer authorized the expense in advance;
  • the expense is incurred by the employee in good faith; and
  • the claim includes documentation, such as a receipt or invoice, that indicates that the expense was incurred.

Other Requirements

Employers will also be required to provide employees with information about their employment in an employment statement, including information about how to claim reimbursement of reasonable work-related expenses. The employment statement must be given to an employee within 30 days of the start of employment or within 30 days of an update of the government materials or employee statement. Employers must also retain a copy of the employment statement for 36 months after an employee’s employment ends, and provide additional copies to the employee upon request.

Note that the employment statement must include other information as well, not just the information related to the reimbursement of expenses.

Time Period for Reimbursement

An employer must make any required payment within 30 days after the day on which the employee submits the claim for payment.

Guidelines

The Government has issued an Interpretations, Policies and Guidelines document (IPG-120) providing guidance for employers on the reimbursement of reasonable work-related expenses.

How Compliance Works Helps HR Professionals

Staying on top of compliance deadlines and constantly changing employment laws can be challenging and time consuming. Compliance Works provides timely updates on changes to employment laws across Canada and our Reminders ensure that you never miss a change.

Reimbursement
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About the author

Gayle Wadden
Gayle Wadden CLO, Compliance Works
Gayle Wadden is a senior lawyer with deep experience in employment and corporate law. She is responsible for overseeing Compliance Works’ legal content.

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