5 reasons why employees aren’t complying with corporate policy

In the ever-changing world of corporate finance, following internal policies is more than just a means to control costs: it’s crucial to maintaining financial integrity and guaranteeing operational efficiency. While most might agree with this statement and understand the benefits of staying compliant with corporate expense policies, Finance teams often face the dreaded issue of non-compliant expense claims, as not all employees follow these guidelines as they should.

It might often be an innocent gesture, but a hotel booking that’s a bit over budget or a client dinner that exceeds the established amount is enough to lead to an issue with the company’s finances. Even if some employees try to cross the line of corporate policy because they feel entitled to it, the reality is that, more often than not, employees aim to comply. The challenge lies in the obstacles they face when trying to adhere to the policy, which can happen for many reasons, ranging from being unaware of its existence to being unclear in some specific situations.

Understanding why employees are not complying with corporate policy is essential for finance teams to help their peers navigate its complexities and ensure that they stay compliant. For that, keeping open channels of communication is key. Openly discussing employees’ compliance struggles and getting their feedback is the first step to finding these problems. It can also help managers and finance teams understand if the current rules at play are actually working and how they can improve them.

By tackling these issues, finance leaders can develop effective, clearer, and user-friendly policies that employees are more likely to follow. This new approach will help them manage the company’s finances, control costs, and ensure that everything runs smoothly without any hiccups or roadblocks for everyone involved. It’s much more than simple rule enforcement: it’s about creating a culture where compliance is natural, logical and easy for all employees to follow.

Finance leaders must understand their employees’ pain points and why they are not adhering to the company’s policy to determine what changes need to be made within the organisation. Whether it’s because employees don’t have a clear understanding of the policy, they don’t know if it exists, or it doesn’t adjust to their reality, there’s always a solution to the issue of lack of compliance with corporate expense policies.

Awareness is the main key to achieving compliance, so if employees are not aware of the expense policy, they are highly likely not to follow it. It might seem obvious that such a policy exists, but if employees are not properly reminded of it, they won’t know what expenses are allowed or their limit.

Simply sending an email seems like the obvious solution, but with inboxes overflowing at all times, it might go unnoticed by most employees. Proactive and engaging strategies need to be implemented to ensure everyone is involved, such as posting about it on the team’s internal channels, setting some dates for training, and sharing regular policy reminders and updates. Only when everyone’s on the same page can organisations expect to see a meaningful improvement in compliance rates.

The corporate policy should be concise and easy to understand so employees can quickly find the information they are looking for and avoid out-of-policy expensing.

How many instruction manuals for gadgets have you read back to back? The answer is most likely none, as most of them are confusing, difficult to interpret, and unclear on what’s expected of you. The same happens when employees are handed a 30+ page expense policy they can’t understand.

The corporate policy should be concise and easy to understand so employees can quickly find the information they are looking for and avoid out-of-policy expensing. It’s also important to clearly state if the policy is flexible or not and to outline the steps employees should take in case of an unplanned scenario, such as a client dinner that went over budget or a flight booking that got cancelled at the last minute, leading to a more expensive trip.

Outdated rules in corporate expense policies can create a disconnect between employees’ expectations and the company’s guidelines, especially when referring to expenses related to technology, travel or subscriptions. In an era of continuously evolving digital solutions and new services, sticking to older, less flexible rules can frustrate employees and slow down operations.

Take, for instance, the use of software such as ChatGPT. It’s convenient, easy to use, and accessible, and more and more teams are adding it to their current setup. But if the company policy was crafted before such tools existed, it might not authorise them to be expensed, which creates limitations for employees. Updating the corporate policy to include modern tools and services is not just about keeping pace with technology but about reflecting a company’s understanding of current work dynamics and showing flexibility in accommodating employees’ needs.

Different employees have different needs regarding business spending, and company policy should reflect this. When policies are not flexible —like enforcing specific hotels that might be inconvenient or setting meal budgets that don’t align with the destination’s cost of living— employees feel that the rules are too strict and, at times, unfair, which may lead them to non-compliant spending.

Leaders should seek employee feedback to understand their true needs and adjust policies to current industry standards to avoid out-of-policy spending. When possible, introducing more flexibility and allowing for exceptions depending on the context can also reduce the perception of unfairness and encourage compliance.

Addressing these actions and opening a dialogue to understand the motivations behind non-compliant spending and how to avoid them is crucial.

Expense fraud has been on the rise over the last few years, with the number of cases reported having risen by 38% in 2023. A dinner that goes over budget or submitting personal expenses as business ones are typical ways employees intentionally breach the policy. This intentional non-compliance happens for a multitude of reasons, such as disagreement with the policy or a belief that they deserve a bigger budget, but it can have great implications for the organisation, especially in case of an audit.

Addressing these actions and opening a dialogue to understand the motivations and avoid them is crucial. Equipping the team with a smart expense management solution that flags these fraudulent claims is also a step to mitigate the issue. Rydoo’s expense management solution leverages AI and sophisticated algorithms that identify the issues as soon as the expenses are submitted. If they’re not complying with the corporate policy, the software will send a policy warning to the user, the manager and the finance team to notify them of the situation before the expense has been submitted so they can solve the issue.

Achieving high corporate policy compliance rates is a challenge that requires leaders to fully understand the reasoning behind the infractions. Lack of awareness, feelings of unfairness and even deliberate breaches show the need for clearer and fairer policies that also reflect employees’ current needs. Addressing them through open dialogue, flexibility, and regular policy updates is important to avoid these situations, but technology can also have a significant role to play.

Leveraging expense management solutions allows companies to streamline the submission and approval processes, offering employees a user-friendly way to manage their expenses. It also enforces policy compliance in real time by acting as a bridge between policy and practice, ensuring that employees follow corporate policy guidelines without adding an extra layer to their often complex workload.

For leaders, it’s also a way to gather all the necessary insights to truly understand what these needs and behaviours reflect. This, in turn, allows them to make strategic decisions to align corporate policies with employees’ realities, which will help prevent non-compliant spending. Technology can be a game-changer in helping employees follow established regulations and create effective policies that they will support and adhere to.