Expense lessons from MPs

Harriet Harman was wrong when she said before the General Election that the MPs’ expenses issue was solved. The MPs’ problems, and those of the Independent Parliamentary Standards Authority which was set up to oversee the system of allowances and salaries, mirror those experienced by many companies, and are only just beginning.

Businesses and other organisations can learn some valuable lessons about how to introduce a new employee expenses system, or any fundamental change to the way things are done, by looking at what is going wrong inside Westminster.

IPSA Chairman, Sir Ian Kennedy has admitted to “teething troubles” with the new expenses system in an interview with the Times. Nigel Gooding, operations director of IPSA resigned after only six months telling the Mail on Sunday that he left “for the sake of my health and sanity”. Recently, the Speaker’s Committee interrogates Sir Ian and interim chief executive, Andrew Macdonald following an article in the Guardian in which IPSA compliance officer Alan Lockwood claimed that older MPs were defying the new expenses rules.

The Times has also reported that IPSA complained to party chief whips that some MPs had been abusing the staff with angry phone calls lasting up to one hour. Those responsible have apologized in writing. MPs in turn have complained that the new expenses system is overly bureaucratic.

Any management consultant or HR professional can tell you that cultural inertia is the main obstacle to introducing any change to an organisation, whether to a minor procedure or a fundamental business process. Changing the employee expenses system is particularly emotionally charged because it effects the repayment of money employees have spent from their own pockets on company business and is a particularly sensitive flare point - it is no surprise that IPSA staff have been subjected to abusive calls.

The challenge of cultural change is particularly acute in the House of Commons because a hard-core of MPs still view expenses as a perk, an adjunct to their salaries and perceive that something is being taken away from them. This attitude is no less common in the private sector, where too often being permitted to claim expenses is seen as a badge of office.

Fairness, consistency and communication are the keys to making such a change work.

The employee expense policy must be fair and equitable. A YouGov survey commissioned by GlobalExpense revealed that 71 % of people think it is acceptable to fiddle expenses when an employer doesn’t reimburse all of the costs incurred by the employee and 36% believe that taking a long time to reimburse an employee is a valid reason to fiddle expenses.

The indications are that the MPs’ expenses policy isn’t as well thought through as it should be and that there are some genuine examples of unfairness which still need to be ironed out as illustrated by Mark Lancaster, Tory MP for Milton Keynes North East, who has been sleeping in his Commons office after late sittings in Parliament because he is no longer eligible to claim hotel expenses in London.

Perceived unfairness, late payment, incorrect payment and other bureaucratic hiccoughs which cause delays to staff getting back money they have spent on behalf of the company are triggers for fraud. Employees should be reimbursed for everything they are expected to spend, in as fast and efficient a way as possible.

The policy must also be seen to be fair for all and applied consistently across the board from the CEO to the cleaner. This will help authorisers do battle against die-hard reactionaries who don’t want to understand the new rules. Some companies name and shame employees at all levels that persistently break the rules, and others present directors with the total amount of out-of-policy claims that they have approved during Board meetings. Eventually, patience and consistency will win out.

Authorisers and users both need to be trained to use the new system and to understand the new rules. This will go a long way towards undermining the objections of those resistant to the changes and also give authorisers the authority they need to reject claims that fall outside the new policy. Many of the complaints from MPs about the bureaucracy of the new system are down to a lack of clarity in the rules and confusion about what is and what is not allowed (it may also be that the new system is unwieldy and not easy to use). The policy and its rules should be clear and straightforward and they should be prominently communicated. New joiners to an organisation should be trained on the system as part of their induction.

A company or organisation can spend tens of thousands of pounds with a specialist adviser to produce a compliant, fair, well-written expenses policy, but if they don’t educate their people to use the system correctly and ensure that there is an efficient back office audit process and user support, all the money they’ve spent on the policy will be wasted.

Finally, our research shows that if employees are rewarded appropriately they won’t be tempted to recompense themselves via the expenses system – but that’s one hot-potato I’ll leave to Nick and Dave.

David Vine is the CEO of GlobalExpense