Accounting Best Practices, Fifth Edition

17–4. Prohibit Deductions for Employee Purchases

Many companies allow their employees to use corporate discounts to buy products through them. For example, a company may have obtained a large discount on furniture from a supplier. Its employees buy at the discounted rate and then have the deductions subtracted from their paychecks in convenient installments. Some employees make excessive use of this benefit, purchasing all kinds of supplies through the company; accordingly, it is common to see a very small minority of employees making up the bulk of these purchases. The problem for the payroll staff is that it must keep track of the total amount that each employee owes the company and gradually deduct the amount owed from successive paychecks. If an employee has multiple purchases, the payroll staff must constantly recalculate the amount to be deducted. Depending on the number of employees taking advantage of purchases through the company, this can have a measurable impact on the efficiency of the payroll department.

The apparently easy solution is to prohibit purchases. By doing so, all the extra paperwork associated with employee purchases is immediately swept away. Though a good best practice for most companies to implement, this is one that should first be cleared with senior management. The reason is that some employees may be so accustomed to purchasing through the company that they will be rudely surprised by the change, which may be something that management wants to avoid ...