Background
You are the new Administration Manager of a London based bank incorporated 3 years ago and you have responsibility for all ‘Back Office’ matters.
Senior front office staff have been travelling extensively for the bank to promote its business and a junior member of the administration team looks after all business travel arrangements and flight booking. She has taken over only recently from a more senior administrator who has recently left the department to join another firm.
The amount of overseas business travel is running at a high level, incurring significant expense and your MD asks you to consider ways of curtailing these costs.
One of your team mentions to you that the Bank has accumulated a substantial number of ‘air-miles’ as it is the Bank’s policy to accrue air miles generated by business travel in its name, rather than permit staff to collect them personally. No attempt seems to have been made to use these air miles to defray the cost of business trips and there are no other policies or rules covering the air miles scheme, leading you to conclude that there exists some general uncertainty about these arrangements.
On investigating the air miles total, which proves to be very substantial you notice that, while no business flights have ever been booked, surprisingly, there appear to be a number of flights booked in the personal names of both the former administrator who has left the bank and her successor who is now responsible for the scheme administration.
Analysis of the records indicates that these flights were for holiday purposes judging by the destinations, the fact that the air miles were also used for hotel bookings and that on at least one occasion, a non-member of staff also travelled. It transpires that the non-member of staff was the former administrator’s boy friend.
You interview your junior administrator who appears somewhat naïve and who says that her predecessor told her that the former Head of Administration had said that it was OK to use the air miles in this way. You also contact the former administrator who confirms what you have already heard, namely that your predecessor had said that it was acceptable for her to use the air miles as a perk. When you express surprise at fact that her boyfriend had his travel and accommodation paid for by the bank, she replies that the bank did not pay for anything; she and her boyfriend had paid all of the airport taxes, “which were a lot of money” and they only used the air miles. She repeats that her former boss knew about this and permitted it.
Upon checking, you ascertain that there is nothing in writing to confirm what you have been told and there is absolutely nothing in the bank’s procedures to cover this situation.
Accordingly, you decide to contact your predecessor who has now retired and ask him whether he did in fact give permission for these two-administration staff, or indeed anyone else, to use the bank’s air miles for private travel and accommodation.
He says that he really cannot remember specific situations and is generally vague about the whole matter, leaving you feeling somewhat uncomfortable about the situation you are now faced with.
To complicate matters further, the team member who first informed you of the bank’s air miles account complains to you that it is unfair that only those staff directly responsible for administering the air miles scheme, can benefit from it. He considers that everyone in the back office should be able to benefit.
Verdict
There are a number of issues which may influence how you respond to this situation:
- There are no bank procedures to control the scheme
- Two staff who have been responsible for administering the air miles scheme have personally benefited from it
- It is unclear whether the former Head of Administration actually gave permission to any of his staff to use the air miles for personal travel
- It is unacceptable that only staff responsible for administering the scheme, benefit personally from the air miles without specific permission being given each time and within the context of formal scheme rules and independent controls
- You have received a complaint from another staff member about the apparent unfairness of the distribution of bank air miles
- The bank itself is not benefiting from its substantial air miles balance which could be used to reduce business travel costs
- According to your in-house legal counsel, you have no tangible evidence that the staff members concerned have actually done anything illegal.
Possible Courses of Action
- You might seek to obtain re-payment from the former administrator of the value of the flights/accommodation she and her boyfriend enjoyed.
- You could indicate to her that there will be a late P11D submission to HMRC for the value of the flights and hotel accommodation, which were a benefit in kind.
- You may wish to re-consider the wording of the written reference that the bank gave to her present employer which asked about honesty and integrity.
The practical difficulty with the three options above is that while you may question the honesty of the former administrator, bearing in mind your predecessor’s unhelpful attitude, there is no proof of wrong-doing.’
Notwithstanding these difficulties you should:
- Introduce formal written procedures for the administration of the air miles scheme and publish to all staff. This should include a requirement to obtain appropriate senior, sign-off for all flight/hotel bookings.
- Decide formally whether company air miles may be used only for business travel or whether a proportion may be ‘given’ to staff as an incentive.
- If air miles are distributed as an incentive, a demonstrably fair distribution method should be developed and published, applicable to all staff.
- Immediately advise your current administrator that, pending application of the new policy, any use of corporate air miles must be pre- signed off by you.
Conclusion
Although issues such as that referred to above may not, of themselves, appear significant, recent media attention, demonstrates that they do have the ability to generate a lot of attention. In public bodies this is likely to engender the view that no one in public life should receive any benefit that is not open and transparent. The question might then reasonably be asked, “Why should it be any different in business? “.
The response ought to be that standards of openness and transparency should be no different, in public or corporate life, even if the rewards themselves may be.
Consequently, and as suggested above, the introduction of a documented procedure, together with its formal application, are essential to prevent the continuation of this unsatisfactory and opaque situation which, if left unchecked, is likely to fester, and generate ill-will and possible general disregard for rules and policies.
The response of the former administrator suggesting that only cash counts as payment is a mistaken view that also needs to be dispelled. There is an often-expressed belief that because an item referred to does not involve actual cash, it has no value. However, the reality is that air miles have a value akin to that of the future cost of the travel to which the holder is entitled which, in a business,
can be a significant amount, running into thousands of pounds.
Further reading