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What Is a Reimbursement Agreement?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 20 July 2014
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A reimbursement agreement is a deal between two parties to repay one party for costs undertaken in a specific venture. Reimbursement agreements are often subject to specific terms in order to qualify for repayment. Businesses often make reimbursement agreements with employees for costs accrued on the job, such as mileage or travel expenses on business trips. Governments sometimes make a reimbursement agreement with a service provider, such as a doctor, to provide necessary services for citizens who cannot pay normal fees.

In business, a reimbursement agreement is often a practical alternative to simply handing an employee a set amount of money for costs. Since costs such as gasoline, plane tickets, or hotel fares, may vary from one day to the next, it is usually simpler for an employer to agree to reimburse the worker for each type of service, rather than for a set dollar amount. Most reimbursement agreements specify what may and may not constitute a reimbursable cost; for instance, meals may be covered under the agreement, but visiting a nightclub may not be included. Some agreements do have limits on expenses; this is to discourage an employee from excessive spending simply because he or she knows the cost will be reimbursed.

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A reimbursement agreement may require the employee to turn in receipts in order to receive money in return. This allows the employer to see exactly where money was spent and if it qualifies for repayment. Some contracts allow employees to simply keep personal records, such as diaries, of expenses, though this does increase the potential for fraud. Requiring receipts can help the accounting department keep track of reimbursement monies with greater ease, and may be necessary for tax purposes.

Another common type of reimbursement agreement in business is tuition repayment. These agreements are often used when a company wants an employee to attend a training class or seminar to improve his skills for later use on the job. These contracts usually specify that the worker must complete the course, receive certification, or provide some other demonstration of completion in order to receive tuition reimbursement.

Government outreach programs often use reimbursement agreements with private service providers in order help qualifying citizens. In the medical field, for instance, it is often considered impractical for the government to employ doctors and set up government hospitals when a thriving private industry already exists. Instead, a government may set up a program in which a physician takes on low-income patients at a reduced rate of cost to the patient, in return for a promise of reimbursement for the remaining costs by the government.

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