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How to set up a cell phone reimbursement policy

Written by: Chase Charaba
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Published on November 9, 2022.

When providing an employee expense reimbursement program, many organizations reimburse employees for their work-related expenses like laptops, software fees, and home internet bills for remote workers. But, some organizations stop short of reimbursing cell phone expenses.

Today many employees around the world use their personal cell phones for business purposes. Marketers use their phones to post on social media, and outside sales representatives use them to take calls on the go, for example. In some industries, cell phones are an essential tool for employees.

If your employees use their personal cell phones for work, you can set up a cell phone reimbursement policy that outlines your procedures.

This article will explain how to set up a mobile phone reimbursement policy. It will also explore why your organization should consider a mobile device reimbursement.

Looking for an easy way to offer reimbursements to your employees? Learn more about offering employee stipends with our guide

Why should employees receive cell phone allowances?

Offering a comprehensive benefits package is essential for attracting and retaining employees. Your employees will be more productive and less likely to leave your organization when they receive benefits they value.

Providing monthly payments for work-related personal cell phone use is a perk that can go a long way toward reducing turnover.

Attracting and retaining employees isn't the only reason to offer monthly reimbursements. There are also state regulations to consider.

Currently, 11 states, the District of Columbia, and the city of Seattle require employers to reimburse their employees for necessary work-related expenses. States like California and Illinois specifically require reimbursement for employee cell phone expenses.

Without a monthly stipend, your employees in these states could sue your organization for unpaid wages. That’s what happened in 2022 when California employees sued Amazon1 for uncompensated remote work expenses, including work-related use of mobile devices.

While you aren't required to reimburse employees for mobile phone expenses in most places, it’s still an excellent benefits option. That's because many employees want remote work expense reimbursement. According to our 2022 Employee Benefits Survey Report, 47% of remote workers value internet or phone reimbursement. Additionally, 39% of hybrid employees and 27% of in-office workers value these benefits.

What is a cell phone stipend?

One of the most common ways to reimburse employees for their cell phones is with a cell phone stipend. A cell phone stipend is a sum of money employers provide to employees to pay for their personal cell phone plans. Sometimes employers provide a lump sum or an annual allowance. Many employers, however, choose a monthly allowance.

This allows you to pay for some or all of your employees’ personal phone costs when they use their devices for work. For example, you could offer all your full-time employees a $100 monthly allowance. This would cover most of your employees’ monthly phone bills, as the average cell phone bill—According to J.D. Power2—is $127.37.

For states that require cell phone expense reimbursement, you’d need to provide a large enough allowance to cover the entire cost of your employees’ work-related phone expenses. However, in other states, the amount you choose to offer is entirely up to you.

Is cell phone reimbursement taxable by the IRS?

Reimbursements made for work-related use of personal mobile devices aren’t taxable. The IRS issued special guidance for the tax treatment of personal cell phones in IRS-2011-933. To qualify for nontaxable reimbursements, the use of personal cell phones must not be primarily for business purposes.

If you want your reimbursements to be tax-free, there are a few extra steps to take. You must submit documentation to the IRS proving that using personal phones is necessary for employees to do their jobs. Otherwise, it will be considered a taxable benefit.

Employers can also provide employees with cell phones for substantial business reasons. This is considered a tax-free fringe benefit, provided the phone isn’t offered as a perk.

What is the average cell phone reimbursement amount?

As you set up a compliant cell phone reimbursement policy for your organization, you might wonder what other organizations offer for their mobile phone stipends.

According to the SHRM’s 2022 Employee Benefits Survey4, 62% of organizations offer reimbursement for work equipment. Those employers offered an average of $891 to employees for all remote work expenses combined.

A 2022 study by Samsung and Oxford Economics5 found that the average mobile device reimbursement was between $30 and $50 per month. According to the report, this averages out to $40.20 each month or $482 annually.

How to create a "bring your own device" policy

Bring your own device (BYOD) policies are the formal structure behind mobile stipends for existing personal devices. You should include these policies in your employee handbook. BYOD policies should cover what devices employees must acquire on their own and which devices and tools you’re expected to provide to them.

You should also include any necessary security measures for keeping company information safe. This could include confidentiality agreements, requiring the use of VPNs, and having your IT department install anti-virus software on mobile devices.

You’ll also need to outline your employee reimbursement policy. This includes how often you’ll provide mobile reimbursements, your allowance amount, and any other rules or conditions that accompany your stipend program. This includes any prerequisites such as submitting receipts or filing an expense report.

Remote work and equipment stipends

You can also create an attractive benefits package that works for all of your employees regardless of their personal cell phone use.

With a remote work stipend, you can provide your employees with a monthly allowance for their home office and work equipment costs. Simply provide an allowance for certain eligible expenses, such as internet access costs, or one allowance for all remote work-related expenses.

An employee can then request reimbursement for their remote work expenses. You’ll simply approve these amounts up to their eligible allowance.

This allows your employees to choose which remote work expenses matter most to them.

Conclusion

A cell phone reimbursement agreement can help you attract and retain employees, especially remote and field workers, while avoiding potential litigation in states that require employee expense reimbursement.

In addition to having a written cell phone policy, offering an employee stipend can help you easily pay for employees’ mobile expenses while avoiding the higher cost of employer-provided cell phones.

If you’re interested in setting up a cell phone or remote work stipend, PeopleKeep can help. Our employee stipend benefits administration software makes it easy to set up and manage personalized benefits your employees want.

Get in touch with a personalized benefits advisor today to see how custom employee stipends can help you reimburse employees for their mobile expenses

1. https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/lawsuits-put-spotlight-on-paying-remote-workers-expenses.aspx

2. https://www.jdpower.com/business/tmt/us-wireless-total-ownership-experience-study

3. https://www.irs.gov/pub/irs-news/ir-11-093.pdf

4. https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Pages/2022-Employee-Benefits-Survey.aspx

5. https://insights.samsung.com/2022/05/16/how-much-should-you-compensate-byod-employees-for-mobile-expenses-3/#:~:text=What%20is%20the%20average%20mobile,per%20year%20for%20each%20employee.

Originally published on November 9, 2022. Last updated November 9, 2022.
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