If your employees are using their personal cell phones for work, you may be considering whether it makes sense for your company to provide them with a device or reimburse their phone expenses to support them.
Before you go down either road, you should know what you’re getting yourself into. Keep reading to learn about the pros and cons of company cell phones and cell phone reimbursement policies.
What is a work phone?
Simply put, a work phone is a phone used for business-related calls and tasks. The world of work is increasingly mobile and collaborative, so having a work phone can help your team members stay connected to colleagues and clients, maintain productivity, and work on the go.
Some states require employers to reimburse workers for work-related expenses, which includes the business use of a personal cell phone. Still, employers can choose to provide mobile devices for their workers instead.
If you do provide your employees with a phone, there are certain tax considerations you should be aware of as it’s not a simple write-off. For example, if your employees use their company-provided cell phones for “non-compensatory business reasons,” the phones would be considered a working condition fringe benefit, which is nontaxable and exempt from a worker’s wages. In other words, neither your organization nor your employees would need to pay additional tax for the phones.
Non-compensatory business purposes can include:
- Being reachable at all times for work-related emergencies
- Being available to speak with clients when they’re away from the office
- Being able to talk with clients in other times zones at times outside of regular work hours
If you provide employees with cell phones to promote morale or goodwill, attract candidates, or as additional compensation, the phones won’t qualify as a working condition fringe benefit. Phone-related expenses would also be taxable.
What is a cell phone reimbursement policy?
A cell phone reimbursement policy is a set of general guidelines that outlines how an organization will reimburse (fully or partially) an employee’s work-related phone expenses.
No federal law in the United States requires all US employers to reimburse work expenses. Still, some states have legislation that mandates the repayment of necessary job expenses, such as the business use of an employee’s personal cell phone.
- New Hampshire
- New York
- District of Columbia
For example, in California, employees are entitled to a reimbursement that reflects a reasonable percentage of their cell phone bill. They’re also entitled to “a partial payment of their cell phone expenses,” even if they don’t have to spend more than they ordinarily would for their cell phone usage. California employers can reimburse employees through a stipend or a wage increase.
However, even if it’s not a legal requirement in your business’ region, it’s still good practice to have a cell phone policy or rules for reimbursing employee cell phone expenses. Whether it’s a complete reimbursement, partial repayment, or a Bring Your Own Device Policy (BYOD), creating guidelines around work-related phone expenses could save you and your employees from potential confusion down the road.
The pros and cons of employer-provided phones and cell phone reimbursement policies
Allowing employees to use a company-provided or employee-owned phone for work is not as straightforward as you might think. Here are a few benefits and challenges of reimbursement policies and company-provided phones.
- Helps with attracting talent
- Provide tax deductions
- Ensure flexibility for your team
- Promote better work-life balance
- Can get expensive
- May need IT support
- Can get complicated based on your team's dynamics
Most professionals nowadays use cell phones for work, whether their company provides a mobile device or they receive some form of reimbursement. Here are a few reasons why you may want to do the same,
1. Both solutions can help with talent attraction.
Premium smartphones often cost over $1000 or more and come with many additional expenses (cell phone plans, device upgrades, roaming charges, etc.). Offering your employees a company phone (or a reimbursement for phone-related expenses) would help lighten their financial load, which could help your company stand out from other employers.
For example, certain positions at PayPal come with a company phone. The company also fully reimburses phone-related expenses.
2. Employer-provided phones and reimbursements are tax-deductible.
As long as your employees exclusively use their employer-provided phone for business, the entire cost of the phone, monthly plan, overage fees, and early termination fees are tax deductible.
Cell phone reimbursements are also tax deductible, but you should save copies of all phone contracts, monthly bills, and related receipts as proof of the expense in case of an IRS audit.
3. Can ensure everyone on your team has more flexibility and can work on the go.
Odds are you have team members who can’t always work from a computer. For example, maybe you have an outside sales team that needs to take calls from the road. Or perhaps your social media manager needs to cover an event after work.
Equipping these employees with work phones gives them the flexibility to work whenever or wherever they need to. Plus, many collaboration tools like Office 365, Google’s G Suite, and Slack have mobile-friendly apps that your employees can use to stay connected and available when they’re not physically at their desks.
4. Can promote better work-life balance for your team.
We all know how easily the boundaries between work and life can blur, especially now that hybrid and remote work has become the norm. You can help promote better work-life balance for your employees by providing them with a separate mobile device for work or helping them set up work and personal profiles on their personal phones. These measures ensure your employees have a healthy work-life separation without sacrificing any flexibility or freedom that comes with working from a mobile device.
Company cell phones or reimbursement policies aren’t ideal for every organization. Here are a few of the potential challenges you could face.
1. Both can get pretty expensive.
The costs of providing employees with phones or reimbursing phone expenses can quickly add up and may be prohibitive for small businesses. If you equip your employees with phones, you need to consider the cost of the device itself–which, on average, is $652 per employee–and the cost of:
- Phone service plans
- Data plans
- Phone delivery (for remote workers)
- Device maintenance
- Device monitoring
- Device retrieval after employee termination
Mobile stipends or reimbursement plans can also be quite costly. Studies show that most organizations that provide mobile reimbursements pay between $30 and $50 per month per employee. At that rate, a mid-sized company with 1,000 employees could expect to spend nearly $500,000 on reimbursements over a year.
2. You may need to hire more IT support as your team grows.
Whether your employees use their own phones or company-provided devices, your IT team would be responsible for maintaining them and managing potential cybersecurity risks, on top of any existing technology they already manage. They may also need additional training to troubleshoot issues, ensure compatibility, or deploy business apps across multiple operating systems and device models.
3. Equipping contractors with work phones can get complicated.
Certain contractors may need to use a mobile device while working with you, but providing them with a cell phone, or reimbursing their phone expenses, could complicate their employment status. Plus, mobile devices like cell phones pose a more significant security risk than other technology as they can be lost or stolen.
Pros and cons of work cell phones provided upfront by the employer
Is it better to provide your employees with a company cell phone? Let’s dive into the pros and cons of this approach.
- Can more easily monitor usage
- Provides stronger boundaries for your team to enjoy life outside of work
- Can save by purchasing in bulk
- May require more technical support
- Will need to upgrade devices
- Your employees will likely use their work phones for personal tasks
Here are a few of the advantages of equipping your employees with work cell phones.
1. Can monitor device usage.
With company-owned devices, your organization can review any data on the device at any time and for any reason. This data can include phone calls, voicemails, text messages, instant messages (e.g., WhatsApp and Facebook Messenger), emails, GPS locations, photos, and web browsing history.
The company has less control when employees use their personal phones for work. Since the employee owns the device, you won’t have as much control over what apps they install or use, making it harder to track their activity and how much they use the phone for work.
2. Can help your team have stronger work-life boundaries.
According to a survey of 1000 employees, employees who use only work-issued devices to do work were the most likely to rate their productivity and work-life balance as “very good” or “excellent.” In addition, an overwhelming 80.7% of employees say they’d prefer to use separate devices for work and personal activities.
3. You could save money with bulk pricing.
For example, Apple offers leases with flexible terms and two buyout options for small and medium-sized businesses. Their Fair Market Value (FMV) lease allows customers to spread the cost of their order over one to four years, which helps lower their monthly payments. At the end of the lease period, customers can upgrade, return, or buy the device at fair market value. Their $1 buyout lease operates similarly but is available for more products, and at the end of the lease, customers can either upgrade or pay a $1 buyout fee.
Here are a few of the drawbacks of giving your employees cell phones.
1. May require more technical support.
Due to their portability, cell phones often require more maintenance and repairs. According to an Intel report, businesses report an average of five incidents in the first year of the device’s life alone. When you factor in the cost and time to support and services mobile devices remotely, this option may not be feasible for small and mid-sized businesses.
2. Time and cost spent upgrading devices.
Most mobile devices have a life span of about five years. After that point, the devices experience a significant reduction in productivity, have a shorter battery life, and likely won’t be able to run the latest software or receive manufacturer support. Plus, since mobile devices tend to take a lot of wear and tear, most employers should expect to upgrade their employees’ mobile devices even more frequently.
3. Your employees will likely use their work phones for personal tasks.
If you’re not comfortable with your employees using work cell phones for personal use, a reimbursement or BYOD policy might be a better fit for your team. According to a survey by password security company Yubico, almost half of respondents (42%) use work-issued devices for personal tasks. Roughly a third of this group use corporate tech for banking and shopping, while 7% visit illegal streaming websites.
Employees using their work phones to check social media or watch Netflix after hours likely wouldn’t impact their productivity much. Still, it could increase your company’s chances of a data breach or malware or ransomware infection.
Pros and cons of reimbursing employees for their cell phone use (partially or fully)
Rather than providing employees with a device, you could allow your employees to work from their personal phones and reimburse them partially or fully for any expenses they incur. Of course, this route has pros and cons like any option.
- Teammates can pick their preferred devices
- More cost-effective than providing work phones
- Employees can set boundaries via apps and other smartphone features
- Need to define stipends
- More legwork to create clear processes around monitoring and managing confidential information.
Here are a few key reasons why a reimbursement policy could work well for your team.
1. Your team can pick their preferred devices.
Adapting to a new device or operating system can be a steep learning curve, meaning it could take them longer to reach full productivity. For example, while Android OS offers more customization options, it can come off as more complex to someone new to Android. Employees can hit the ground running in their new roles much faster when using their personal phones.
2. More cost-effective than providing work phones.
Phone reimbursement can be expensive, but it’s still more affordable than purchasing work phones for your employees. As mentioned earlier in this article, the average mobile stipend is $30-$50 a month. Compare that to the average price for an enterprise smartphone in the United States:$619.49. Plus, if you’re paying to cover the expenses for a traditional carrier, that can add up quickly. The average monthly cell phone bill was $127.37 last year.
3. Employees can use apps and other smartphone features to set boundaries.
A dedicated work phone can help your employees separate their work and personal lives. But carrying two phones at once can be a hassle. They need to keep them both charged, remember multiple passwords, and keep track of all device accessories.
If you choose to reimburse your employees for cell phone use, they can get the best of both worlds by using specific apps and smartphone features to maintain healthy work-life boundaries. For example, using a virtual business number through OpenPhone allows employees to separate their work and personal communications.
Reimbursement isn’t a perfect solution. Here are some reasons why you might not want to go with this option.
1. Need to define the stipend amount and other policies.
The are a few different ways to approach a cell phone reimbursement policy. For example, you could opt to pay your employees’ entire cell phone bill, require employees to prove work-related cell phone use, or pay employees a fixed amount. But, of course, each one of these options has its pros and cons.
For example, requiring employees to prove work-related cell phone use can be tedious and time-consuming, but the upside is that you will only pay for what your employees use. In comparison, paying your employees’ entire cell phone bill would likely reduce any debate over fair use but could be pretty costly. If you decide to go the reimbursement route, you will need to take the time to figure out which approach works best for your organization.
2. Need clear processes to monitor and manage confidential information.
From eye exams to video editing, there’s a smartphone app for pretty much everything these days. Unfortunately, apps also make mobile phones, especially personal ones, difficult to secure, as they provide hackers multiple entry points into your employee’s device. Additionally, if your employees frequently use their devices to connect to public WiFi networks, this behavior could also put your company at risk.
To help secure your employees’ personal devices, your IT department can recommend that your employees follow specific security protocols such as:
- strong password requirements
- two-factor authentication
- device tracking
- application and network monitoring
However, since the devices aren’t company property, these measures can only go so far.
Company cell phones: which option makes the most sense for your organization?
So, should you invest in company cell phones for your employees? Ultimately, it comes down to your organization’s specific needs and budget.
For example, some employees need a work cell phone more than others, particularly those who frequently work away from their desks and don’t always have access to their computers. Frequent business travelers, IT staff, on-call employees, and social media managers can fall into this category.
However, both reimbursement and employer-provided phones can be a significant financial investment, so you need to look at your budget (as well as the costs associated with work cell phones) before making your final decision.
If you decide that company-provided cell phones aren’t the best choice for your organization, you can still keep your team connected by allowing employees to use their personal cell phones for work.
For example, your employees can use OpenPhone on any smartphone or computer (company-provided, reimbursed, or BYOD) to help them stay on top of work communications and tasks.
OpenPhone also helps employees have better work-life balance and protect their information by keeping work and personal communications separate, even when using a personal device. Plus, with OpenPhone, your employees can use their US, Canadian, or toll-free phone number on any device with an internet connection and set up business hours to mute work calls and messages when they’re off the clock.
When you weigh the pros and cons, allowing your employees to use cell phones at work is a lot more nuanced of a decision than you might think. But regardless of your choice, OpenPhone can help keep your team seamlessly connected across all their communication devices.
Try out OpenPhone free to see if it’s a good fit for your team with a free, seven-day trial.