A staggering 4.7 million people (and counting!) work remotely at least half of the time in the United States alone.

According to insights from Standford’s Institute for Economic Policy Research (SIEPR), around 80% of U.S. companies offer some form of remote or hybrid work option, which the Bureau of Labor Statistics estimates to be 27% of the total workforce.

That is a lot of people working from home.

A lot of employees are powering up a personal workstation, logging on from a company-provided desktop or laptop, and answering Slack messages from their phones.

It makes sense that there’s some gray area regarding what costs the employee is responsible for covering and what the company should pay for, especially when it comes to remote work perks like internet reimbursement and phone bills.

For remote-first and hybrid companies that may not want to ship a cell phone to every new employee, a stipend is a perfect solution to cover the cost of using personal cell phones for work calls. The right employee perks software can help disperse these funds and keep companies tax compliant — a massive plus for U.S.-based businesses with employees in the states and overseas.

Has your team asked for this stipend in your recent employee benefits survey? How do you know if a cell phone stipend is the right solution for your business? Read on to find out.

What is a Cell Phone Reimbursement Stipend?

We keep referring to it as a cell phone reimbursement stipend, but you may be more familiar with the term ‘cell phone allowance.’

Either way, we’re talking about a sum of money a company gives its employees to purchase cell phone plans or pay their bills.

Typically, these stipends are distributed monthly (thus covering the monthly bill!). According to a study from Samsung and Oxford Economics, U.S. companies that offer cell phone stipends to employees typically provide an average of $40.20 per month, which amounts to approximately $482 annually per employee.

And while it could be seen as additional employee compensation, if you’re wondering, “are cell phone allowances taxable?” the answer is no. According to the IRS, cell phone stipends are a non-taxable benefit, which is excellent news for both your company and your employees.

Example of a Cell Phone Stipend

When to Reimburse Employees for Cell Phone Use

The key is to discern when to reimburse employees for cell phone use properly, and there are some clear guidelines to follow. It’s appropriate to do so when team members use personal phones to:

• Make work calls
• Check and respond to email
• Post updates in work-specific accounts and apps
• Message coworkers via Slack, Microsoft Teams, or other internal chat systems

Why You Should Set Up A Cell Phone Stipend

Depending on your state, you could be required to cover the cost of personal cell phone use for work matters. For instance, employers must reimburse California employees even if that person does not actually incur additional expenses due to personal cell phone use.

Aside from requirements, there are clear benefits to offering a cell phone stipend:

• It’s non-taxable, which is good news for your employees and finance team.
• When distributed through expense or perk management software like Compt, the best employee benefits are scalable, meaning they ease the administrative burden on your HR teams. Plus, with Compt, you can stay 100% IRS compliant without having to lift a finger.
• It clarifies what additional, non-traditional benefits your company covers, which is helpful in recruiting and retention efforts.

What Is the Difference Between a Cell Phone Stipend and a Work Equipment Stipend?

In today’s remote world, many people are using their cell phones to get work done and spending money on other work-related expenses, especially if they have work-from-home costs like setting up a home office. Purchasing noise-canceling headphones, ergonomic chairs, computer monitors, etc., can get expensive. And that’s all before the monthly internet bill arrives.

Many employee-first companies, whether fully remote or hybrid, are going beyond a traditional cell phone allowance and offering extra cash to support employees, such as a work equipment stipend. In fact, a survey by Forbes Advisor found that 17% of employees and 20% of employers named a home office stipend as a top remote-work benefit.

With a more expansive stipend that covers all the tools remote employees need to be productive at home, companies can provide the same amount of money for employees but give them more options and control over what they want and need to spend their stipend on.

Personalizing employee perks is proven to increase utilization and engagement if you’re looking for ideas for remote workers on employee engagement.

A Step-by-Step Guide: How to Offer a Cell Phone Stipend

1. Determine how much you want to offer your team and in what time frame. Will your stipend be monthly, quarterly, annually, or a one-time remote work stipend or equipment stipend? When you give employees a specific monthly amount, you can reimburse them through expense software. (With Compt, this is especially easy because the software integrates with the popular expense tools HR teams rely on.)
2. Select your perk spending categories. Do you want to offer just a “Cell Phone Perk Stipend,” or will you consider offering a “Work Equipment Stipend” or maybe a “Productivity and Tech Stipend”? Keep in mind that a cell phone exclusive stipend will be nontaxable, and a work equipment allowance will include some taxable items, like a computer monitor.
3. Decide how you’ll manage the process. We don’t have to tell you that a software like Compt makes this much easier and more efficient (or maybe we do). Some companies though, will opt to keep track of stipends through spreadsheets or other tracking programs, such as through their expense platform.
   
   BONUS: Don’t forget to talk about your new benefit! With your program in place, what methods do you use to ensure you are communicating effectively with a remote team? It’s important employees know how to take advantage of this new benefit.

Cell phones have undoubtedly become more essential in everyday work. When planning to reimburse employees or implement a stipend program to cover phone expenses, it is crucial to meet IRS guidelines.

Make Cell Phone Stipend Management Easy with Compt

Compt helps ease the administrative burden on your HR team, simplify accounting and IRS compliance for your finance team, and make reimbursement fast and easy for employees.

Get in touch with a member of our team today to learn more.

Editor’s Note: Compt software supports the categorization and proper reporting of benefits according to IRS guidelines, helping businesses maintain compliance. However, Compt cannot provide tax advice, and users should consult their own tax, legal, and accounting advisors when necessary.

Originally published in 2022, this post has been recently updated for clarity and relevance for our readers.