Cell Phone Stipend: A Win-Win Solution for Employers and Employees

Cell phones provide the perfect illustration of blurred lines between work and home. Employees stay connected with their boss, colleagues, spouse, friends, clients, business partners, and even their kids' teachers from the same mobile device. They might spend their lunch breaks flitting between work emails and family WhatsApp groups, logging into a client meeting, and then shopping online for a new pair of jeans. It's as convenient as it is chaotic, and it's become second nature to us all. 

The burning question: Who should pay for cell phone plans when employees use their devices for both work and play? 

This guide explains how companies can attract and retain talent by offering a cell phone stipend and the legalities involved in doing so. We also discuss how this model differs from a cell phone reimbursement plan and some examples of stellar companies already supporting their workforce with this perk. 

What is a cell phone stipend?

A cell phone stipend is a monthly or annual allowance employers give employees to reimburse the cost of using their personal cell phone for work activities. This money may cover part or all of their cell phone plan.

Is a cell phone stipend right for your company? Pause to consider how your employees may use their personal devices for business purposes: 

• Making and receiving calls 
• Reading, writing, and responding to emails 
• Updating project management software 
• Scheduling meetings in their phone calendar 
• Using Google to research a project 
• Making to-do lists for the week ahead 
• Submitting invoices and receipts 
• Attending a Zoom or Teams call 
• Accessing course content 
• Crafting or responding to company social media posts 

By providing a cell phone stipend, you’ll show your employees that you appreciate their dedication and hard work in completing these tasks on the go. 

Types of cell phone stipends

Cell phone stipends typically fall into two categories: 

Corporate-Owned, Personally-Enabled (COPE) 

Under COPE, the company purchases and owns the device. It also selects and pays for the employee's cell phone plan in full. This model is more common with larger companies that can afford devices for their employees at scale. It’s also a surefire way to ensure the devices your employees use are secure, and your company or customer's confidential data will remain safe. 

The COPE model involves plenty of admin, though; employers must be willing to manage the company cell phone, the plan, and the bill associated with every device in their organization. 

Bring Your Own Device (BYOD) 

The BYOD model allows employees to use their personal cell phones for work purposes. The company reimburses each person for a portion or all of their cell phone plan by issuing a stipend. 

Smaller companies may prefer this approach, as it doesn’t require the expense or resources to purchase and manage devices for everyone. It’s also a great fit for employees who may be unlikely or unwilling to carry two separate work and personal cell phones around. 

Cell phone reimbursement stipend

The difference between a cell phone reimbursement policy and a stipend is that a stipend is provided in advance and doesn't require employees to log the expense. There's no burden associated with tracking, managing, and submitting expense reports, making it attractive to employees and accounts departments. 

In a contrasting cell phone reimbursement model, employees must submit documentation of their expenses before being reimbursed. Employees pay the cost of the cell plan upfront, then go through a lot of red tape to receive their money back. They must track receipts, submit a report, and hope it's processed quickly so they're not out of pocket for long. This is especially difficult for those with lower socioeconomic status or existing student loans who may struggle with dents in their monthly finances. Some will go into debt waiting for the payment to arrive. 

Equally, in a reimbursement model, finance teams must go through the headache of combing through call and internet data — and there's a cost associated with this work. GBTA research highlights that the average time to process an expense report is 20 minutes at a company cost of $58. But 19% of expense reports include errors or missing information, which adds 18 minutes and $52 to the total.

What are the benefits of cell phone stipends?

Why fork out for a cell phone program? Here are three top reasons to find room for this in your benefits budget: 

1. Avoid litigation 

Although there’s no federal law related to cell phone stipends, states such as California, Illinois, Iowa, Massachusetts, Minnesota, Montana, New Hampshire, New York, Pennsylvania, and the District of Columbia, all require employers to reimburse workers for business expenses, including cell phone device usage. 

The law varies by state; for example, California has Labor Code 2802, which requires an employer to pay back a reasonable percentage of an employee's cell phone plan costs, even if they have unlimited minutes or data.

If you're not covering these costs, your organization could be vulnerable to legal action, such as class action lawsuits against these unpaid benefits. 

2. Attract and retain top talent

Thoughtful workplace perks can swing the balance in your favor when it comes to talent acquisition and retention. A Glassdoor survey revealed that 80% of employees prefer a greater selection of benefits than a pay rise. 

A competitive cell phone policy can be the deciding factor in ensuring you attract and keep the best people on your team. 

3. Support a cost-effective BYOD policy 

Adopting a “bring your own device” to work policy is often more cost-effective than supplying company cell phones to your employees. Statista research finds that the average price of a consumer smartphone in 2024 is $940, or $814, in the enterprise category, which can quickly add up across an organization. 

As a result, only 15% of businesses provide mobile devices for their employees, known as corporate-owned, personally enabled (COPE) wireless devices, where the employer monitors their usage. Instead, some 39% implement a BYOD policy and use a cell phone stipend as an affordable alternative. 

Typical cell phone stipend amount

The average cell phone stipend cost may vary according to the business, employee role, and phone plan. Our 2024 Benepass Benefits Benchmarking Guide reveals a stipend cost based on our internal customer data. For a phone-only plan, the stipend is a median of $720 per year, although some companies may bundle phone and internet stipends together. 

Download the complete guide today to cross-check your benefits package against benchmarked standards from leading companies across a variety of industries.

How to calculate costs for your cell phone stipend 

Follow this simple formula to calculate costs for your cell phone stipend: 

• [Number of eligible employees] multiplied by [your monthly stipend allowance] multiplied by [12 months] = Annual cost of your cell phone stipend

Optional extra 1: To ensure you have plenty of budget allocated, consider adding the administrative costs of running your stipend program. For example, if there’s an estimated 5% administrative cost for managing the stipend program, add this to your total:

• Administrative costs: 5% of annual stipend spend of $90,000 = $4,500
• Total annual cost: $90,000 + $4,500 = $94,500

Optional extra 2: Anticipate any upcoming changes, such as headcount increases, in your calculations. For example, if you anticipate a 10% growth in staff this year, adjust your calculations accordingly:

• Adjusted employee count: Current 150 employees + 10% growth = 165 employees 
• Adjusted annual cost: 165 employees x annual stipend allowance of $600 per employee/year = $99,000
• Total with administrative costs: $99,000 + 5% administrative costs = $103,950

Are cell phone stipends taxable?

IRS-2011-933 offers specific guidance on the tax treatment of cell phones. Employers may provide cell phone stipends for work-related purposes as a non-taxable benefit. However, you must have documentation showing that personal cell phone use is necessary for your employees to perform their job duties. Without this, the benefit will be taxable. 

If you provide your employees with cell phones for business purposes, you can do so as a tax-free fringe benefit, as long as it's necessary for their job and not just an additional incentive. 

3 examples of companies offering a cell phone stipend policy

Here are three examples of organizations committed to compensating their employees for their cell phone usage. 

1. Muck Rack 

Public relations platform Muck Rack has a global workforce of 250+ employees across 28 states and eight countries. Its employees use a pre-funded Benepass Visa card to gain access to various phone and internet service plans. 

2. NerdWallet 

Personal finance company NerdWallet offers its employees an excellent range of perks, including a WFH stipend, covering a monthly cell and Wifi service. 

3. Strava 

Global sports community Strava offers its hybrid and remote employees a mix of stipends and reimbursements. This includes a $1,000 annual gear allowance, which uses a reimbursement model for gym memberships and mobile phone expenses. 

How to structure your cell phone stipend

There is no one-size-fits-all approach to covering your employees' cell phone bills. To create a customized policy that's fair, consistent, and cost-effective, ask key questions like the following to define the parameters of your stipend.   

1. Who is eligible to receive your stipend?

Consider whether you intend to offer a cell phone allowance to all part-time and full-time employees or those in specific roles or seniority levels. For example, sales professionals who must keep in touch with potential leads and customers on the go may regularly use a mobile device.

Local laws may also influence your decision. For example, Illinois-based businesses must adhere to the state's expense reimbursement law, which changed in January 2019 to require employers to reimburse “all necessary expenditures or losses incurred by the employee within the employee's scope of employment and directly related to services performed for the employer.”

2. What's the budget for your stipend? 

Calculate your budget based on how many employees you offer the stipend to.

If you opt for a stipend of $50 per month per employee and extend this to 100 employees, that's $60,000 annually. 

3. Will you offer a lump sum or monthly allowance? 

The advantage of a fixed monthly stipend is that it's easier to manage and budget for, especially if staff members leave or join during the year. 

Alternatively, a lump sum payment is great for employers who want to cover costs one time and are confident they have the upfront budget to do so. 

4. What are the prerequisites for receiving a cell stipend? 

A stipend covering cell payments goes hand in hand with outlining how your employees access business systems and data on their personal devices. 

Karolina Kijowska, the Head of People at PhotoAiD, reminds HR teams to liaise with IT and compliance departments before providing “clear guidelines on how employees should use their phones for work purposes, as well as establishing security protocols. This may include requiring employees to use password protection, encryption, or other security measures. Without that, the program could potentially put the company at risk of sensitive information leaks.”

5. What should you include in your cell phone stipend agreement? 

Complete a templatized agreement and ask your employee to sign it before paying out the stipend. The content will vary depending on your specific business requirements but could include:

• Basic details: Employee's name, department, job title, and stipend start date.
• Policy summary: Detail why the employee is receiving this stipend (for example, their role) and explain whether this is a taxable benefit.
• Stipend amount: State the amount, the payment frequency, and when you plan to review this figure.
• Employee responsibilities: Outline what you expect from stipend recipients, especially regarding data security.
• Signatures: Obtain signatures from the employee and a Human Resources team member.

Cell phone stipend vs a Lifestyle Spending Account

Some organizations may choose to deliver a fixed stipend explicitly designed to cover the cost of cell phone payments. As with any benefit, some employees will love it, while others may prefer support in a different area. 

An alternative to a fixed cell phone stipend is to add it as an eligible spending category within a more flexible perks program such as a Lifestyle Spending Account or LSA. 

An LSA is an all-encompassing perk that employees can use for a wide variety of post-tax benefits. Employers fund the LSA, typically on a monthly basis, and employees spend their allowance on a variety of eligible spending categories. 

Example: Company A adds $200 each month to each employee’s LSA and sets the benefit up with eligible spending categories, including Cell Phone and Internet, Wellness, Family, and Professional Development. Sally, a senior accounts executive, uses her LSA to fund her cellphone bill, her gym membership and enjoys a monthly meal for two at her local Thai restaurant. Sally’s direct report, Billy, uses his entire LSA allowance for childcare for his toddler and doesn’t use any of it to cover his cell phone costs. 

Based on this illustrative example, we can break down the main differences between cell phone stipends and LSAs to help you decide which option might be the best fit for your organization:

• Targeted vs. flexible: A cell phone stipend is ideal if you want to provide targeted support specifically for work-related mobile phone expenses. It’s straightforward, easy to manage, and often non-taxable. On the other hand, an LSA offers flexibility, allowing employees to use their allowance for a variety of needs, including cell phones, but also many other eligible expense categories. 
• Personalization: LSAs empower employees to choose how they spend their benefits, catering to their unique lifestyles and preferences. In contrast, a cell phone stipend is more focused but may have a high value for employees relying heavily on their mobile devices.
• Compliance: A cell phone stipend might be the more straightforward solution if your goal is to meet specific state reimbursement requirements for work-related expenses. LSAs, while more versatile, might require careful structuring to ensure compliance if you’re planning to meet similar legal obligations.
• Budgeting and administration: Both cell phone stipends and LSAs are easy to budget for and offer predictable costs. 

How to add this policy to your Remote Work Account with Benepass

If your employees use their personal phones or other mobile devices to complete work-related tasks during the business day, then providing a stipend positions you as an employer who cares about your people. 

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With Benepass, you can offer a cell phone allowance as part of your work-from-home stipend or Lifestyle Spending Account, enabling your employees to use their benefit funds for their phone plans or any other perk that suits them. Here's how it works: 

1. Design your perks program by setting the amount and eligible spend categories.
2. Link it to your payroll or HRIS. Benepass connects to your system to automate directory sync and enrollment.  ‍
3. Distribute Benepass cards to your employees. Employees can immediately spend on anything that falls within your benefit policy.

Ready to transform your benefits offerings? Request a demo of Benepass today or contact our sales team at sales@getbenepass.com for more information.