Reimbursing Employees for Using their Personal Technology Can Benefit Both Employers and Employees
As more businesses have adopted work from home policies, companies have found that more employees are using their personal vehicles, computers, phones, and Internet connections to conduct company business. In the past, companies would typically provide a company car or device in order to do company business; however, there are reasons why reimbursement makes more sense.
An advantage for employers is that this can reduce capital expenses, taxes, and even accounting costs. For instance, if a company purchases a company car to be used by an employee, there will usually be the cost to purchase the vehicle either outright or with a loan as well as all fuel and maintenance and insurance charges. These expenses will also end up needing to be tracked in the accounting system, especially in cases where depreciation must be included. Property taxes may have to be paid. Or the employer can reimburse the employee at the current IRS rate of $0.67/mile and take the tax deduction. While this does require that the employee document the miles driven, this can be done by keeping a basic mileage log or using an app.
This same concept has been extended to phones and other technology. The IRS addressed this in the Small Business Jobs Act of 2010, stating that “where employers reimburse employees for business use of their personal cell phones, tax-free treatment is available without burdensome recordkeeping requirements”. This opened up options for reimbursing employees for using personal devices without requiring a great deal of additional paperwork. Individual states have also passed laws requiring reimbursement for other necessary expenses. While it’s important to check the individual state laws, the general rule of thumb is that a written policy applied to all people working remotely in similar conditions be used.
There are options for reimbursement policies for phones. Companies can offer to pay the full bill, but that opens the door to a certain amount of risk. Another option is paying for the percentage of use that’s business vs. private, though that can be complicated to determine and take more time than it’s worth. What tends to work best is paying a fixed allowance per month for each employee which will cover a portion of both the services as well as use of their hardware. While this can be structured solely for phones, it can be extended to include a personal computer, Internet service, etc by setting the policy up as a technology allowance. A reasonable number for this could be between $30 - 100 depending on the type of work being done and the amount of use expected.
While there are arguments for this being beneficial to employers, this can also be beneficial to employees because these reimbursements for equipment or devices offset regular expenses that people typically have and making it easier for them to afford the same or possibly even better services or devices. Another advantage is that these reimbursements don’t count as taxable income for the employee, so they effectively increase their compensation without incurring additional taxes.
If you have any questions about implementing this type of policy or find out about other ways to benefit your employees while helping your business, reach out and let Brightleaf help your company!
- John Thrush
