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How to use stipends to ensure BYOD success

Josh Bouk, VP of Sales and Marketing, Cass Information Systems, Expense Management Division | Sept. 18, 2015
There are real differences between stipend options, and the success of your program will depend on getting them right

* Taking Control. The decision to reimburse employees for BYOD, at least in California, became clearer with the Cochran ruling. In other states, it may simply come down to control. That is, control over the devices accessing corporate information. For example, if MDM software is required to be downloaded prior to accessing the network, businesses can ensure their employees don’t download certain apps or visit certain sites that may jeopardize security.

Stipends offer a compelling incentive for end users. Employees get help paying their mobile bill (for work-related purposes, of course) and employers get some measure of control over the device itself due to the fact that stipends can be tied into the MDM software in such a way that if a device falls out of compliance the stipends are immediately suspended. Those safeguards are absent from reimbursements made via expense reports. And though stipends may be contingent upon compliance, if those stipends aren’t synced with the MDM software, it does little to prevent a breach or respond quickly to a noncompliant device.

* Limiting Taxes. The Internal Revenue Service (IRS), in Notice 2001-72, thankfully removed mobile devices from the “heightened substantiation requirements” they were subject to prior to 2010. The devices, to avoid tax consequences, have to be provided for substantial noncompensatory business reasons, such as an employee’s need to communicate with clients after normal work hours or the employer’s need to reach the employee during similar off hours.

Shortly thereafter, the IRS issued Interim Guidance on Reimbursement of Employee Personal Cell Phone Usage in light of Notice 2011-72, wherein it addressed reimbursements made to employees for the business use of employee-owned devices. In order for a stipend to avoid taxation based on additional wages or income, the memorandum states that, where employers, for the same substantial noncompensatory business reasons noted in Notice 2001-72, require employees to use their personal cell phones, the employee must “maintain the type of cell phone coverage that is reasonably related to the needs of the employer’s business, and the reimbursement must be reasonably calculated so as not to exceed expenses the employee actually incurred in maintaining the cell phone.”

A tiered approach to stipends that considers the differing needs and demands of various roles within an organization would seem to satisfy those requirements. Though not without shortcomings, split billing solutions clearly satisfy the requirements by separating usage on each bill.

While there is much that is unclear regarding the tax code, the fact that BYOD is growing in popularity every year is undisputed. And as more Millennials enter the workforce, that trend will likely not slow.

BYOD is about more than the wishes of tech-savvy employees; it’s about productivity and the bottom line. To maximize both, companies should strongly consider offering employees a stipend for the work-related use of their personal devices.

While options for paying stipends exist, organizations need to understand there are real differences between those options and, often, the success of a BYOD program depends on how those stipends are offered.


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