Telcos

How businesses can cut cell phone costs

Deb Shinder offers cost-cutting tips to businesses that provide employees with mobile phones or reimburse workers for some or all of their cell phone expenses.

Once upon a time, workers had to depend on the availability of pay phones to stay in touch with their office, and that resulted in many missed opportunities. Today, cell phones are a business essential for employees in numerous fields. Many businesses recognize this need and either provide their employees with company-issued mobile phones or reimburse those workers for some or all of their cell phone expenses. It makes for a more connected, more accessible, and more efficient workforce, but the expenses can add up. I'll discuss some strategies that can help businesses reap the benefits of cell phone-equipped employees and keep costs down.

Embrace consumerization

The consumerization of business IT is a hot topic; it basically involves allowing employees to connect their own devices, particularly mobile devices such as phones and tablets, to the company network. There are advantages and disadvantages to this approach.

Advantages
  • It can save companies money, because the employees buy their own equipment. (Employees can often get equipment for free or at a low cost because wireless carriers subsidize the devices they sell to consumers in return for a contractual commitment.)
  • Since workers get to pick the models they want, they may be happier with the devices and use them more.
  • The company saves administrative overhead because it doesn't have to deal with the wireless companies, to purchase equipment, to keep track of billing records, and so forth.
Disadvantages
  • IT personnel need to be able to troubleshoot and support many different mobile platforms and models.
  • The IT department doesn't have as much control over users' devices, which can create serious security issues.
  • Many companies reimburse workers for their monthly cell phone bills when they use the phones for business. If companies aren't careful, they could wind up paying for premium features such as mobile hotspots, navigation services, and entertainment services that can send a cell phone bill sky high. Employees who travel out of the country with their phones or make international long distance calls on the devices can also incur huge phone bills.

Tips for reducing equipment costs

If your company provides the phones or reimburses employees for the cost of their phones, you should consider whether employees need the latest and greatest phone with video conferencing, 8 megapixel cameras, and 4G speeds to do work. You can often save a great deal by going with a less popular, less feature-laden, or older model of smartphone, which still has basic email, web browsing, and other capabilities that workers need.

If you will be buying a large number of phones for employees, you may be able to negotiate a better price per unit with the vendor or wireless carrier.

Tips for reducing monthly bills

If you're issuing the phones, you can negotiate with wireless carriers for a good deal because your business will be a volume customer. Compare plans and evaluate workers' cell phone usage; for instance, you may not need to pay for unlimited calling plans for employees who only make a few calls.

If you're paying for employees' monthly cell phone bills, set policies and provide training on how to reduce costs. For instance, instruct employees not to call 4-1-1 for information from their phones -- carriers charge as much as $1 per call for this service. If a smartphone has web access, there are a number of free directory assistance services on the web, such as 411.com, PhoneNumber.com, and Free 411, where they can often find the same information.

Carriers are moving away from unlimited data plans. If your employees have data plans with caps, instruct them in reducing their 3G or 4G data usage by setting their phones to use Wi-Fi for Internet access when it's available (for example, when they're at the office or at home where they have a Wi-Fi network). Employees can also use Skype or other Voice over IP applications (such as zerofone on the iPhone) on their smartphones to make voice calls over Wi-Fi instead of using expensive cellular minutes. This can save even more money when making international calls, for which the wireless carriers charge dearly.

You may not want to pay for employees to send text messages, especially if they have smartphones with email capability. I suggest canceling other features that aren't essential to conducting business (such as games, ringtone downloads, video streaming, and other entertainment services), or having employees pay for those features if they want them. You might also think about not paying for roadside assistance and phone replacement insurance.

Another idea is to reconsider which employees really need cell phones for business purposes. Many organizations are reducing the number of employees to whom they issue cell phones. For example, the city of Los Angeles is considering taking phones away from more than 7,000 employees, for a projected savings of $5 million per year.

Stop paying for employees' cell phone service

An obvious way to cut the amount that you're paying for employees to have cell phones is not to pay for them at all. According to a CTIA-The Wireless Association June 2010 survey, approximately 93% of the U.S. population had cell phones. Many companies have taken the stance that employees should be expected to have -- and pay for -- their own mobile phones, just as they traditionally were expected to have and pay for their own landlines.

But of course, today's phones aren't just about making phone calls. Your company might need workers to be able to receive and answer company email when they're away from their desks or home computers, or even access web portals. To do all that, they'll need a smartphone and a data plan. Is it fair to ask workers to take on such a large expense if they wouldn't otherwise have needed those functionalities for their personal use?

One solution is to continue to reimburse employees for cell phone service, but only up to a set amount per month. It's unlikely that employees will use phones they purchased for work purposes, so by reimbursing only a portion of the bill, you help compensate them for the business usage without paying for excessive personal activities.

Consider the tax implications

An important consideration when thinking about providing cellular equipment to employees or reimbursing them for the cost of their equipment and service is how that will affect the business's taxes and the employee's taxes. You may be able to deduct the costs as a business expense, but you will need documentation showing how much the company paid and the business relationship of the person using the phone (it must be the company's employee or contract worker). You'll also have to document how much of the use of the phone was for business and how much was personal.

Property that is used for both business and personal purposes, called "listed property," can be depreciated as a business asset if more than 50% of its use is for business. This is called the "predominant use test."

In general, for the purposes of U.S. federal income taxes, if the company pays for the phone and it's used for business, the company can deduct the expense and the employee doesn't have to pay taxes on it. However, if the company pays for the phone and it's used for personal use, the company cannot deduct the cost, and the employee must pay taxes on its value as part of his or her gross income, which means the company has to report it as such.

Tax laws change frequently, so consult your accountant or tax attorney to determine the tax impact of issuing cell phones to employees or reimbursing employees for cell phone expenses.

About

Debra Littlejohn Shinder, MCSE, MVP is a technology consultant, trainer, and writer who has authored a number of books on computer operating systems, networking, and security. Deb is a tech editor, developmental editor, and contributor to over 20 add...

2 comments
archie_t
archie_t

We're looking at replacing our entire phone system later this year. Instead of assuming everyone gets a desk phone and a voice mail (at $350 each), we're considering NOT giving desk phones/voice mail to those who have a company-paid cell phone. The cell numbers will be programmed into the switchboard and distribution lists. This could save us +15K.

Bill_Miller
Bill_Miller

We have a small company with distributed IT services resources, and over the last 4 years we have been choked by the swelling cost of cell phone reimbursement. This article is spot on in terms of how those costs can grow to a point of concern. Of the options to control this expense, we applied a couple of the suggestions presented and adopted a policy whereby we designated by job function what services we would reimburse for and simultaneously a cap on the amount that we would reimburse. We allow for case-by-case exceptions if some extenuating circumstance arises.

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