Video and voice calls – that is the new normal of going about our daily official work since the pandemic hit the world. Surprisingly, before the pandemic, a multitude of companies did not have an effective cell phone expense reimbursement policy in place for their employees.
For the lack of crisp phone allowance policy, finance department of a company used to grapple with the vagueness of reported cell phone expenses.
The spiking cell phone expenses while conducting business during pandemic forced the corporate to evolve rigorous phone allowance policies to address the cell phone claims reported by the workforce.
Mobile devices have become an essential business tool. Creating a cell phone policy is not a cakewalk for a company. The decision makers must ensure policy’s homogeneity and mapping with the existing mobile bill reimbursement policy.
Types of cell phone policies in a company
- Stipend policy: It entails a cell phone allowance for employees. The company pays monthly amount to employees as compensation for the use of their personal cell phones for business purposes. Sometimes, the company might pay for the employee’s purchase of a new smartphone as well but usually, monthly stipend is paid for covering the employee’s cellular plan (partially or wholly) through company’s expense management software. There is a catch though. Stipends are the least tax effective options as these are allowances and not reimbursements actually.
- Company Owned, Personally Operated (COPE) plan: In this plan, the organization purchases both the device as well as the cellular plan. The device is to be strictly used for business purposes, however, companies sometimes allow few minutes per day for personal usage of the device in a manner not conflicting with company’s business interests.
- Bring Your Own Device (BYOD) policy: A lot of corporate & public sector undertakings have adopted BYOD policies. Here, communication reimbursement is made to employees who use their own devices for work purposes. The employees can file claims for whatever communication & internet bills they have incurred during the month.
- Simple reimbursement: Company reimburses the initial cost of a cell phone & cellular plan bought by the employee, on receiving the relevant receipts. The cell phone or device bought has to be the one among the company-approved list of devices.
While BYOD policy saves acquisition costs for the company, data security is a tradeoff worth pondering. On the other hand, COPE plan has a lot of hidden costs but it guarantees data security, confidentiality and improves productivity.
Before devising the mobile allowance policy for employees …
In India, as per Rule-3(7)(ix) of the Income Tax Rules (Assessment Year 2021-2022), the employee cell phone reimbursement amount is exempted from tax and all communication expenses incurred by an employee as part of work are reimbursable.
Following aspects have to be kept in mind while formulating a mobile bill reimbursement policy for employees:
- Although there is no explicit reference or restriction to the maximum number of mobile connections per employee which can be covered under the phone allowance policy, an organization typically allows reimbursements for one landline and/or one mobile connection per employee.
- A telephone allowance includes the cost borne by the employee for both the landline and mobile connections. In case of the latter, it obviously includes the data charges in addition to the voice call charges (for both prepaid and post-paid connections), as incurred by the employee. These charges vary from one network provider to another and organizations take this into account while drafting the cell phone expense reimbursement policy.
- In order to avail the tax benefit on a cell phone reimbursement claim, the phone/internet connection should be in the name of the employee who must submit the cell phone invoices to the finance department of the company as evidences of mobile spending.
- The Information Technology Act, 2000 (for scanned communication bills) states that electronic records can be used in place of physical documents. Expenses submitted that way and reimbursements made on them are perfectly valid for tax-exemption. In fact, Zento, a Cloud-based expense management automation tool empowers employees to submit their bills’ scan-copy in few clicks for claiming reimbursement & keep track of it in real time.
- An organization will be perfectly within its rights to set a cap on the per employee expense reimbursement amount. In fact, the company can segregate employees into multiple levels according to their job roles for cell phone reimbursements. For instance, an Assistant Systems Engineer in an IT firm may file claim for cell phone expenses not exceeding Rs900 per month while a Senior Manager in the same firm might get up to Rs2500 in reimbursements.
- The cell phone reimbursement policy should be flexible enough to accommodate drastic changes in work conditions like the Covid-19 pandemic of 2020. The corporate workforce is in work-from-home mode since a year mostly over internet voice/video calls. Cell phone expenses would obviously spike and the employers have to configure new reimbursement policies.
- The policy should mandate a proper record of bills to offer tax rebate. The best way forward would be asking employees to upload digital copies of their bills through an automated expense reporting software like Zento which backs up all invoices on Cloud.
In the next section, we discuss how an expense management software smoothens the setting up new cell phone reimbursement policies & corresponding expense submissions.
Streamlining reimbursement of mobile phone expenses with an expense management software
An expense management software empowers your organization to enforce an effective cell phone reimbursement policy.
- It makes cell phone expense reporting effortless & instantaneous. For instance, with Zento, as soon as the scanned copy of your cell phone expense invoice is uploaded, the OCR extracts the expense details from the invoice and populates the expense report form within seconds.
- It allows configuring phone allowance policy at multiple levels, which means employees of different functions stick to the set allowance limits while submitting cell phone expenses, ensuring policy compliance.
- You can analyze the cell phone related spending pattern of your workforce through custom reports and dashboard provided by the software. This helps to keep a tab on the company budget from a good vantage point.
- Approval workflows configured in the tool take care of validating the submitted phone bill. If a submitted mobile expense violates the company cell phone reimbursement policy, it is promptly flagged which helps improve spends visibility.
- Finance teams needn’t be disturbed for getting a historical cell phone expense report. Reports can be retrieved on-the-go ubiquitously & anytime with the software as a mobile application.
- A Cloud-based software keeps digitized record of all the cell phone invoices submitted and the corresponding reimbursements made. There is no fear of misplacing or losing invoices or any unauthorized access to them.
- It helps the decision makers to gauge how cell phone expense reimbursements are affecting the cash flow in real time.
Zento comes equipped with all the features discussed above, and much more. A Cloud-based expense management automation tool, Zento vanquishes issues like policy non-compliance, delayed resolution of valid phone bill claims, fraudulent invoice submissions etc., as far as the company cell phone reimbursement policy is concerned.
It also allows for advance reconciliation of cell phone expenses, resubmission of claims & easily integrates with major ERPs.
For an exhaustive account of its whole range of other features and how Zento unifies the entire cell phone expense reporting & resolution process of your organization, feel free to contact us for a 3 month free trial of Zento.