What seems like an obvious response is to let users get their own devices and plans, and then reimburse them for work-related wireless expenses. One company I worked with years ago gave their employees a “cell phone allowance,” at a single rate company-wide. Employees who used more minutes than their allowance were responsible for the overage charges, whether the overage was work-related or not. There was no control to make sure that the base minutes were actually work related, and no reimbursement for a higher volume of work-related usage.
While many organizations are moving toward corporate-liable cell phone accounts, others still use employee-liable accounts and reimburse their employees. In fact, I recently met with a city IT manager who is in the process of moving every mobile device off the city’s accounts on to a reimbursement allowance. This approach may make sense for smaller businesses, but in larger organizations there is a huge loss of control and economy of scale when each user is allowed to purchase his or her own device. Users will still want email integration and other kinds of tech support for work-related usage whether they are using their own cell account or the company’s.
In many big companies that are still reimbursing employees, the IT departments are now stuck supporting a hodgepodge of devices and users who need access into the corporate infrastructure. Once email integration is achieved, there is no control over security; users can be running multiple email accounts or applications on the device, or they may swap out the phone themselves and leave proprietary information on the older device.
Another lesson that IT should have learned from the wireline world is that corporate telephone numbers should be considered a company asset. Many businesses spend large sums of money porting, preserving or forwarding published phone numbers during office relocations. Yet their best salespeople may have their own cell phones. If these people leave the company, they take their phone numbers with them—numbers that could be known to years’ worth of customer contacts and leads. If the company owns the phone numbers, these numbers can be reassigned to new salespeople.
These are some of the reasons many companies are moving away from employee-liable plans to take control of the whole wireless cost and assets. But there is an accounting issue that could make corporate-liable plans less attractive.
IRS Compliance Issues—Something To Think About
Since 1989, the IRS has considered cell phones to be in the category of “listed property,” that is, items which people can use as easily for personal as for business purposes. An IRS Fact Sheet explains, “‘Listed property’ includes items obtained for use in a business but designated by the Internal Revenue Code as lending themselves easily to personal use. This includes automobiles, computers, and entertainment or recreation-related items. In 1989, cellular telephones were added to this category. Although the use of these phones is much more widespread and economical today, they remain listed property and are subject to these restrictions.”
The IRS is in essence acknowledging that cellular costs have gotten cheaper, so maybe companies don’t care about some personal usage on a company owned phone, but the law still excludes this usage as a deductible expense. In fact, personal calls on a company owned phone are actually supposed to be reported as employee income.
According to telecommunications attorney Martha Buyer, “If the employee owns the phone and gets reimbursed for business usage, that’s a corporate expense which the company will likely deduct. If it’s the company’s phone, then the employee’s personal usage, as well as a portion of the value of the phone itself can be classified as income to the employee and will likely show up on the employee’s W-2.”
This factor alone could keep some organizations away from corporate-liable cell phone deals, since it is fairly easy to reimburse employees for usage that they submit on expense accounts. Doug Stevens of MobilSense said he had talked to companies that have been audited and, “they have had significant portions of that spend disallowed as an exemption.” He noted that MobilSense’s Mobilsentry service has a directory function that automates the process of separating business from personal calls. John Shea of Rivermine said the issue “does tend to surface,” and as of November, the Rivermine/BBR solution will add the ability to differentiate business and personal calls on a wireless bill.
I also asked some of my colleagues from the Society of Telecommunications Consultants if they knew of clients or other businesses that had actually been audited by the IRS for this. While most were aware of the issue and had made sure their clients were aware, none knew of actual IRS audit instances. Still, the consensus is that it is a good idea to be ready for this issue. “Nothing has happened yet” is never a good reason to be out of compliance with tax regulations! Strict compliance entails having a written policy about personal cell phone use, separating personal from business calls, and reporting personal call expenses as employee income or having the employee reimburse the company for these expenses.
Given these conflicting trends, it’s not surprising that some busy professionals are carrying around two devices, one from the company and one of their own.
Conclusion
Eventually wireless costs will be folded into an overall TEM strategy, but for now the issues remain different from wireline charges. Billing and device issues alone make this a different field of expertise, and industry expertise is an important characteristic of your TEM partner, whether that partner provides managed services or software.
I think companies like Rivermine, Tangoe, Telesoft and MGB are making a good call by merging or aligning themselves with the providers of wireless TEM solutions. Fixed/mobile convergence, once perfected, will make wireless devices much more common, even in the office, as a replacement to the desktop telephone. They will also lead to new billing complexities. Already having a unified cost management solution that handles both wireless and wireline will be very advantageous.
Robert Lee Harris is president of Communications Advantage, Inc., a telecommunications consulting firm. He specializes in strategic technology acquisition and implementation. He is a member of the Society of Telecommunications Consultants and can be reached at 800-765-9497.
