BYOD Stipends May Soon Go Away (If IT Gets Its Way)

For employees, nothing gets more personal than money. So when companies began doling out payments to offset Bring Your Own Device wireless service bills, employees cheered.

Those cries of joy, however, may turn to tears of sorrow. The BYOD payment has undergone multiple facelifts over the last couple of years — from expense reimbursements to paycheck stipends to wireless bill credits — and might soon evolve itself right out of existence.

In fact, IT decision makers at companies supporting BYOD anticipate the day when payments go away. “As with any large expenditure, I think everyone has this on their radar screen,” says Jim Gay, vice president of information delivery at insurance giant Nationwide.

[Related: Should CIOs Use a Carrot or a Stick to Rein In BYOD Workers?]

BYOD payments are already starting to disappear in areas of the country where jobs are sparse and companies aren’t under pressure to provide perks. Some industry watchers predict BYOD payments will follow in the footsteps of home Wi-Fi reimbursements, which, for the most part, employees no longer receive even though they use their home Wi-Fi for work purposes.

For the average employee, the BYOD payment is a decent chunk of change every month that can add up quickly. The average BYOD employee receives $70 a month, or $849 a year, to cover a portion of the wireless bill. Most BYOD programs today offer some form of employee payment. Given the high rates of a smartphone bill, employees will no doubt notice its loss.

Your Phone, Your Phone Bill

Much like Wi-Fi in homes, BYOD’s march toward ubiquity will no doubt spell the end of payments. Once enough people are on a BYOD program and get use to carrying a single device for both work and personal purposes, companies can slowly reduce the payment until it disappears. In other words, once BYOD reaches an economy of scale, individuals won’t be able to push back effectively.

However, slow adoption might slow down the payment’s demise. This month, conflicting reports on BYOD adoption surfaced: a CompTIA survey found as many as half of large companies are not doing BYOD at all, while an Aruba Networks survey found that more than half of organizations have already fully embraced employee BYOD or implemented new policies to support it.

It wouldn’t be surprising to see the end of the BYOD payment. After all, it has undergone considerable changes in its short time in the corporate world.

Companies have faced hurdle after hurdle trying to provide the employee payment for BYOD smartphones, pivoting on how it’s delivered nearly every year, and thus would like to see its end — not to mention the money it would save companies.

[Related: Mandatory BYOD Heading Your Way]

In the earliest days, employees filed expense reports to get the BYOD payment, or reimbursement. It was a method riddled with problems. For instance, a globetrotting executive might file an expense report chock full of international roaming charges that add up to thousands of dollars over the course of a year. Some employees expensed entire family plans. Others signed up for and expensed maximum data plans even though they didn’t need them.

These faulty and costly expense reports fall through the cracks because finance often doesn’t have a system to monitor and flag them. Without an automated system, finance simply doesn’t have the manpower to go through each expense report separating business calls from personal ones. Even direct managers don’t have that kind of time to spend on expense-report approvals.

Then Aberdeen Group shed light on the hidden cost of expense reports, whose numbers blossomed under a BYOD plan. A single expense report costs about $18 to process. Thus, the average $70 monthly reimbursement of a phone grew to nearly $90 per month. It’s one of the reasons why a company with 1,000 mobile devices spends an extra $170,000 per year, on average, when they use a BYOD approach, Aberdeen reported.

It’s no wonder BYOD expense reporting is giving ground to an automatic, flat stipend appearing on an employee’s paycheck. The stipend offers many advantages over expense reporting. For instance, the stipend doesn’t have monthly variations, such as outrageous spikes from international charges. It bypasses the hidden costs of expense reporting and monitoring.

But stipends presented a wholly different set of troubles. Some employees game the system by qualifying for the largest stipend they could get away with, and then buying a much cheaper phone and plan. This means the stipend is essentially reimbursing for a “zombie” premium phone and data plan that don’t exist, and the employee is making a little extra money on their paycheck in an underhanded way.

Taxes Take Toll on BYOD

There is another major problem with stipends: taxes. In many cases, the employee receiving the stipend has to pay taxes on it. “When we went to our payroll department, ‘stipends’ was a nasty word because of the tax implications,” says an IT executive at a large manufacturing company.

[Related: 12 Big BYOD Predictions for 2014]

Both that manufacturer, with 4,500 people enrolled in its BYOD program (at least those receiving payments), and Nationwide, with 7,000 people, chose the Cass system, an expense management system with an interesting method of doling out BYOD payments. Cass has relationships with major wireless carriers and issues payments directly on an employee’s phone bill in the form of a credit. There’s no expense reimbursement, no paycheck stipend. Even wireless carriers are getting into the BYOD payments game directly, with AT&T offering split billing.

Cass’s tiered payment system is also pretty novel. At the manufacturing company that spoke to CIO.com on the condition of anonymity, BYOD employees fall into one of five categories:

• A tier-0 employee does not get any reimbursement
• A tier-1 employee rarely needs to be contacted outside the office and receives $35
• A tier-2 employee spends about half the time outside the office and receives $50
• A tier-3 employee is typically a salesperson and receives $75
• A tier-4 employee has a fully paid corporate phone

Additionally, both Cass customers have negotiated with wireless carriers to get deals on smartphones and service for their employees, such as discounts on data plans and, in some cases, waiving of termination fees for an employee’s prior service contract.

With Cass, companies manage their BYOD workforce from beginning to end. New employees get assigned a tier by managers and enroll in the BYOD program over Cass’s web portal. Employees who leave the company are removed from the system and no longer receive a credit on their wireless bill. An employee who gets promoted or whose role changes can be assigned a different tier.

Of course, herein lies one of the problems. Let’s say an employee gets promoted from a field salesperson to a sales analyst who sits in the office all day. The employee’s BYOD tier may change from tier three to tier zero, meaning they actually lose $70 a month in a promotion. Will the difference be factored into the uptick in salary?

The bigger threat to Cass’s credit-reimbursement system is if BYOD payments go away completely. Josh Bouk, vice president of sales and marketing at Cass’s expense management division, contends that no more than five percent of BYOD-supporting companies think they can get away with ending BYOD payments. He says BYOD payments will be around for at least the next five to seven years.

Cass’s customers, though, are singing a slightly different tune.

The executive at the large manufacturing firm says his company is in the midst of evaluating its three-year BYOD reimbursement plan. “That’s a discussion we’re having right now.” He says BYOD payments will eventually go away. Much like home Wi-Fi, employees will pay for a smartphone anyway. But he said he understands the personal nature of BYOD payments and assures they’ll continue in the new version, although they might be reduced a bit.

“I think it’s a transitional phase,” he says. “To go to nothing in 2015 would be a very difficult thing for employees. They’ll say, ‘Here you go again, shifting costs back to us.'”

Tom Kaneshige covers Apple, BYOD and Consumerization of IT for CIO.com. Follow Tom on Twitter @kaneshige. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn. Email Tom at tkaneshige@cio.com