Nowadays, more and more employers opt for a solution in which employees use their private phones for work instead of receiving dedicated company devices. This approach can benefit both sides, but it also raises questions about how reimbursements are taxed and how such settlements should be documented. Tax issues around employees using private phones, in the context of PIT (personal income tax), require particular attention from HR and accounting departments. If you do not have your own department, see our accounting firm in Warsaw.
Employers must remember that deciding to use employees’ private phones for work means obtaining appropriate consent and ensuring proper financial settlements. Getting this wrong may cause tax problems both for the employer as the tax remitter (płatnik) and for the employee. That is why it is worth getting to know all the legal and practical aspects of the issue.
Pros and cons of using private phones at work
Deciding to let employees use private phones for work brings both significant benefits and potential problems, which should be considered before introducing such a solution in an organisation.
The main benefit for the employer is a significant reduction in operating costs related to buying, maintaining and administering a fleet of company phones. In addition, employees have only one device at their disposal, which simplifies day-to-day work and removes the need to carry two phones
The most important advantages of this solution include, above all, lower employer spending on telecommunications equipment and related accessories. Employees do not have to get used to an additional device, which makes their work more comfortable. The organisation can also limit unnecessary equipment purchases, as such equipment is often not fully used by all employees.
However, this solution also has significant drawbacks that may adversely affect both employees and the whole organisation. One of the most serious problems is the disruption of the employee’s work–life balance, as they may feel constantly available to the employer.
Using private phones for work may lead to breaches of the employee’s privacy and raise concerns about the security of company data stored on a private device. Employees often find it difficult to keep private and business data separate
Information security is a particularly important issue for companies processing sensitive or confidential data. Private devices may not meet the security standards required by the organisation, which creates a risk of data leaks. In addition, when the working relationship with an employee ends, recovering business data from a private device may prove problematic.
Obtaining the employee’s consent to use a private phone
The basic condition for lawfully using an employee’s private phone for work is obtaining their voluntary and informed consent. The employer cannot force the employee to give such consent in any way, and without it the solution cannot be introduced at all.
The process of obtaining consent should be transparent and professional. The employer must clearly present all aspects of the solution to the employee, including the rules for settling costs, how business calls are documented and the procedures related to data protection.
The employee’s consent to using a private phone for work must be given voluntarily and can be withdrawn at any time. The employer cannot make employment or other benefits conditional on a job candidate giving such consent
A key element of the whole process is concluding a written agreement governing the use of a private phone for work. Such an agreement should set out in detail:
- The scope of using the phone for work
- How business calls and costs are documented
- Procedures for settling and reimbursing the costs incurred
- Rules for protecting company data on a private device
- Conditions for terminating the agreement and final procedures
The agreement must also include the employee’s undertaking to provide the employer with appropriate documentation confirming the costs incurred. Most often these are the operator’s invoices and itemised call lists that make it possible to identify business calls. Similar clauses are used for company cars, as shown in a company car entrustment agreement template.
Practical aspects of documenting business costs
Properly documenting the costs of using a private phone for work is a key element of the whole settlement system. The employee must be able to prove which of the costs they incur are actually related to performing their work duties.
The basic document is the invoice issued by the telecommunications operator, which confirms that the phone owner has incurred the costs. In addition, an itemised call list is needed, which makes it possible to identify business calls and distinguish them from private ones.
An employee using a private phone for work must keep detailed records of all business calls, including dates, times, phone numbers and the purpose of each call. These records are the basis for settling costs with the employer
Documentation requires the employee to be systematic and accurate. Each business call should be recorded with basic information allowing it to be identified. In practice, this means keeping a register of business calls, which is then compared with the call list received from the operator.
The employer, in turn, must develop clear procedures for verifying the documentation submitted by the employee. The process should be fair and transparent, while ensuring appropriate control over the costs incurred by the organisation.
Legal rules on employment income
Under the PIT Act, employment income includes all cash payments and the monetary value of benefits in kind received by the employee, regardless of how they are financed.
The catalogue of employment income is very broad and covers not only basic pay but also various allowances, bonuses, cash equivalents and other cash and non-cash benefits. When private phones are used for work, cash benefits paid on the employee’s behalf and cash equivalents for various benefits are particularly relevant.
| Type of income | Characteristics | Examples | Taxation |
|---|---|---|---|
| Basic pay | Fixed monthly pay | Salary, hourly wage | Fully taxable |
| Allowances and bonuses | Variable pay components | Annual bonus, function allowance | Fully taxable |
| Cash equivalents | Reimbursement for the employee’s own resources | Phone, car, tools | Exempt if conditions are met |
| Benefits in kind | Non-cash benefits | Company car, laptop | Taxed according to value |
The PIT Act treats all cash payments and the value of benefits in kind as employment income, regardless of what they are called or how they are financed. This also covers partly paid benefits and cash equivalents for various benefits
Particularly relevant to the use of private phones are the rules on cash equivalents for employees using their own tools, materials or equipment at work. This category of income is subject to special rules that may lead to a tax exemption if certain conditions are met.
How reimbursement of phone costs is taxed
Reimbursement of the costs of using a private phone for work is, as a rule, the employee’s income within the meaning of the PIT rules. However, special rules allow such benefits to be exempt from tax if certain legal conditions are met. On the employer's side, the reimbursement is treated under the general rules on tax-deductible costs.
The key provision is the one exempting from tax cash equivalents for tools, materials or equipment owned by employees and used by them at work (Article 21(1)(13) of the PIT Act). Such an equivalent is also not included in the basis for calculating ZUS (Social Insurance Institution) contributions (§ 2(1)(9) of the Regulation on detailed rules for determining the basis for pension and disability insurance contributions). A private phone used for work can be classified as a work tool, which opens up the possibility of using this exemption.
A cash equivalent for using a private phone for work may be exempt from income tax, but it must correspond to the actual value of the employee’s use of the equipment. It cannot be treated as a flat-rate payment without a proper economic calculation
The condition for the exemption is setting the amount of the equivalent correctly – it must correspond to the actual value of the employee’s use of the equipment. This means making a calculation that takes into account various elements, such as the number of hours the phone is used for work, the value of one hour of use or wear-and-tear norms.
The tax authorities indicate in their rulings that the equivalent may be a predetermined amount, but it must correspond to the employee’s expenses connected with using their own phone (e.g. the ruling of the Director of National Tax Information (KIS) of 1 June 2023, no. 0112-KDIL2-1.4011.309.2023.1.TR). This benefit therefore cannot be treated as a flat-rate payment made without any calculation. The employer must have appropriate evidence showing that the benefit is really an equivalent for using the employee’s private equipment.
- The employer must document that the employee owns the phone
- The amount of the equivalent should correspond to the actual cost of use
- Records of business calls must be kept
- The benefit cannot be a flat-rate payment without a calculation
- The employer bears the burden of proof in a tax inspection
The employer’s evidential obligations as tax remitter
An employer acting as remitter of income tax has particular obligations to assess correctly whether the conditions for applying the tax exemption are met. When paying equivalents for the use of private phones, it must have appropriate evidence confirming that the exemption is justified.
The burden of proof lies entirely with the employer, who in a tax inspection must show with the appropriate documents that there were grounds for paying the equivalent and that the benefit paid really has that nature. This means collecting and keeping the relevant documentation for the entire limitation period for tax liabilities. A different kind of equivalent, for unused leave, follows its own rules – we explain the payment deadline for the unused leave equivalent.
The employer as tax remitter must have evidence confirming that the phone is owned by the employee and that the amount of the equivalent paid corresponds to the actual cost of using the device for work. This documentation must be available for the entire period for which tax documents are kept
The basic document confirming that the employee owns the phone is the purchase invoice for the device or another acquisition document that leaves no doubt as to ownership. The employer may require the employee to present such documentation as a condition for concluding the agreement on using a private phone for work.
In addition, the employer should collect documents confirming how the amount of the equivalent was calculated. These may be analyses of the phone’s running costs, summaries of working time spent using the device or other documents allowing the value of the benefit to be determined objectively.
A consultancy decided to pay employees equivalents for using their private phones. In preparation for a possible tax inspection, the employer asked all employees to present the purchase invoices for their phones and developed a uniform method of calculating the equivalent based on the time the device is used for work and average running costs.
Practical aspects of introducing an equivalent system
Introducing a system of equivalents for using private phones requires proper organisational and legal preparation. The employer must develop clear procedures covering all aspects of the solution, from obtaining the employee’s consent to regular financial settlements.
The first step is to prepare a template agreement on using a private phone for work, to be concluded with each interested employee. The agreement should set out in detail the rights and obligations of both parties, how costs are documented and the settlement procedures.
It is equally important to develop a method of calculating the equivalent that is fair to employees and, at the same time, safe from the point of view of tax rules. The method should take into account various factors affecting the cost of using the phone, such as:
- Average daily time the phone is used for work
- The proportion of business calls to the total time the device is used
- Depreciation of the device attributable to business use
- Additional costs related to greater wear of the battery and other components
- Costs related to installing additional business apps
An equivalent system requires transparent procedures for documenting business calls and settling costs regularly. Employees must be properly trained in keeping the required records, and the accounting department should develop standard procedures for verifying and booking such settlements
Another key element of success is properly training employees in keeping the required records. Employees must understand what information is needed to settle costs correctly and how it should be documented and passed to the employer.
Control and verification of phone settlements
For a system of equivalents for using private phones to work properly, appropriate mechanisms for controlling and verifying the settlements submitted by employees must be put in place. Such control must be fair and transparent, but also effective in preventing abuse.
The basic element of the control system is checking whether the settlements submitted by employees match actual business needs. The employer should be able to check whether the reported business calls were really necessary to perform work duties.
Verification should include comparing business call lists with work schedules, the projects the employee is working on and other documents that allow the justification of phone costs to be assessed. Particular attention should be paid to calls made outside standard working hours or on days off.
An effective system for controlling phone settlements should include regular internal checks, comparison of costs with previous periods and analysis of trends in phone use by individual employees. Any irregularities should be clarified with employees without delay
The employer should also monitor the total cost of phone equivalents and compare it with the cost of alternative solutions, such as buying and maintaining company phones. Such an analysis makes it possible to assess the cost-effectiveness of the solution adopted and adjust the procedures if necessary.
Another important aspect of control is employees’ compliance with the rules for protecting company data on private devices. The employer should regularly remind employees of the security rules in force and check compliance with them to the extent permitted by law.
Resolving disputes and practical problems
In practice, a system of equivalents for using private phones may give rise to various disputes and problems that need resolving. Most often they concern the amounts settled, the scope of calls treated as business calls or technical issues related to documenting costs.
The basis for resolving disputes should be a clear and detailed agreement on using a private phone for work. The agreement should provide procedures for disagreements between the parties and indicate how interpretative doubts are to be resolved.
A common problem is drawing the line between business and private calls, especially for employees who maintain contacts with clients or business partners. In such situations, it may be necessary to develop additional guidelines specifying which types of calls can be counted as business costs.
A sales employee regularly talked to clients, but some of these calls were social and concerned private matters. The employer and the employee agreed that only calls directly related to specific sales projects would be counted as business costs, which was documented in an additional annex to the agreement on using a private phone.
Another source of problems may be a situation in which the employee refuses to present the required documentation or presents incomplete documents. In such cases, the employer should ask the employee to complete the documentation within a set deadline and, if the lack of cooperation continues, consider suspending payment of the equivalent.
