Every South African business eventually hits the same question: staff need phones, airtime and data to do their jobs, so who pays, and how? Most companies stumble into one of three models without comparing them. This guide lays out all three, what each costs the business and the employee, the tax basics, and a sample policy you can adapt.
One note upfront: this is a practical operations guide, not tax advice. For anything beyond the basics, confirm with your accountant or the SARS guides referenced at the end.
The three models
Model 1: Cash cell phone allowance. You add a fixed amount, say R400 a month, to the employee's payslip. They sort out their own phone, airtime and data.
Model 2: Company contracts. The business takes out cellphone contracts in its own name and hands employees a company phone or SIM.
Model 3: Direct recharge. Employees use their own phones and numbers. The business loads airtime or data bundles directly onto their numbers every month.
Most guides only cover the first two. The third has quietly become the default for field teams, drivers, retail staff and any workforce on prepaid, because it costs less and involves no contracts. More on that below.
Model 1: The cash allowance
How it works. A fixed monthly amount on the payslip, processed by payroll as a phone allowance.
The tax reality. A cell phone allowance is fully taxable. Payroll systems report it under SARS code 3713, and PAYE is deducted on the full amount like normal salary. There is no tax-free portion for phone allowances.
That has a practical consequence employers routinely miss: a R400 allowance does not put R400 of connectivity in the employee's hands. An employee paying tax at a marginal rate of 26% takes home roughly R296 of that R400. To get R400 of actual airtime into their hands through an allowance, you would need to pay closer to R540. The allowance is the most expensive way to buy connectivity, per rand of connectivity delivered.
Where it still makes sense. Senior staff who want full control over their device and contract, and roles where the phone benefit is really just part of the salary package.
Where it fails. You have no visibility or control. Nothing stops the allowance being spent on anything other than airtime, which matters when the whole point was making sure a driver or site manager is reachable.
Model 2: Company contracts
How it works. The business signs 24 or 36 month contracts with a network, in the company's name, and issues devices or SIMs to staff.
The tax angle. Under the Seventh Schedule to the Income Tax Act, if the employer provides a phone or lets the employee use company communication services and the use is mainly for the employer's business, it is not a taxable fringe benefit. SARS has published guidance on employer-provided cellphones and split billing arrangements; the "mainly business use" test is the crux.
Where it makes sense. A small number of senior or client-facing staff, where you want the number to belong to the business.
Where it fails. Cost and admin at scale. Contracts lock you in for years, devices get lost or broken, staff leave mid-contract, and someone has to manage upgrades, itemised billing and out-of-bundle surprises. For twenty drivers or fifty field workers, this model collapses under its own admin.
Model 3: Direct recharge to employee numbers
How it works. Staff keep their own phones and their own numbers, almost always prepaid. Once a month (or on whatever cycle you choose), the business loads a set amount of airtime, or a specific data bundle, directly onto each number. No contracts, no devices, no payroll line.
This is how a large share of South African businesses with field teams actually run it, because:
- Every rand becomes connectivity. Nothing is lost to PAYE on the way through, and the business controls exactly what lands: R100 of airtime, or a 2GB bundle, not cash.
- No lock-in. An employee leaves, you remove them from next month's list. That is the entire offboarding process.
- It works on any network. Vodacom, MTN, Cell C and Telkom numbers can sit on the same monthly list. Since numbers get ported, check the current network before sending a network-specific bundle.
- It scales without admin. Recharging 5 or 500 numbers is one CSV upload: mobile number, network, amount. Upload, confirm the batch, and every recharge is logged against your wallet for reconciliation.
The tax angle. The same Seventh Schedule principle applies: communication services provided mainly for business use are generally not treated as a taxable fringe benefit, whereas airtime given freely for private use is a benefit SARS expects to be taxed (its guidance uses exactly the example of a monthly R500 airtime voucher for private use). The clean approach is a short policy stating the airtime or data is provided for work purposes, sized to the role. Run the specifics past your accountant.
Where it fails. Roles that genuinely need a company-owned number or device. For everyone else, this model is hard to beat.
Side-by-side comparison
| Cash allowance | Company contract | Direct recharge | |
|---|---|---|---|
| Employee tax | Fully taxable (code 3713) | Generally none if mainly business use | Generally none if mainly business use |
| R400 budget delivers | ~R296 after PAYE at 26% | R400 minus contract overheads | R400 of airtime or data |
| Lock-in | None | 24 to 36 months | None |
| Control over spend | None | Partial | Total |
| Admin per month | Payroll line | Billing, devices, upgrades | One CSV upload |
| Offboarding | Remove payslip item | Cancel or reassign contract | Remove from list |
| Best for | Senior staff, salary packaging | Small teams needing company numbers | Field teams, drivers, retail, any prepaid workforce |
A sample policy you can adapt
Keep it to one page. The essentials:
- Purpose. The company provides airtime/data to enable work communication.
- Eligibility. Which roles receive it, and how much per role (for example, drivers 2GB data plus R50 airtime; site managers R150 airtime).
- Delivery. Loaded directly to the employee's registered mobile number in the first week of each month.
- Number changes. Employees must report a changed or ported number within 48 hours, or that month's recharge may be lost.
- Business use. The recharge is provided primarily for work purposes.
- Termination. Recharges stop from the employee's last month of service.
Point 4 matters more than people expect. Airtime sent to an old number is gone. A monthly network lookup on your list before the batch run catches ported numbers before they cost you money.
Setting it up
If you land on direct recharge, the monthly workflow looks like this:
- Keep a master list: employee, mobile number, network, allocation.
- Verify networks for any new or changed numbers.
- Upload the list as one batch (airtime) or select bundles per network (data).
- Confirm, and reconcile the per-number results against your wallet.
On SIMcloud there are no monthly platform fees, all four networks are supported, and everything above can also run through the API if you want recharges triggered from your own HR or payroll system.
FAQ
Is a cell phone allowance taxable in South Africa?
Yes. A cash phone allowance is fully taxable and reported under SARS code 3713. PAYE applies to the whole amount.
How much should a cell phone allowance be?
There is no regulated amount. In practice South African employers pay anywhere from around R200 to R800 a month depending on the role. Size it to the actual work need; if the goal is connectivity rather than compensation, loading airtime or data directly delivers more value per rand.
Is airtime given to employees a fringe benefit?
If it is provided mainly for business purposes, it is generally not a taxable fringe benefit under the Seventh Schedule. Airtime provided for private use is a benefit. Document the business purpose in a policy and confirm your treatment with your accountant.
Can a company buy airtime for employees on different networks?
Yes. Bulk recharge platforms load airtime and data across Vodacom, MTN, Cell C and Telkom from one list. Verify each number's current network first, since ported numbers keep their old prefix.
Allowance or company phone: which is better?
For a handful of senior staff who need company-owned numbers, contracts. For compensating people, an allowance. For making sure a workforce is reachable and connected at the lowest cost per rand, direct recharge.
References: SARS Guide for Employers in respect of Allowances; SARS interpretation guidance on employer-provided cellphones and communication services; Seventh Schedule to the Income Tax Act 58 of 1962. This article is general information, not tax advice.
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