Stipend Definition, Types, and How to Offer It

A stipend is a type of payment made to an individual for expenses related to a specific purpose, such as education or research.

It's a fixed amount of money paid regularly, like a salary, but with a clear distinction between personal and work-related expenses.

A stipend can be offered as a form of financial support to help individuals cover costs associated with a particular activity or project.

The key difference between a stipend and a salary is that a stipend is not necessarily tied to the individual's work performance.

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A stipend is a predetermined, fixed amount paid to individuals on a regular basis, mainly for expenses or as support while doing particular activities.

Stipends are not meant to compensate for services like wages and salaries do.

They relieve the price involved in their service, as seen on the internship, research, and education side.

Stipends can vary depending on the company or organization that pays them, and many companies offer stipends to cover housing, food, or travel costs. Some companies even provide stipends to support living expenses for employees with mortgages, rent, or moving.

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There are many types of stipends, and they can be categorized into different groups. Here are some examples:

Some stipends are specifically designed for education, such as scholarships that are awarded to students with the basis of merit, need, or other factors. Others are for research, like academic research stipends that universities and research institutions provide to students and professionals undertaking studies.

In the private sector, businesses involved in research and development may offer stipends to researchers working on certain projects to help advance innovation and discovery.

A stipend is often paid as a lump sum payment, and it's commonly referred to as an allowance. This type of compensation is usually provided on a daily, weekly, or monthly basis.

You can offer your workers a stipend for a specific purpose or expense, such as covering the cost of online courses or textbooks. For example, you could offer a $100 monthly stipend for professional development opportunities.

Stipends can be paid up-front for employees to use on specific perks, or through reimbursement after an employee incurs the cost of a lifestyle benefit. The stipend amount varies based on the assigned task or the expense covered, and it can be as low as $450 for a week's worth of training.

A stipend is often paid out in a fixed amount over a set period, such as daily, weekly, or monthly. This can be determined by the employer or organization providing the stipend.

You can offer a stipend for a specific purpose, like professional development opportunities, and set the amount accordingly. For example, a $100 monthly stipend can cover online courses, textbooks, and certifications.

Stipends can be paid upfront for employees to use on specific perks or through reimbursement after the employee incurs the cost. This flexibility allows employers to tailor their stipend offerings to their employees' needs.

The amount of a stipend varies based on the assigned task or the expense covered. For instance, a company may pay a trainee $450 for a week's worth of training.

Stipends can be offered on an annual, monthly, quarterly, or on-the-spot basis. This gives employers the flexibility to choose the frequency that best suits their needs.

A typical work-from-home stipend will cover expenses related to a home office setup, such as desk chairs, monitors, and printers. The average annual value of such a stipend is $546.

Stipends are completely customizable, so you get to decide who's eligible to participate.

You can include full-time employees in your stipend program, giving them a way to earn extra money on top of their regular salary.

Part-time workers can also be eligible, providing them with a financial boost that's tailored to their unique needs.

International employees are not left out, and can participate in stipend programs just like their domestic counterparts.

Independent contractors can also be included, offering them a way to earn money through your stipend program.

Employee stipends are a type of compensation that can be used for various expenses, such as health and wellness, travel, or personal development.

They can be structured in different ways, with some stipends being considered taxable income and others tax-free or tax-advantaged. For example, health and wellness stipends are typically considered taxable income, while other stipends may be exempt.

Employers can offer stipends to improve retention, simplify their benefits package, and show appreciation for their employees' hard work. A one-time stipend can be given to recognize employees' efforts, or a stipend can be offered for ongoing expenses, such as gym memberships or professional development courses.

To administer an employee stipend program, start by conducting a benefits survey using a free template. This will help you determine which benefits your employees want most.

You'll need to create a four-step breakdown of the process, which includes setting up the stipend program, establishing guidelines, choosing a stipend provider, and tracking expenses.

A Lifestyle Spending Account (LSA) is a great stipend option for employers who want to provide more choice and flexibility to their employees.

Companies can design the LSA to encompass any spending categories they like, for example, fitness, mental health, home office equipment, food, family support, or professional development.

The most common eligible spending categories are fitness (94%), mental health (84%), and nutrition (61%).

LSAs offer employees the freedom to spend their benefits on items and services that fit their personal preferences and lifestyle needs.

51% of Benepass customers offer LSAs worth an average of $169.

To learn more about launching a flexible LSA program, download the ebook "Launching a Competitive Lifestyle Spending Account Program: 7 Steps for Success".

Stipends are a flexible way to cover the diverse needs of your workforce, and they can be structured in various ways to provide tax benefits for both employers and employees.

Most stipends are considered taxable income, meaning recipients must pay applicable taxes themselves. Employers may need to withhold federal, state, or local income taxes, and employees will be taxed on the amounts reimbursed.

The type of stipend and its purpose can affect its tax implications. For example, educational stipends can be tax-deductible and tax-free up to $5,250 per year per employee.

Here are some common tax implications to consider:

Most stipends are considered taxable income, which means recipients must pay applicable taxes themselves. This includes Social Security and Medicare taxes, with a combined withholding rate of 15.3% for the 2024 tax year.

Stipends are not considered wages, so employers won't withhold income tax on any stipends made to employees. However, employers may need to withhold federal, state, or local income taxes on taxable stipends.

You can offer tax-free or tax-advantaged stipends, depending on the type and structure of the benefit. For example, educational stipends can be tax-deductible and tax-free up to $5,250 per year per employee.

To qualify for tax-free treatment, stipends must meet specific requirements, such as being used for tuition purposes or other prescribed expenses. Employers should consult with their accountant or tax professional to determine the best approach for their organization.

Here are some common types of stipends and their tax implications:

Employers should use a stipend administration platform to keep track of expenses and store employee receipts in case of an audit. This can help ensure compliance with tax laws and regulations.

Remember, the tax implications of stipends can vary depending on the type and structure of the benefit. Employers should consult with their accountant or tax professional to determine the best approach for their organization.

Communicate the benefit to employees by sending a notice letting them know about new stipend offerings, including what stipends are being offered, when the benefit will start, and how much of an allowance is being offered.

You should include these details in your notice to keep employees informed and engaged. This will help them understand the value of the new benefits and how they can benefit from them.

By keeping a close eye on metrics like employee participation and satisfaction, you'll be able to measure the success of your benefits and make changes as needed.

Health and wellness benefits are a great way to support your employees' overall well-being, and they can also be a tax-efficient option for your company.

You can offer a taxable health stipend to cover your employees' out-of-pocket medical expenses and health insurance premiums.

A health reimbursement arrangement (HRA) is a better, tax-free alternative to a health insurance stipend. It allows you to reimburse your employees for their qualifying medical expenses, including out-of-pocket costs and sometimes health insurance premiums.

A wellness stipend is a great way to encourage employees to live healthier lives and make them more productive in the workplace. This is an excellent way to support your employees' holistic well-being.

Common wellness expenses and services that employees can purchase with a wellness stipend include:

Reimbursing employees for these expenses can help create a holistic wellness program that benefits both your employees and your company.

Offering stipends can be a great way to attract and retain top talent. Some workers will jump ship if another organization offers better perks, and offering stipends can give you a competitive edge in the job market.

According to Mercer's Health and Benefits Strategies Report, the following stipends are in demand in 2024: free or subsidized meals at work, subsidized phone or internet for remote working, and a stipend for home office setup and supplies.

You can offer stipends for almost any expense or perk you can think of, and customize your stipend program to fit your company culture, values, and the needs of your unique workforce.

Any employer with employees or contractors can offer stipends, including nonprofit organizations. This means stipends can be a great perk for small businesses looking to stretch their benefits dollars or large companies committed to HR innovation.

You can't offer a stipend to any W-2 employee instead of a regular salary or hourly wages. Stipends are intended as an extra perk, not a replacement for regular pay.

Employers can choose what kind of stipends they want to offer, such as annual, quarterly, or monthly stipends. This flexibility allows you to tailor your benefits package to your organization's needs.

You can offer stipends for almost any expense or perk you can think of, and customize your stipend program to fit your company culture, values, and the needs of your unique workforce.

Dating app Hinge offered its New York employees a $200 monthly stipend for dates, while Seattle-based Rover, a dog-walking app, offers its employees a $1,000 one-time stipend for adopting a dog or cat.

Some common types of stipends include:

These stipends can be tailored to fit the specific needs of your employees and company, and can be administered through a stipend administration software.

A stipend is a type of financial support that's different from a salary. It's not considered compensation for work, but rather monetary support for various factors, such as expenses incurred during traveling or training periods, or to cover certain living expenses.

Stipends are typically lower in amount than salaries and are often lower than minimum wage. They're also not regulated by the state, but rather provided at the discretion of the employer.

One key difference between stipends and salaries is that stipends don't connote hours or an amount of work that has to be done. They're more of an allowance toward living expenses rather than actual compensation.

Here's a quick comparison of stipends and salaries:

Stipends offer a unique flexibility that enables recipients to focus on their goals without the constraints of a traditional salary structure. This makes them a critical component in supporting individuals across numerous fields, allowing them to pursue educational, research, and volunteer opportunities without the financial burden.

Stipends are allocated for a specific purpose, such as paying for transportation costs, meal allowances, or cell phone usage.

You can design the perfect stipend type and tailor its frequency, eligibility, and amount to best suit your business, making stipends highly flexible.

Stipends serve various purposes, including educational support, internships and fellowships, research and training, and volunteering and non-profit.

Some common types of stipends used by businesses today include lifestyle spending accounts, commuter stipends, and caregiving stipends.

Stipends can improve employee retention, simplify your benefits package, and provide a more contemporary mix of benefits to employees.

By offering stipends, you can provide better benefits to your employees, from support with housing and parenting to education and travel.

Here are some trending benefits that companies are offering, from most to least popular:

A stipend is often paid as a fixed sum, commonly referred to as an allowance, and is usually provided on a daily, weekly, or monthly basis.

Stipends are typically offered as compensation for training instead of salaries for employment purposes, allowing individuals to pursue work that would normally be unpaid.

The U.S. Department of Labor has rules surrounding stipends, including that they cannot be used to hire students to replace existing staff, and the students must be the primary beneficiaries of the employment or training.

Stipends can add to a salary for W-2 employees but cannot replace it.

The stipend amount varies based on the assigned task or the expense covered, such as $450 for a week's worth of training or $1,000 for living expenses.

A stipend is often offered as a fixed sum, paid as a lump sum payment, and can be provided on a daily, weekly, or monthly basis.

Stipends are commonly used as compensation for training instead of salaries for employment purposes, allowing individuals to pursue work that's normally unpaid while helping defray living expenses.

Interns, apprentices, fellows, and clergy are common recipients of stipends, which are given as financial support while they engage in the service or task at hand.

A stipend may include other benefits, such as higher education, room, and board.

The U.S. Department of Labor outlines rules surrounding how stipends can be used by companies and organizations, including that stipends cannot be used to hire students to replace existing staff.

Stipends can be lower than the minimum wage as long as they're used to pay trainees.

For W-2 employees, stipends can add to a salary but can't replace it.

The stipend amount varies based on the assigned task or the expense covered, such as $450 for a week's worth of training or $1,000 for living expenses.

Stipends are typically paid out in fixed amounts over some period, set in light of the type of involvement expected and the financial need of the person.

This may be from an educational institution, a non-profit organization, employer, or government program.

In the stipend system, there are specific rules and regulations that govern how stipends are paid and managed.

Stipends are taxable income, as mentioned in the "Tax Implications" section, and recipients are responsible for reporting them on their tax returns.

A stipend is not considered employment income, but rather a form of compensation for specific expenses or services rendered, as outlined in the "Definition and Purpose" section.

Stipend recipients are expected to keep accurate records of their expenses and hours worked to support their stipend claims, as discussed in the "Documentation and Record-Keeping" section.

Stipends are typically paid out on a regular schedule, such as monthly or quarterly, as noted in the "Payment Schedules" section.

Employee stipends are a flexible way to cover diverse employee needs, from housing and parenting to education and travel. They can be a valuable addition to your benefits package, helping to attract and retain top talent.

Most stipends are considered taxable income, but some can be tax-free or tax-advantaged. For example, educational stipends can be tax-deductible and tax-free up to $5,250 per year per employee.

Employers can design a benefits package that fits their organization's and employees' needs by setting monthly allowance caps and choosing what kind of stipends to offer. This can be done using stipend administration software that lets you easily set up customized allowances for each stipend.

A remote work stipend can help employees with work-related expenses, such as home office setup costs, office expenses, and internet access costs. Employers can also reimburse employees for cell phone bills and coworking space memberships.

Here are some popular benefits trending with our internal customers, from most to least popular:

By offering employee stipends, employers can provide better benefits and simplify their benefits package. They can also keep all their perk benefits in one place, making it easy to offer and manage different types of reimbursements.