What is a monthly stipend: Examples, benefits & types [2025 guide]

Your top performer just turned down a 15% raise at a competitor. Not because they're satisfied with their current salary, but because you offered something their spreadsheet-focused rival couldn't match: genuine flexibility in how they spend their benefits dollars. That's the power of getting creative with compensation, and monthly stipends are the top reason why companies are starting to rethink how they reward their people.

Employers no longer dictate exactly which gym employees can join or which meditation app they should download. People now expect the option to make choices that reflect their actual lives, whether that means covering their teenager's coding camp, their rescue dog's vet bills, or their weekend pottery classes. Monthly stipends are more than a line item in your benefits package. They recognise that your employees are whole human beings with interests, responsibilities, and aspirations that extend far beyond their job titles.

This article talks about all you need to know about monthly stipends, from the basics of how they work to the sophisticated strategies companies are using to transform them into powerful retention tools. We'll also mention some real examples from organizations that discovered a surprisingly simple truth: when you trust employees to make their own choices about benefits, they actually appreciate those benefits more. 

Key takeaways

• A monthly stipend is a fixed allowance provided to employees to support specific needs like wellness, housing, caregiving, or learning.
• Stipends differ from salaries; they’re not tied to work performed and may be tax-free depending on use and IRS guidelines.
• Popular stipends include wellness, professional development, remote work, caregiving, housing, and commuter support, tailored to diverse employee needs.
• Offering stipends boosts retention, engagement, and morale by respecting individual lifestyles and promoting well-being, growth, and flexibility.
• Clear policies, thoughtful communication, and the right management tools are essential for successful and compliant stipend programs.
• Forma’s flexible benefits platform simplifies stipend management with multiple payment options, global reach, and high employee utilization. <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Schedule a demo</span> to see it in action.

What is a monthly stipend?

A monthly stipend is a fixed sum of money provided to employees by their employer on a regular basis, typically every month. This money is intended to cover specific expenses or provide financial support for certain activities or needs.

Unlike a salary, which compensates employees for their work, a stipend is usually designed to help with costs associated with an employee's job, professional development, or overall well-being.

Monthly stipends are often provided in addition to an employee's regular salary and can be an attractive benefit for both current and prospective employees.

Examples of monthly stipends

There are various types of monthly stipends that employers can offer, depending on the needs and goals of their organization and employees. Some common examples include:

Wellness stipends

To promote health and well-being, many companies offer a monthly wellness stipend. 

Employees can use this for a wide range of activities and products, such as gym memberships, fitness classes, mental health apps, meditation programs, ergonomic equipment, or healthy meal subscriptions. 

Wellness stipends allow employees to choose the wellness path that fits their lifestyle and can signal that the company values their physical and mental health.

Caregiving stipends

To support employees who have children, aging parents, or other dependents, companies can offer a monthly caregiving stipend. This flexible allowance might cover babysitting, daycare, elder care services, or family support apps. 

For working parents and caregivers, this type of benefit reduces stress and helps them better balance their responsibilities at home and at work.

Remote work stipends

As hybrid and remote work becomes more common, employers are increasingly offering monthly remote work stipends. These can be used to cover internet bills, phone plans, or home office upgrades like desks, chairs, lighting, and tech accessories.

A stipend dedicated to remote productivity helps create a more comfortable and efficient work environment, which can drive better engagement and performance.

Professional development stipends

Companies focused on employee growth often offer a monthly professional development stipend. These funds can be used for online courses, certifications, industry conferences, or other learning resources that align with an employee’s career path. 

Giving employees ongoing support for skill-building not only boosts performance but also reinforces a culture of learning and progression within the organization.

Key differences between stipends and salaries

While both stipends and salaries are forms of compensation provided by employers, there are some key differences between the two that you should understand.

Purpose

The primary purpose of a salary is to compensate employees for their work and contributions to the company. Salaries are typically based on factors such as job responsibilities, experience, and performance.

In contrast, stipends are designed to cover specific expenses or provide financial support for certain activities or needs. They are often provided in addition to an employee's regular salary and are intended to help with costs associated with an employee's job, professional development, or overall well-being.

Taxation

Salaries are subject to income tax withholding, as well as Social Security and Medicare taxes. Employers are required to withhold these taxes from an employee's paycheck and remit them to the appropriate government agencies.

The tax treatment of stipends can vary depending on the type of stipend and how it is used. Some stipends, such as those for tuition or job-related expenses, may be tax-free if they meet certain requirements set by the Internal Revenue Service (IRS). Other stipends, such as those for housing or wellness, may be considered taxable income and subject to withholding.

It's important for both employers and employees to understand the tax implications of any stipends provided and to consult with a tax professional or refer to IRS guidelines to guarantee compliance with tax laws.

Fixed amount

Another key difference between stipends and salaries is that stipends are typically provided as a fixed amount, while salaries can vary based on factors such as hours worked or performance.

Stipends are usually predetermined and provided on a regular basis, such as monthly or quarterly. The amount of the stipend is typically based on the estimated costs of the expenses it is intended to cover or the value of the benefit being provided.

Salaries, on the other hand, can fluctuate based on factors such as overtime hours, bonuses, or commission structures. Employees may also receive salary increases over time based on their performance, tenure, or changes in their job responsibilities.

Benefits of offering monthly stipends

Offering monthly stipends can provide numerous advantages for both your company and your employees. Here are some of the key benefits of implementing a monthly stipend program.

1. Attract and retain top talent

Monthly stipends demonstrate your commitment to your employees' well-being and professional growth, making your organization more appealing to top talent.

When you provide stipends for things like wellness, professional development, or remote work expenses, you show that you value your employees' needs and are willing to invest in their success. This can lead to increased job satisfaction and loyalty, reducing turnover and helping you retain your best employees.

2. Improve company culture

Monthly stipends can also contribute to a positive company culture by promoting a supportive and inclusive work environment. When you offer stipends that cater to a variety of needs and interests, you acknowledge and celebrate the diversity of your workforce.

For example, offering a wellness stipend that can be used for gym memberships, yoga classes, or mental health services demonstrates that you care about your employees' physical and emotional well-being. Similarly, providing a professional development stipend shows that you are invested in your employees' career growth and want to help them acquire new skills and knowledge.

3. Boost employee morale and engagement

When employees feel valued and supported by their employer, they are more likely to be engaged and motivated in their work. Monthly stipends can contribute to this sense of appreciation and support, leading to increased morale and productivity.

By offering stipends that address your employees' specific needs and interests, you demonstrate that you understand and care about their individual circumstances. This can create a greater sense of connection and loyalty between your employees and your organization.

4. Encourage professional development

Investing in your employees' professional development not only benefits them individually but also strengthens your organization as a whole. Monthly stipends for learning and development opportunities can encourage your employees to acquire new skills, stay up-to-date with industry trends, and grow in their careers.

When you support your employees' professional growth, you cultivate a workforce that is adaptable, innovative, and equipped to tackle new challenges. This can lead to improved performance, increased creativity, and a more competitive edge for your company.

5. Potential tax advantages

In some cases, monthly stipends may offer tax advantages for both employers and employees. Depending on the type of stipend and how it is structured, you may be able to provide tax-free benefits to your employees while also claiming tax deductions for your business.

For example, stipends for qualified educational expenses, such as tuition or textbooks, may be tax-free for employees if they meet certain requirements set by the IRS. Similarly, stipends for job-related expenses, such as home office equipment or professional memberships, may be tax-deductible for your company.

It's important to consult with a tax professional or refer to IRS guidelines to see that your stipend program is structured in a way that maximizes tax benefits while remaining compliant with tax laws.

How do monthly stipends work?

When you offer monthly stipends to your employees, you provide them with a fixed sum of money on a regular basis, usually once a month. This money is intended to cover specific expenses or support certain activities related to their work or well-being.

The amount of the stipend is typically determined by factors such as the purpose of the stipend, the estimated costs of the expenses it covers, and your company's budget. For example, a wellness stipend might be $50 per month, while a professional development stipend could be $100 or more.

Once the stipend is set up, your employees will receive the funds automatically each month, either as a separate payment or as part of their regular paycheck. They can then use this money for the designated purpose, such as paying for a gym membership, buying books for work-related learning, or covering the cost of a professional conference.

Depending on the type of stipend and your company's policies, employees may need to provide documentation or receipts to show that they used the funds for the intended purpose. This can help smoothen out accountability and compliance with any applicable tax laws or regulations.

It's important to communicate clearly with your employees about the purpose and guidelines of each stipend you offer. This can help them understand how to use the funds appropriately and make the most of this valuable benefit.

Are monthly stipends taxable?

The tax implications of monthly stipends can vary depending on the type of stipend and how it is structured. Some stipends may be considered taxable income, while others may qualify as non-taxable fringe benefits.

When a stipend is considered taxable income, it means that the amount received is subject to federal, state, and local income taxes, as well as Social Security and Medicare taxes. In these cases, the stipend will be included in the employee's gross income on their W-2 form, and taxes will be withheld from the payment.

However, certain stipends may qualify as non-taxable fringe benefits if they meet specific criteria set by the Internal Revenue Service (IRS). For example, stipends for qualified educational expenses, such as tuition or textbooks, may be tax-free for employees if they meet the requirements outlined in IRS Publication 970.

Similarly, stipends for job-related expenses, like home office equipment or professional memberships, might be considered working condition fringe benefits . These benefits are not included in an employee's taxable income if they meet the necessary criteria.

It's important for both employers and employees to understand the tax implications of any monthly stipends provided. Consulting with a tax professional or referring to relevant IRS publications can help compliance with tax laws and regulations.

When designing a monthly stipend program, consider the following factors to determine the tax treatment of the stipends:

• Purpose of the stipend
• Amount and frequency of the payments
• Eligibility criteria for employees
• Documentation and reporting requirements

By carefully structuring your stipend program and staying informed about tax laws, you can provide valuable benefits to your employees while minimizing tax liabilities for both your company and your workforce.

Common types of monthly stipends

As an employer, you have the flexibility to design monthly stipend programs that cater to the unique needs and interests of your workforce. Here are some common types of monthly stipends you might consider offering:

Wellness stipends

A wellness stipend is a monthly allowance that employees can use to support their physical and mental well-being. This type of stipend can cover a wide range of expenses, such as:

• Gym memberships or fitness classes
• Healthy eating programs or meal delivery services
• Stress-reduction activities like yoga or meditation
• Mental health services or therapy sessions

By providing a wellness stipend, you demonstrate your commitment to your employees' overall health and well-being. This can lead to a more productive, engaged, and resilient workforce.

Professional development stipends

Investing in your employees' professional growth can benefit both the individual and your organization as a whole. A professional development stipend is a monthly allowance that employees can use to acquire new skills, knowledge, and experience. This type of stipend can cover expenses such as:

• Online courses or workshops
• Industry conferences or seminars
• Professional certification programs
• Books or subscriptions related to their field

A professional development stipend shows that you value your employees' career aspirations and want to support their continuous learning and growth.

Remote work stipends

With the rise of remote work, many companies are offering monthly stipends to help employees set up and maintain a comfortable and productive home office. A remote work stipend can cover expenses such as:

• Ergonomic office furniture
• High-speed internet or phone service
• Computer hardware or software
• Utility costs associated with working from home

Providing a remote work stipend allows your employees to have the tools and resources they need to succeed in a remote work environment.

Commuter stipends

For employees who commute to the office, a monthly commuter stipend can help offset the costs of transportation. This type of stipend can cover expenses such as:

• Public transit passes
• Parking fees
• Tolls or gas for personal vehicles
• Bike-sharing or ride-sharing services

A commuter stipend can make it easier for employees to get to work, reducing stress and improving punctuality.

Cell phone stipends

In the current connected world, many employees use their personal cell phones for work-related purposes. A cell phone stipend is a monthly allowance that helps cover the costs of maintaining a mobile phone plan. This type of stipend can cover expenses such as:

• Monthly service fees
• Data plans
• Device upgrades or repairs

Offering a cell phone stipend gives employees reliable communication tools without bearing the full cost themselves.

When designing your monthly stipend program, consider surveying your employees to understand their needs and preferences. You can also review industry benchmarks and best practices to make your stipends competitive and aligned with your company's goals and values.

Remember to communicate the details of your stipend program clearly to your employees, including eligibility criteria, payment methods, and any documentation or reporting requirements. By offering a range of monthly stipends that support your employees' well-being, professional growth, and work-life balance, you can create a more engaged, loyal, and productive workforce.

How to implement a monthly stipend program

Implementing a monthly stipend program can be a great way to support your employees' needs and improve their experience at your workplace. Here's a step-by-step guide to help you get started:

Determine the purpose and budget

First, identify the specific goals you want to achieve with your monthly stipend program. Do you want to promote employee wellness, support professional development, or help with remote work expenses? Once you have a clear purpose in mind, allocate a budget that aligns with your company's financial resources and the estimated costs of the stipends you plan to offer.

Establish clear guidelines and eligibility criteria

To make sure the success of your stipend program, develop clear guidelines and eligibility criteria for your employees. This should include details such as:

• Who is eligible for the stipend (e.g., full-time employees, part-time employees, contractors)
• What expenses are covered by the stipend
• How much each employee will receive per month
• What documentation or proof of expenses is required, if any
• How the stipend will be paid out (e.g., as a separate payment or as part of regular payroll)

Having well-defined guidelines will help prevent misunderstandings and make your program’s administration fair and consistent.

Choose a stipend management platform

To streamline the administration of your monthly stipend program, consider using a dedicated stipend management platform. These platforms can automate many of the tasks involved in managing stipends, such as:

• Tracking employee eligibility and enrollment
• Processing payments and reimbursements
• Generating reports and analytics
• Ensuring compliance with tax laws and regulations

A stipend management platform can save you time and reduce the risk of errors, while also providing a user-friendly experience for your employees.

Communicate the program to employees

Once you have established your monthly stipend program, it's important to communicate the details to your employees clearly and effectively. This can include:

• Sending an email announcement or newsletter
• Holding informational sessions or webinars
• Updating your employee handbook or benefits portal
• Providing regular reminders and updates about the program

Make sure to emphasize the value of the stipend program and how it aligns with your company's mission and values. Encourage employees to take advantage of the stipends and provide them with any necessary resources or support to do so.

Monitor usage and gather feedback

After launching your monthly stipend program, regularly monitor its usage and gather feedback from your employees. This can help you assess the effectiveness of the program and identify areas for improvement. Some key metrics to track include:

• Participation rates
• Average stipend amounts claimed
• Types of expenses covered
• Employee satisfaction and engagement

You can gather feedback through surveys, focus groups, or one-on-one conversations with employees. Use this information to refine your stipend program over time so it can continue to meet the needs of your workforce.

By following these steps, you can successfully implement a monthly stipend program that supports your employees' well-being and professional growth, while also fostering a positive and engaging workplace culture.

Closing thoughts - Do monthly stipends really make a difference?

Monthly stipends represent more than just a modern benefits trend. They signal a fundamental shift in how companies view their employees: as individuals with unique needs, preferences, and circumstances. The data speaks for itself. 

Companies implementing flexible stipend programs report higher engagement scores, improved retention rates, and stronger employer brand perception. When employees can choose benefits that genuinely improve their lives, they feel valued in ways that traditional, rigid benefit packages simply can't match.

The real question isn't whether monthly stipends make a difference, but whether your organization is ready to embrace this more personalized approach to employee benefits. Success requires the right mindset, clear policies, and most importantly, the right platform to manage it all effectively.

That's where Forma comes in. As a leading flexible benefits platform, Forma helps companies design and deliver customized stipend programs that employees actually use. With a 78% monthly utilization rate that far exceeds industry standards, Forma combines three payment options (the Forma Store, Forma Visa Card, and reimbursements) with dedicated human support and real-time analytics. 

Companies like Stripe, Instacart, and Lululemon trust Forma to manage their global benefits programs across 100+ countries, ensuring compliance while giving employees the flexibility they deserve. 

Ready to see how monthly stipends can help? <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Schedule a demo</span> with Forma to explore how flexible benefits can help you attract and retain top talent.

*This document is for informational purposes. Forma is not engaged in the practice of law. Nothing contained herein is intended as tax or legal advice nor to replace tax or legal advice from counsel. If you need tax or legal advice, please consult with counsel or a certified tax professional.