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What is a stipend?

Stipends are a great way to motivate your workforce and retain and attract the best talent to your company. But, what are they? Read on to find out all you need to know about stipends.

 Min Read 

These financial incentives are designed to cover specific expenses, ranging from healthcare to professional development, and acknowledge the changing needs and preferences of the workforce.

This implies that you are not alone in contemplating the introduction of stipends into your compensation package. 

Many forward-thinking companies have embraced this approach, witnessing significant improvements in employee morale and company loyalty.

In this article, we'll cover the essentials of stipends: what they are, how they differ from salaries, the benefits of offering them, and the types of stipends that can be particularly impactful.  

This guide aims to provide a comprehensive understanding of stipends and how they can enhance your benefits program, making it more aligned with the needs of today's diverse workforce.

Key takeaways

  • Stipends cover specific expenses like healthcare, aiding employees in professional development without replacing salaries.
  • Offering stipends enhances employee morale and loyalty by meeting diverse, changing workforce needs.
  • Unlike salaries, stipends are fixed payments not tied to job performance, often supporting educational and internship opportunities.
  • Effective stipend programs are tailored to employee needs, such as remote work setups or continuous learning, enhancing job satisfaction.
  • Stipends attract diverse talent by offering flexible benefits that support personal and professional growth within a budget.
  • Partnering with Forma allows companies to tailor stipend programs effectively, ensuring benefits align with both organizational goals and employee preferences.

What is a stipend?

A stipend is a predetermined, regular payment to individuals to support their needs during work, study, or training.

The purpose of a stipend is not to compensate for the work performed in the way wages do but rather to assist with expenses, making it possible for individuals to take advantage of opportunities they might not otherwise afford.

Stipends are common in educational and research settings, where they support students and researchers engaged in extended studies or projects. 

For example, a university might provide a stipend to a graduate student conducting research in a specific field. 

Similarly, non-profit organizations or businesses might offer stipends to interns, allowing them to gain professional experience without the financial burden of unpaid internships.

The stipend amount varies widely based on the sponsoring organization, the cost of living in the location where the work is being done, and the nature of the work itself. 

Some stipends are modest, covering only basic living expenses, while others can be quite generous, especially in fields where specialized knowledge or skills are in high demand.

What are the main differences between a stipend and a salary?

Stipends and salaries are two forms of financial compensation, but they serve different purposes and are structured differently.

Salaries are periodic payments made by employers to employees as compensation for their job duties. The amount is typically agreed upon during the hiring process based on factors like industry standards, role responsibilities, experience, and geographic location. 

Stipends, on the other hand, are fixed, regular payments that are not directly tied to the performance of specific job duties. The primary purpose of a stipend is to help cover living expenses and other costs associated with the opportunity, enabling the recipient to focus on learning, research, or volunteering without the need for additional employment.

Other key differences include the following:

How much is a stipend?

The stipend amount varies widely depending on its purpose, the geographic location, and the funding capacity of the issuing organization. 

Stipends are not typically meant to replace a full salary but rather to cover basic living expenses, enabling the recipient to focus on a specific project, study, or internship without financial strain. 

The exact amount often reflects the estimated cost of living where the activity occurs, including factors such as housing, food, transportation, and other essentials.

How much should your stipend be?

Determining the amount of a stipend requires careful consideration of both the goals you wish to achieve by offering the stipend and the needs of your employees. 

Here's how to approach setting the stipend amount:

1. Evaluate employee needs

Start by assessing your employees' specific needs. For remote workers, you might consider a stipend that covers the cost of a co-working space or enhances their home office setup. Adding a stipend for a gym membership might be a great benefit for your employees as well. For employees engaged in continuous learning, a stipend could be directed toward covering educational materials or courses.

2. Consider the return on investment (ROI)

Consider the benefits to your organization of making employees more comfortable, productive, or skilled. Let’s suppose you’re considering getting decent office chairs for your employees. If a $500 investment significantly boosts employee productivity, the stipend is likely a wise investment. This rationale can be extended to other areas, such as wellness, where the stipend could reduce healthcare costs and fewer sick days.

3. Benchmark against industry standards

Look at what similar organizations in your industry are offering. This will help you set competitive stipend amounts that are neither too low to make an impact nor too high to sustain. The stipend amount varies widely across sectors and geographies, so tailor your approach to fit your specific context.

4. Flexible stipend policies

Consider implementing a flexible stipend policy that allows employees to choose how they wish to spend their stipend within certain categories. This flexibility will increase the perceived value of the stipend among your employees, as it caters to their needs and preferences.

5. Regular review and adjustment

The stipend amount should not be static. Regularly review and adjust it based on employee feedback, inflation rates, and your organization's financial health. This ensures that the stipend remains relevant and valuable over time.

Unsure of where to start or need assistance in setting or making an employee stipend program? <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Scheduling a consultation</span> with one of our experts and you’ll be provided with tailored advice and solutions that fit your needs. 

What are the benefits of offering a stipend to employees?

A well-structured stipend program within an organization's benefits package enhances its attractiveness and competitiveness in the job market. 

It acknowledges employees' unique needs and preferences, offering them the autonomy to allocate resources in a manner that most benefits their personal and professional lives.

Hence, implementing stipends as part of your benefits strategy brings several key advantages.

Elevates employee satisfaction and morale

Stipends directly enhance employee satisfaction and morale by acknowledging and supporting their individual needs. 

This personalization of benefits signals to employees that their employer values them as individuals, leading to increased engagement, loyalty, and a positive work environment. 

The psychological impact of feeling supported in personal endeavors, whether for professional development, wellness, or work-life balance, translates into a more motivated and productive workforce.

Attracts top talent from various backgrounds

A stipend program positions a company as an attractive employer that goes above and beyond in caring for its employees. 

Such a program draws attention from a wide talent pool, appealing to potential candidates who value flexibility and personalization in their benefits package. 

It breaks down barriers to entry for those who might otherwise overlook a role due to personal circumstances or needs, ensuring a diverse and innovative team.

Facilitates continuous professional growth

Dedicating stipends to professional development acknowledges the importance of continuous learning and growth within your team. 

This investment in your employees' futures not only aids in upskilling your workforce but also aligns with the ambitions of those striving for personal and professional advancement.

As employees enhance their skills and qualifications, the organization benefits from the increased expertise and innovative potential brought back into the business.

Encourages a healthy work-life balance

By providing stipends for activities that promote a healthy work-life balance, companies demonstrate an understanding of the importance of mental and physical well-being. This could include stipends for fitness memberships, hobbies, or family activities. 

Employees who feel supported in maintaining a healthy balance are likely to experience lower stress levels and burnout, contributing to a happier, more resilient workforce.

Offers flexibility while managing costs

Stipends offer a structured yet flexible approach to employee benefits. 

For companies, this means the ability to provide meaningful benefits within a defined budget, ensuring financial predictability. 

For employees, the flexibility lies in how they choose to use their stipend, allowing them to direct funds toward what matters most to them. 

This flexibility enhances the perceived value of the benefit, as it can be tailored to individual needs and circumstances.

To learn more about how stipends can be effectively integrated into your organization's benefits strategy and the impact they could have on employee engagement and company culture, <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">scheduling a consultation</span> with one of our experts is a strategic first step.

Types of stipends

Unlike traditional benefits, which are often one-size-fits-all, stipends provide a personalized approach that empowers employees to invest in areas of their lives that matter most to them. 

From healthcare to education, wellness, and even technology, stipends cover a broad spectrum of needs, aligning with the diverse priorities of today’s workforce.

Here's a breakdown of the different stipends that can play a vital part in improving employees' lives.

1. Healthcare stipend

A healthcare stipend is an allocated sum to employees to spend on healthcare needs. 

This approach is distinct from traditional employer-sponsored health insurance plans, where the employer selects and provides employees with a specific health insurance policy. 

The stipend model shifts the choice to employees, allowing them to select health insurance plans or healthcare services that best fit their personal or family needs.

How it works

  • Allocation: Employers set aside a predetermined amount for each employee, often based on roles, tenure, or part/full-time status.
  • Distribution: Stipends are typically distributed monthly or as a lump sum annually. Employees might receive these funds through payroll or a designated health reimbursement arrangement (HRA).
  • Usage: Employees can use these funds to purchase individual health insurance plans, including those available in the marketplace, or to reimburse themselves for out-of-pocket medical expenses.

What it covers

  • The flexibility of healthcare stipends means employees can address a broader range of healthcare needs than those typically covered by standard insurance plans. This might include:
  • Mental health counseling and therapy sessions are not covered under traditional plans.
  • Specialized medical treatments or procedures that are considered out-of-network in standard insurance plans.
  • Health and wellness programs aimed at preventive care include gym memberships, nutritional counseling, and stress management programs.

Incorporating a healthcare stipend into your benefits package is  a powerful tool for promoting a healthier, more satisfied, and productive workforce. 

It's a testament to a company's commitment to its employees' well-being that it offers them the autonomy to manage their healthcare expenses in a way that makes sense for them.

For businesses looking to explore and calculate the benefits of offering a healthcare stipend, consulting with experts in employee benefits can provide valuable insights and guidance. 

Forma specializes in crafting flexible benefits packages tailored to the unique needs of your workforce. 

Ready to get started? <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">scheduling a consultation</span> with one of our experts now.

2. Wellness stipend

A wellness stipend is a predetermined amount of money employees spend on activities, products, or services that promote their physical and mental well-being. 

This stipend acknowledges the importance of holistic health in enhancing quality of life and boosting work performance.

How it works

  • Allocation: Similar to healthcare stipends, employers decide on a fixed amount to allocate to employees, typically monthly or yearly. 
  • Flexible usage: Employees can use the stipend on various wellness-related expenses, from gym memberships and fitness classes to meditation apps and nutritional programs.
  • Reimbursement or direct payment: Depending on the company's setup, employees may purchase wellness services or products and submit expenses for reimbursement, or the stipend might be provided as a direct payment or credit.

What it covers

  • Gym memberships and fitness class fees.
  • Wellness app subscription fees, including meditation, sleep assistance, and fitness tracking.
  • Equipment for physical activity, such as yoga mats, weights, and bicycles.
  • Nutritional counseling sessions and diet plan subscriptions.
  • Wellness retreats and workshops focused on stress management and mental health.

Incorporating a wellness stipend into the benefits package can significantly improve employee health, morale, and productivity. 

Focusing on wellness helps reduce healthcare costs in the long run by promoting preventive care and healthy lifestyle choices. 

Furthermore, acknowledging the role of mental health in overall well-being will help reduce burnout and enhance employee engagement.

3. Education stipend

An education stipend supports employees in pursuing further education, skill development, or training that enhances their professional growth and the value they bring to their role. This stipend underlines an organization’s commitment to continuous learning and workforce development.

How it works

  • Scope: Employers allocate funds that employees can apply toward educational expenses. These include tuition fees, online courses, workshop registrations, textbooks, or software necessary for learning.
  • Eligibility and conditions: Typically, to qualify for this stipend, the educational program or course should be relevant to the employee’s current role or career path within the company. Employers may require employees to remain with the company for a certain period after completing the course.

What it covers

  • Degree programs related to the employee’s field of work
  • Certifications and licenses that add value to the employee's skill set
  • Professional development courses and workshops
  • Conferences and seminars relevant to the employee’s job or industry
  • Subscription fees for online learning platforms
  • Licensing fees for required software

Creating a well-structured education stipend program involves defining clear guidelines on eligibility, application processes, and fund usage to ensure that the investment benefits both the employee and the company. 

4. Cell phone stipend

Employees are provided with a cell phone stipend to cover the costs associated with using mobile phones for work-related purposes. 

Recognizing that employees often use their phones for emails, calls, and other work communications, this stipend aims to offset their expenses.

How it works

  • Allocation method: Employers determine a fixed monthly or annual amount to help cover the costs of cell phone service plans and, in some cases, the purchase or upgrade of a mobile phone.
  • Policy details: Companies typically establish guidelines that specify eligible expenses, such as service plans, data packages, and hardware. These policies also outline the process for claiming the stipend.

What it covers

  • Monthly service fees for voice, text, and data plans.
  • Partial or full reimbursement for the purchase of a mobile phone.
  • Upgrades or accessories necessary for fulfilling job duties.

For instance, an account manager who frequently travels to meet clients needs a reliable smartphone with a comprehensive data plan to access emails, presentations, and client management tools.

A cell phone stipend ensures they choose a service plan that meets their needs without incurring out-of-pocket expenses.

5. Remote work stipend

The remote work stipend supports employees who work from home or other non-office locations, covering expenses that create a productive and healthy remote work environment. 

As remote work becomes more prevalent, this stipend acknowledges the necessity of a conducive work environment outside the traditional office.

How it works

Allocation: A predetermined amount is offered to employees either as a one-time setup stipend or regularly to cover ongoing expenses.

Eligibility: Typically available to full-time remote employees or those who work from home more than a specified number of days per week.

What it covers

  • Home office furniture, such as ergonomic chairs and desks.
  • Office supplies, including monitors, keyboards, and computer mice.
  • Internet service upgrades for faster, more reliable connections.
  • Utilities allowance, compensating for increased electricity and heating/cooling costs.
  • Co-working space memberships are available for those who prefer an office environment.

Implementing this stipend involves defining clear guidelines on eligible expenses and the reimbursement process, ensuring that employees understand how to maximize the stipend. 

Consulting with employee benefits experts like Forma can help design a remote work stipend program that aligns with your company's objectives and supports your employees effectively.

Why you should offer lifestyle stipends to employees

Offering lifestyle stipends to employees, such as wellness stipends or allowances for non-traditional benefits, is also an increasingly popular way for companies to show they care about the holistic well-being of their workforce. 

These stipends support activities and purchases that contribute to an employee's physical, mental, and emotional health outside traditional health care benefits. 

Here are compelling reasons why these stipends are beneficial to employees and, by extension, to the organizations that offer them.

Personalized well-being

Lifestyle stipends allow employees to customize their well-being practices according to their unique preferences and needs. 

Whether it's a subscription to a meditation app, a fitness tracker, or a specialized diet plan, these stipends empower individuals to take charge of their health in ways that make the most sense. 

Personalization is key in making wellness initiatives more effective, as it acknowledges the diverse ways people achieve personal well-being.

Enhanced employee engagement and productivity

Employees who feel their employers support their well-being are likelier to be engaged and productive at work. 

Lifestyle and wellness stipends can lead to healthier lifestyles, which often translates into reduced absenteeism, higher energy levels, and better focus at work. 

Companies that invest in the holistic well-being of their employees not only foster a happier workforce but also benefit from the increased output and creativity that come from individuals who feel well cared for.

Building a positive company culture

Incorporating lifestyle stipends into a benefits package signals a company culture that values and respects the well-being of its employees. This fosters a positive workplace environment where employees feel supported and valued. 

A strong, positive company culture improves employee satisfaction and enhances the company's reputation in the industry.

Supporting remote and flexible work

As remote and flexible work arrangements become more common, lifestyle stipends help employees to create a conducive work environment at home or address specific challenges associated with remote work. 

From ergonomic furniture to co-working space memberships, these stipends ensure that employees have what they need to be productive and healthy, regardless of their work location.

For organizations looking to implement or enhance their wellness and lifestyle stipends, partnering with experienced benefits providers like Forma will ensure that their programs are impactful and aligned with their overall benefits strategy.

Speak to a Forma expert about stipends today

Having explored the various facets and substantial benefits of offering stipends to employees, it's clear that such a move enhances individual well-being and propels organizational growth. 

The idea behind integrating stipends into your benefits package is to create a more dynamic, flexible, and employee-focused offering that resonates with the modern workforce's evolving needs.

If integrating such innovative and flexible stipends into your benefits program is the next step for your organization, Forma is here to help. 

With expertise in customizing benefits packages to align with company objectives and employee preferences, Forma offers the guidance and solutions necessary to implement a successful stipend program.

<span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Scheduling a consultation</span> with one of our experts to find out how stipends can be tailored to fit your organizational structure and meet your workforce's unique needs. 

What is a stipend? Frequently asked questions (FAQs)

1. Are stipends taxable?

Yes, stipends are generally taxable income. However, the tax treatment may vary based on factors such as the purpose of the stipend and the recipient's tax status. 

2. Can volunteers be paid a stipend?

Yes, volunteers can receive stipends in certain circumstances. However, these stipends are often subject to specific regulations and may not be compensation for services rendered. It's essential to understand the legal and ethical considerations surrounding volunteer stipends.

3. Is a stipend monthly?

Not necessarily. Stipends can be paid on various schedules, including, weekly, bi-weekly, monthly, quarterly, or annually, depending on the employer and employee agreement. The frequency of stipend payments is typically outlined in the stipend agreement.

4. Is a stipend considered income?

Yes, stipends are considered income but are not immediately taxed. Whether they are subject to taxation depends on various factors, including the purpose of the stipend and the recipient's tax status. It's essential to consult with a tax professional or refer to relevant tax guidelines for specific guidance on reporting stipend income.

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