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What is an educational stipend?

find out what an educational stipend is and how offering stipends can enhance employee skills, boost retention, and drive your company's growth.

 Min Read 

Do you want to give your employees more flexibility and choice in their learning and development? An educational stipend is a crucial benefit to attract top talent who want to continuously learn and add to their skill set.

An educational stipend offers a personalized approach to upskilling your workforce. It’s a non-taxable benefit that lets employees pursue knowledge and skills that align with their career goals and interests.

In this article, we’ll cover the benefits of an education stipend, the eligibility, tax regulations, and, most importantly, information about how you can implement your own education stipend.

What is an educational stipend?

An educational stipend is a sum of money companies give employees to spend on learning initiatives relevant to their professional development.

This allowance can be used for various educational expenses, such as online courses, books, newsletter or industry magazine subscriptions, coaching programs, and conferences. Educational stipends are typically offered on a monthly, quarterly, bi-annual, or yearly basis, depending on the company’s budget and learning and development strategy.

  • Flexibility and personalization: Educational stipends allow employees to choose learning opportunities that best fit their needs and learning styles. Rather than a one-size-fits-all approach, stipends allow for a tailored learning experience.
  • Variety of learning options: Employees can use their stipend to access a wide range of educational resources, from virtual classes and webinars to printed materials and in-person events. This diversity of learning methods caters to different preferences and helps keep employees engaged.
  • Support for continuous learning: By providing a dedicated budget for education, companies encourage a culture of ongoing professional development. Employees feel supported in their learning journey and motivated to acquire new skills throughout their careers.

Learn more about stipends by reading our blog, what is a stipend.

Types of educational stipends

Educational stipends come in various forms to suit different company budgets and learning and development strategies. Here are the most common types of educational stipends:

1. Monthly stipends

Monthly educational stipends provide employees with a set amount of money to invest in their professional development. This type of stipend is ideal for companies that want to encourage continuous learning and support employees in pursuing short-term learning goals.

With a monthly stipend, employees can take advantage of smaller-scale learning opportunities, such as online courses, webinars, or books.

2. Quarterly stipends

Quarterly educational stipends are distributed every three months, allowing employees to plan for slightly larger learning initiatives. This type of stipend is suitable for companies that want to balance providing regular learning opportunities and allowing employees to pursue more substantial educational goals.

Quarterly stipends give employees the flexibility to save up for more expensive learning resources, such as multi-part online courses or professional certifications.

3. Bi-annual stipends

Bi-annual educational stipends are offered twice a year, usually at the beginning of each half-year period. This type of stipend is beneficial for companies that want to align their learning and development efforts with their overall business strategy.

By providing stipends on a bi-annual basis, companies can ensure that employees are focusing on learning initiatives that support the organization’s goals for each half-year period. Employees can use bi-annual stipends to invest in more comprehensive learning programs, such as attending industry conferences or enrolling in specialized training.

4. Yearly stipends

Yearly educational stipends are provided once a year, typically at the beginning of the fiscal or calendar year. This type of stipend is most suitable for companies that want to make a significant investment in their employees’ long-term professional development.

With a yearly stipend, employees have the opportunity to plan for more extensive learning initiatives, such as pursuing a professional degree or participating in an immersive workshop. Yearly stipends also give employees the flexibility to allocate their funds according to their individual learning needs and goals for the year ahead.

Many companies require employees to stay for a specific period after receiving an education stipend. This period varies by company but is typically meant to ensure that the company benefits from its investment in your education.

Moreover, if an employee leaves before this period expires, they might have to repay the stipend or a portion of it.

Benefits of offering educational stipends

Offering educational stipends can significantly impact employee morale and increase employee retention. Here are some key benefits of making educational stipends a part of your employee benefits program.

Attract and retain top talent

In today’s competitive job market, candidates are looking for more than just a paycheck. They seek employers who invest in their personal and professional growth.

Educational stipends demonstrate your commitment to employee development, making your company more attractive to high-quality candidates. When you offer this benefit, you differentiate yourself from competitors and position your organization as the employer of choice.

Increase employee job satisfaction and productivity

When employees have the opportunity to learn new skills and advance their careers, they are more likely to feel satisfied with their jobs. Educational stipends empower employees to take control of their own development, leading to increased engagement and motivation.

As employees acquire new knowledge and skills, they become better equipped to tackle challenges and contribute to your organization’s success. This, in turn, boosts overall productivity and performance.

Help employees achieve career goals

Educational stipends provide employees with the resources they need to pursue their career aspirations. Whether they want to deepen their expertise in a particular area, learn a new skill, or explore a different field, stipends give them the flexibility to choose learning opportunities that align with their goals. Supporting your employees’ career development benefits them individually and strengthens your organization by fostering a skilled and adaptable workforce.

Promote continuous learning and professional development

In today’s rapidly changing business landscape, continuous learning is no longer a luxury—it’s a necessity. Educational stipends encourage employees to embrace a growth mindset and engage in ongoing professional development.

By providing financial support for learning initiatives, you create a culture that values knowledge-sharing, innovation, and continuous improvement. This culture of learning helps your organization stay agile and responsive to evolving industry trends and customer needs.

Boost employee retention

Investing in your employees’ education and development shows that you value their contributions and are committed to their long-term success within your organization. When employees feel supported in their learning journey, they are more likely to remain loyal to your company.

Educational stipends can be a powerful retention tool, as they demonstrate your willingness to invest in your employees’ future. By offering this benefit, you create a strong sense of loyalty and reduce turnover rates.

Improve work-life balance

Educational stipends give employees the flexibility to pursue learning opportunities that fit their schedules and learning preferences. Whether they prefer online courses, in-person workshops, or self-paced learning, stipends allow them to balance their professional development with their personal lives. This flexibility can lead to improved work-life balance, as employees feel empowered to manage their own learning journey without sacrificing their personal commitments.

Fill skill gaps and hard-to-fill positions

As your organization grows and evolves, you may encounter skill gaps or struggle to fill certain positions. Educational stipends can help bridge these gaps by enabling employees to acquire the specific skills and knowledge needed for these roles.

By investing in your existing workforce’s development, you can create a pipeline of qualified internal candidates for hard-to-fill positions. This not only saves time and resources on external recruiting but also provides career advancement opportunities for your employees.

How do educational stipends work?

Educational stipends are a flexible and personalized way for companies to support their employees’ learning and development.

The process is simple: the company allocates a specific amount of money for each employee to spend on educational resources and activities that align with their professional goals and the organization’s objectives.

Once the stipend is allocated, employees can choose how they want to spend it. They can select learning opportunities that best suit their needs, interests, and learning styles.

This could include online courses, workshops, conferences, books, or any other educational resource that helps them acquire new skills and knowledge relevant to their role and career aspirations.

Companies can administer educational stipends in two main ways: reimbursement or prepaid debit cards. With the reimbursement method, employees pay for their chosen learning initiatives upfront and then submit receipts to their employer for reimbursement. This approach requires employees to have the financial means to cover the initial costs, which may be a barrier for some.

Alternatively, companies can provide employees with prepaid debit cards loaded with their stipend amount. This method eliminates the need for employees to pay out of pocket and simplifies the process for both the employer and the employee.

Prepaid debit cards offer a more inclusive and accessible way for all employees to take advantage of their educational stipends, regardless of their financial situation.

What can employees spend their educational stipend on?

Educational stipends offer employees a wide range of options to support their learning and development.

From online courses to professional memberships, there are numerous ways employees can utilize their stipend to acquire new skills and knowledge. Here are some of the most popular categories:

Online courses and classes

Online learning platforms like Udemy, Coursera, and edX provide a vast array of courses on various subjects, allowing employees to learn at their own pace. These courses range from brief video tutorials to comprehensive certificate programs, catering to different learning needs and preferences.

Employees can use their educational stipend to enroll in courses that align with their professional goals, such as digital marketing, data analysis, or project management.

Memberships and networking

Joining professional associations and attending networking events can be valuable for employees looking to expand their industry knowledge and build connections.

Educational stipends can cover the cost of membership fees for organizations like Toastmasters, which helps individuals improve their public speaking and leadership skills. Employees can also use their stipend to attend networking events, conferences, or seminars, where they can learn from experts and connect with peers in their field.

Books and audiobooks

Reading remains one of the most effective ways to acquire new knowledge and insights. Employees can use their educational stipend to purchase books, ebooks, or audiobooks related to their professional development.

Whether it’s a book on effective communication, a guide to data visualization, or a biography of a successful business leader, reading can help employees expand their skills and perspective. Subscriptions to services like Audible or Blinkist can also be covered by the stipend, providing employees with access to a wide range of audiobooks and book summaries.

Mentorship and career coaching

One-on-one guidance from a mentor or career coach can be invaluable for employees looking to advance their careers. Educational stipends can be used to pay for mentorship programs or coaching sessions, where employees can receive personalized advice and support.

This can include help with setting career goals, developing leadership skills, navigating career transitions, or overcoming specific challenges. Engaging with a mentor or coach can help employees gain clarity, confidence, and direction in their professional journey.

Magazine and newsletter subscriptions

Staying informed about the latest industry trends and developments is crucial for professional growth. Educational stipends can cover subscriptions to relevant magazines, journals, or newsletters that keep employees up-to-date with the latest news, research, and best practices in their field.

This can include publications like Harvard Business Review, Fast Company, or industry-specific journals. By regularly reading these resources, employees can stay current, generate new ideas, and apply the latest insights to their work.

Virtual and in-person conferences

Conferences provide a wealth of learning and networking opportunities for employees. Educational stipends can be used to cover the cost of attending virtual or in-person conferences related to an employee’s role or industry.

These events often feature keynote speakers, panel discussions, workshops, and networking sessions, allowing employees to learn from experts, share ideas with peers, and make valuable connections. Attending conferences can expose employees to new perspectives, inspire innovation, and help them stay at the forefront of their field.

Learning foreign languages

In today’s globalized business environment, knowing a second language can be a valuable asset. Educational stipends can support employees who want to learn a new language or improve their language skills.

This can include enrolling in language courses, using language learning apps like Duolingo or Babbel, or hiring a private tutor. Developing language skills can help employees communicate more effectively with colleagues, clients, or partners from different countries and can open up new opportunities for international collaboration and growth.

College tuition reimbursement

For employees who want to pursue a degree or certificate program, educational stipends can be used towards college tuition reimbursement. This can include undergraduate or graduate degrees, as well as specialized certificate programs related to an employee’s role or career goals.

By supporting employees’ pursuit of higher education, companies can help them develop advanced skills and knowledge, take on more complex roles, and contribute to the organization’s long-term success. Tuition reimbursement programs often have specific eligibility criteria and may require employees to maintain a certain grade point average or remain with the company for a specified period after completing their studies.

How to implement an educational stipend program

Determine skills needed and tailor the program accordingly

Identify the skills your organization needs to fill current gaps and improve employee productivity. Use this information to design an educational stipend program that addresses these specific requirements, ensuring that the learning opportunities align with your company’s goals and objectives.

Customize the program to employee needs

Gather feedback from your employees about their learning preferences and the skills they believe are most relevant to their roles.

Tailor your educational stipend program to meet these individual needs, allowing for personalized learning paths that cater to each employee’s unique career aspirations and development goals.

Communicate program details and encourage questions

Clearly explain the specifics of your educational stipend program to your employees, including how much they can spend, what types of learning opportunities are eligible, and how to access the funds.

Encourage open communication and address any questions or concerns they may have to ensure a smooth implementation process.

Formalize program and include in employee perks list

Officially incorporate your educational stipend program into your company’s employee benefits package. Document the program details, including eligibility criteria, redemption processes, and any relevant policies or guidelines.

Adding the stipend to your list of employee perks demonstrates your commitment to investing in your workforce’s development.

Feature program in job postings

Highlight your educational stipend program in job postings and recruitment materials to attract top talent who value continuous learning and professional growth.

Emphasize how your company supports employees in acquiring new skills and knowledge, setting you apart from competitors and positioning your organization as an employer of choice.

Embrace a continuous development culture

Foster an organizational culture that prioritizes ongoing learning and professional development. Encourage managers and leaders to actively support their team members’ learning initiatives and create opportunities for employees to apply their newly acquired skills and knowledge in their daily work. 

Celebrate successes and share stories of how educational stipends have positively impacted individual and organizational growth.

Let employees learn at their own pace

Allow your employees the flexibility to pursue learning opportunities that fit their schedules and learning styles. Recognize that some may prefer self-paced online courses, while others may thrive in classroom settings or through hands-on workshops. Trust your employees to manage their own learning journey and provide the necessary support and resources to help them succeed.

Monitor and evaluate program success

Regularly assess the effectiveness of your educational stipend program by tracking key metrics such as employee participation rates, skill acquisition, and the impact on job performance.

Seek feedback from employees and managers to identify areas for improvement and make data-driven decisions to optimize the program’s value for both your employees and your organization.

What are the most effective ways to use an educational stipend?

Align stipend spending with company goals and employee development needs

To maximize the impact of educational stipends, ensure that employees’ learning initiatives align with your organization’s objectives and the skills needed for their roles. Encourage employees to choose learning opportunities that support their personal growth and contribute to the company’s success.

This strategic alignment helps create a win-win situation where both the employee and the organization benefit from the investment in learning and development.

Manage stipends efficiently with a platform

Streamline the administration of your educational stipend program by using a flexible benefits platform. This allows you to easily allocate funds, track spending, and monitor employee progress.

A centralized platform like Forma simplifies the process for both HR and employees, reducing manual work and ensuring that stipends are used effectively. With real-time analytics and reporting generated by Forma, you can gain valuable insights into how employees are utilizing their stipends and make data-driven decisions to optimize the program.

Measure outcomes and establish a learning-first mentality

To determine the success of your educational stipend program, establish clear metrics and regularly assess the impact on employee performance, engagement, and retention.

Gather feedback from employees and managers to understand how the acquired skills and knowledge are being applied on the job. Celebrate learning achievements and share success stories to reinforce the value of continuous learning.

Foster a learning-first mentality by making learning and development a core part of your company culture, encouraging employees to prioritize their professional growth and share their knowledge with others.

Get started with Forma today

Forma understands the difficulties you face in developing a skilled and motivated workforce. With companies constantly competing for top talent, it can be challenging to retain employees with just a salary. 

Employee benefits packages that feature an education stipend are an incredible way to help employees prioritize personal development alongside their employment. Flexible benefits help them better adjust to the current challenges and prepare to take on more responsibilities in the future. 

Our flexible benefits platform streamlines the administration of educational stipends, making it easier for you to invest in your employees’ growth. <span class=“text-style-link text-color-blue” fs-mirrorclick-element=“trigger” role=“button”>Schedule a consultation</span> with one of our experts to discover how we can tailor a solution to meet your unique needs.

*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 is it intended to replace tax or legal advice from counsel. If you need tax or legal advice, pleagoogle.com/search?channel=fs&clientse consult with counsel or a certified tax professional.