Stipends are on the rise with employers looking to improve culture and productivity. Here’s what to know about this type of payment.
By Robin Reshwan, Contributor
STIPENDS ARE A TYPE of payment used by a growing number of organizations to incentivize employees, researchers, teachers, interns and volunteers. To help increase your understanding of and the implications around getting a stipend, here is a comprehensive guide to stipends, including some facts and tips about this tool.
What Is a Stipend?
A stipend is a “fixed sum of money paid periodically for services or to defray expenses,” according to Merriam Webster. Indeed.com states that stipends are usually given when the job focuses on training that primarily benefits the recipient rather than the employer.
Historically, stipends have been used in academia and some religious or nonprofit organizations as customary ways to help out student researchers, teachers and clergy with living and other basic expenses when working for little or no money. You may also be familiar with the business travel stipend as a per diem to cover meals or other daily expenses on business trips.
Although stipends continue to be offered for living and travel expenses, their application has expanded. A more creative range of stipends are used as “fringe benefits” or to offset costs for an employee, intern, trainee, researcher or graduate student. These perks are on the rise with employers looking to improve culture and motivate workers during uncertain times.
Stipend vs. Salary
In most settings, a stipend should not be a primary source of compensation for which an hourly rate or salary is paid, according to the IRS. The primary exception is in academia, where it can be offered in lieu of wages for supporting student roles like research or student teaching.
There are many ways an employer can use a stipend as a perk, benefit, incentive, recruiting or retention tool. Stipends can be used to cover the costs of commuting, meals, home office costs, insurance, wellness, living expenses, travel, cellphone or internet services and training and professional development, according to Hoppier, a stipend management platform.
For example, during a work-from-home mandate, an employer can offer a flat budget to set up a home office or a fixed amount to cover costs like internet and mobile phone services. To manage stress and encourage healthy lifestyles, a company can offer a wellness stipend for exercise and stress reduction. A student loan reimbursement is an excellent recruiting and retention stipend for use when hiring new graduates. Other companies may offer a professional development stipend to help employees maintain or expand their skills.
Are Stipends Taxable?
It depends. Because stipends aren’t equivalent to wages, an employer won’t withhold any taxes for Social security or Medicare. But in many cases, stipends are considered taxable income, so you as an earner should calculate the amount of taxes that should be set aside.
As a potential fringe benefit, some stipends may be taxable. If your company is offering a new stipend or if you are considering a new job that offers stipends, make sure to ask your employer as well as a tax professional about any tax implications.
Most stipends are intended to be a perk, not a replacement for compensation. It is best to research market compensation rates, hourly or salary-based, to ensure that your pay rate is appropriate for the work and that the stipend is an add-on and not in lieu of fair compensation. Some sources for researching current compensation rates are the Bureau of Labor Statistics, PayScale, job positing sites like LinkedIn and Indeed and your university career center.
Certain roles and industries may be more likely to offer stipends. Be sure to research if stipends, like a car allowance or a dining out budget, are expected perks for your profession. In summary, as the recipient of the stipend, you are responsible for knowing if taxes are owed. Do your homework to make sure you are well informed before accepting a stipend.
Are Stipends Negotiable?
Maybe. In general, implementing a stipend obligates an employer to offer it to all employees in similar roles – so it is typically not approached lightly. However, in an uncertain market, employers look for cost-effective ways to attract and retain great employees. This is especially true when compensation budgets are likely frozen or shrinking.
While some benefit programs and stipends are ingrained in the industry, the new work-from-home environment has disrupted many traditional ideas. It is an ideal time to ask a current or potential employer if they offer any support for working remotely, continuing education, staying healthy or other innovative ways to fuel performance.
Be prepared to share the results of your research regarding stipends in your market or profession. Even if your conversation doesn’t turn into an immediate stipend, your manager now knows what perks would be of greatest interest or have the highest return on productivity and engagement for future consideration.