Definition · Compensation and benefits
Stipend
Definition
Stipend, in an employment context, means a fixed amount of money an employer pays to help employees cover a specific category of cost, such as home office equipment, internet, wellness or learning. Unlike a reimbursement, the employee does not usually submit receipts, which keeps administration simple but generally makes the payment taxable.
Also called: Employee stipend, Allowance, Remote work stipend, Wellness stipend
Common types of employee stipend
- Remote work stipend: a one-time setup amount (often $300 to $1,000) for a desk, chair and monitor, and sometimes a monthly amount ($25 to $100) toward internet and phone. Often provided as part of remote onboarding.
- Wellness stipend: a monthly or annual amount for gym memberships, fitness apps or classes.
- Learning stipend: an annual allowance for courses, books or conferences, smaller and more flexible than formal tuition reimbursement.
- Commuter or meal stipend: for in-office days.
- Intern or trainee stipend: a fixed payment to interns or apprentices. In the US, if the intern is legally an employee, the stipend must still meet minimum wage and overtime rules.
Stipends sit within employee benefits and the wider total rewards package, and they are popular because they feel flexible to employees and are easy to run.
Stipend vs reimbursement
A reimbursement pays back a documented, business-related expense, usually under an accountable plan: the expense has a business purpose, the employee substantiates it with receipts, and any excess is returned. Under IRS rules, accountable plan reimbursements are not taxable wages.
A stipend is paid regardless of what the employee actually spends, so in most cases it is taxable income that goes through payroll with withholding. A $50 monthly internet stipend costs the employee tax; a $50 reimbursement backed by a bill does not.
Some states require employers to reimburse necessary business expenses. California Labor Code section 2802 is the best-known example, and it can apply to remote employees' phone and internet use. A flat stipend can satisfy that duty only if it is enough to cover the actual expenses. Rules vary by state.
Overtime and hourly employees
For non-exempt employees under the FLSA, a payment that genuinely reimburses business expenses is excluded from the regular rate. A stipend that is really extra pay, such as a flat wellness amount, generally counts toward the regular rate and increases overtime pay. Payroll should classify each stipend correctly before rollout, especially for contact center or warehouse teams that work frequent overtime.
Designing a stipend program
- Decide the purpose first: equipment, wellbeing, learning or retention.
- Pick a frequency. One-time setup, monthly or annual each suit different costs.
- Set eligibility rules for part-time, seasonal and contingent workers, and apply them consistently.
- Communicate the tax treatment so the net amount does not surprise people.
- Review usage after a year. If most employees spend a learning stipend on the same three courses, a negotiated group program may give better value.
Frequently asked questions
What is a remote work stipend?
It is a payment to help remote or hybrid employees cover home office costs such as furniture, equipment, internet or phone. It may be a one-time setup amount, a recurring monthly amount, or both.
What is a wellness stipend?
A wellness stipend is a fixed monthly or annual amount employees can spend on health and wellbeing, such as gym memberships, fitness classes or meditation apps.
Are employee stipends taxable?
In the US, most stipends are taxable wages because employees do not have to account for how they spend them. Payments made under an accountable reimbursement plan are generally not taxable.
How much should a remote work stipend be?
Common ranges are $300 to $1,000 for a one-time setup and $25 to $100 a month for ongoing costs. Check state reimbursement laws, which may require covering actual necessary expenses.