A step-by-step guide to building a successful employee stipends program

A stipend is a fixed amount of extra income employers give to their employees. Employees can use it to cover all kinds of work- and life-related expenses — transportation, health and wellness, remote work setup, you name it. I talk to clients every day about how to build an employee stipends program that makes sense for their workforce.

Since we just released our 2025 Lifestyle Benefits Benchmark Report, I’ve been fielding a lot of questions and interest from our clients about how to optimize and build their stipend program. 

Which is exactly what my team and I are here to do! So in this blog, we’re giving you the rundown on building an employee stipends program that’ll be a win-win for both you and your employees.

Building your employee stipend program from the ground up

If you’re thinking of building an employee stipends program, you need to understand the steps to put one in place. While it can feel overwhelming, let’s cut to the chase. Here are my seven steps to create your program: 

1. Figure out whether stipends are right for your organization.

Of course, we’ll be the first to tell you stipends are a fantastic benefit. But as with any people-oriented solutions, it’s not a silver bullet answer to every type of engagement and retention issues organizations may be facing.

The effectiveness of ANY perk depends on your unique context and the individual needs of your employees. A great way to understand this is through an employee benefits survey to see where your employees need support. While your employees aren’t going to call out a stipend specifically, you can survey them to see what areas you, as an employer, can help with.

Generally, stipends are a great fit when…

• You have a remote (or hybrid) workforce.
• The administrative burden of traditional perks is too high.
• You already pay your employees a fair salary and offer core benefits like health insurance and PTO, and you want to enhance your benefits package without a large salary increase.
• You have employees across different generations that have different needs and are looking for maximum flexibility.
• You want to be an employer of choice.

2. Consider stipends vs. automatic reimbursements.

You also have to consider whether the reimbursement model might be better for a particular benefit. There’s a key difference between stipends and reimbursements, which is when they’re paid.

When you offer stipends, employees get the money upfront and can spend it freely (within the category). With reimbursements, employees spend their own money first. Then, the expenses are reviewed and approved for repayment (which can take time!). 

With Compt, you can actually pay out several categories (up to 27!)  of reimbursable expenses as stipends. ‘Stipend reimbursements’ have three benefits:

1. Employers don’t have to front the money.
2. (Which means that) employers don’t pay for unused benefits.
3. Your employees still control where and how they spend, so it’s more personalized and effective than standard reimbursements.

3. Ask employees which spend categories they care about most.

Again: Whether or not a stipend is effective depends on how important your team actually thinks it is. As part of your benefits survey, don’t just ask whether or not they’re interested in ‘stipends,’ as they may not fully understand the true benefits or variety in them. Instead, ask more questions around what sort of financial or other support they need.

Here are a few that we’ve recommended our customers start with when considering how to build an employee stipends program: 

• If you could spend money on anything to improve your personal or professional life, what would it be?
• What are some hobbies or interests you wish you had more time or resources to pursue?
• What activities or services would support your mental or physical well-being outside of work?
• Are you a parent or caregiver? If so, what benefits or resources would make your life easier? 
• If we offered stipends for services that improve your work-life balance (e.g., meal kits, house cleaning, pet care), would you find value in them?
• What’s the most unexpected or WOW workplace benefit you’ve seen or heard of?

Depending on the type of company you’re running, you might already have a head start. For instance, if you’re in the veterinary or pet care industry, a pet care stipend is a no-brainer — it aligns with your company values and your employees’ interests.

Still, those aren’t the only stipends that’ll matter to them, so you’ll have to confirm that.

4. Look at your current number of employees and set a budget.

Before moving forward with your stipends program, it’s important you have a realistic idea of what it should look like and what you’ll spend.

At an absolute minimum, if your budget can support it, we recommend you offer a quarterly $100-$150 all-inclusive stipend (LSA).

But, across the tech industry, these are a few standard offerings we’re seeing:

• $50/month cell or internet stipend
• $150/quarter all-inclusive stipend
• $250+ one-time bonus for new hires for remote work office setup

To be more competitive, you could offer $1,000/year for professional development, give your team members $100 on their workiversary, and/or up that $150/quarter LSA contribution to $300.

So, if you have a 100-person team, your program will cost up to $40,000 per year at least, and increase from there. It all depends on the usage and how you set up your program to maximize your budget (which is what my team and I can help you with!)

5. Diversify your employee stipends program according to your company’s values and goals.

The stipends you offer should reflect (a) your current team’s interests, (b) who you’re trying to recruit (and retain), and (c) the values you want to instill. Here’s how to think about connecting your recruitment strategy to your benefits offerings: 

• Need entry-level sales reps and marketers? Student loan repayment assistance will give you a competitive edge when it comes to talent sourcing.
• Several employees are approaching their 30s and/or you have a mainly married or partnered workforce? Maybe they could use a family stipend to spend on costly daycare or a health and wellness stipend to buy groceries and healthy meals.
• Is your workforce mostly Gen Z or Alpha? Studies show that this current and upcoming generation care (a lot!) about corporate social responsibility. Charitable giving stipends are an easy way to help your team members give back in a way that’s meaningful to them. They also might be interested in professional development opportunities with more experienced people in their field, so consider stipends that support mentorships or career coaching. 

6. Set up the program in your stipend software.

I’m here to shout it from the rooftops: Stipend management software makes things so easy. You can set up stipend budgets for each category you want to offer, customize your pre-approval preferences to make expense review easy, and track how much money you’re spending on the program.

For each stipend, setting things up only takes a few minutes. And when it comes to disbursement, tax compliance, and enrollment tracking, your stipend software will do all the heavy lifting (and reporting).

We can get you up and running quickly (as little as two weeks, depending on your program needs!), so if you’re thinking about switching providers, now’s the time. 

7. Invite your team members!

The last step is an easy one: Tell your people about what’s being offered! When it comes to communicating employee benefits, your team needs to know a few things:

• What’s available to them
• How to register or access the stipend program
• What’s in it for them (why should they care about this new program?)

The best way to introduce your new stipend program is through a company-wide meeting. Explain what it is, why you’re offering it, and how they can use it. One easy way to get people excited is to offer a spot bonus stipend for lunch, so they use the stipend right away (who doesn’t love a free lunch?!). 

But you have to maintain open access to benefits information and make it easy to enroll. Make sure all new hires know about your program, and track enrollment so you know who still needs to sign up.

While registering is a part of the battle, regular and ongoing communications about the stipend program will lead to higher utilization — we see our customers as true champions of their programs, with a 94% engagement rate! 

To help get you on the right track, my team provides companies with a one-pager that you can share with employees, along with an employee-facing ‘Getting Started’ guide with videos and articles for step-by-step help. 

What makes stipends such a great benefit?

Stipends are more flexible than traditional benefits options. And with software, they’re easy to administer. In a world where 80% of employees say they’d even take more benefits and perks over a pay raise, they’re the ultimate way to put more money in their pockets while improving your team members’ overall satisfaction and well-being.

100% accurate, tax-compliant, and secure

Most importantly: When you administer stipends through Compt, you can design your own program with any combination of our 27 categories, already divided into taxable vs. non-taxable categories. 

We make tracking and reporting for taxes simple, whether through an API, integrations, or a simple one-click transfer to sync Compt reimbursement data to your own payroll system.

This eliminates the compliance burden from your HR team and keeps your reporting accurate (we like to keep finance happy, too!)

Flexible for you and your employees

Unlike vendor-specific and marketplace solutions, employee stipends are uniquely customizable and can flex with your employee needs (but still giving your team ultimate control over what categories to offer and how much). A higher degree of personalization leads to higher employee satisfaction, as they feel like their individual needs are being taken into consideration.

Inclusive for all team members

Flexibility means stipends are an inclusive benefit. Many perks are not.

Let’s say you offer free 24 Hour Fitness memberships as part of your wellness program. That’s great for your team members who live near a 24 Hour Fitness or who enjoy working out at the gym. But what about your team members who prefer to exercise outdoors or who don’t have a 24 Hour Fitness nearby?

With stipends, everyone can spend their money in a way that works for them. And you won’t have to spend time and effort trying to guess which expenses would be most meaningful.

Easy to administer (set it up in under 1 hour)

With a platform like Compt, it’s as easy as making a post on Instagram:

1. Set your budget.
2. Determine your spending cycle.
3. Choose your spend categories.
4. Name the stipend.
5. Launch and let your team know.

You can set this up in less than an hour, something that isn’t possible with spreadsheets and expense software.

Tax-efficient compared to salary additions

Besides the fact that, statistically, most employees prefer additional perks to a pay raise, there’s a big reason stipends can be better than extra money on a paycheck: taxes.

You can offer plenty of benefits, like commuter allowances or cell phone reimbursements, tax-free through a lifestyle spending account (LSA). On the other hand, additions to their paychecks are subject to payroll taxes, so both parties wind up overpaying when you use salary for these things.

Loved by employees

Since they’re receiving contributions towards a specific service, like remote work equipment or wellness activities, they hold more weight than a generic raise or cash bonus. In our 2024 Lifestyle Benefits Benchmarking Report, we discovered that 84% of Compt users find their stipends through our platform to be a “valuable benefit.”

What can employees pay for with stipend money?

So…now you’re probably wondering: What can employees buy with their stipends in the first place?

The answer is: A lot. It all depends on what kind of stipend you offer and the categories within which employees can spend them.

Let’s say you’re offering a health and wellness stipend. In that case, they might use it for…

• Gym memberships
• Fitness classes or personal training sessions
• Yoga or meditation retreats
• Healthy meal delivery services
• Mental health therapy sessions
• Wellness coaching programs

…or anything else related to improving their physical, mental, and emotional well-being.

But if you have a professional development stipend program, employees could use it for things like…

• Online courses or professional certifications
• Leadership or communication workshops
• Industry conferences or events
• Professional coaching or mentorship
• Training materials and resources

…you get the idea.

Want to see more? We dive into a dozen of our best employee stipend ideas in this article.

Stipend types and spend categories

Since stipends really come in all shapes and sizes, it’s easiest to break stipend categories down into two types: taxable and non-taxable. (Hint: Compt does this for you, automatically.)

Taxable spend categories

A taxable category is one that’s subject to payroll taxes. Employees need to report these on their tax returns.

• Caregiving
• Charitable giving
• Entertainment and experiences
• Family
• Financial wellness
• Food
• Health and wellness
• Home (not to be confused with “work-from-home”)
• Personal development
• Personal travel
• Pet care
• Productivity
• Tech (e.g., earbuds, wearables)
• “Treat Yourself” (a Compt exclusive, and one of our most popular)

Non-taxable spend categories

Non-taxable stipends are ones that aren’t subject to payroll taxes. These are generally either (a) deductible business expenses or (b) excluded fringe benefits.

• Business travel (including airfare, hotel, food, car rental, and local transportation)
• Cell phone and internet bills
• Commuter transit and parking expenses
• Coworking and office space rentals
• Professional development
• Professional certifications
• Remote work office equipment
• Safety equipment
• Student loan repayment
• Team events

Lifestyle spending accounts (LSAs)

A lifestyle spending account (LSA) is an innovative way to provide employees with more flexibility and control over their benefits. Your team can use their LSAs for various lifestyle expenses, such as wellness, fitness, education, transportation, or even pet care — anything that contributes to their well-being and work-life balance.

If you offer a broad array of lifestyle benefits, an all-inclusive LSA is the perfect way to consolidate them and make your program easier to manage. According to our recent report, we actually see higher utilization (up to 20% more!) from employees when offering an LSA versus exclusive stipends, as you can assign different categories to the LSA to make it, well, more inclusive.

Compt: The complete employee stipends solution

When you’re running an employee stipends program, you have several things to track and manage.

• Which perks qualify?
• For which categories and vendors?
• What’s the approval process once someone uses a perk?
• The reimbursement process?
• What about tax compliance?
• And what if employees have remaining balances?

We know it can feel overwhelming, but we have great news for you. Compt takes care of it all.

Book a demo and see how it works.