Scan any a top-rated company’s career pages or job posts, and you’ll quickly get a birds-eye view of today’s most popular employee perk and benefit trend: stipends.
The concept of stipends has been around for a while. However, how organizations design and deploy them to their people has transformed quite a bit over the last 10 years.
Companies are launching new stipend programs to solve operational challenges — consolidating vendors, optimizing budgets, reducing administrative work — while supporting employee needs like wellness, professional development (hello, AI upskilling), family benefits, and more.
The result? Stronger total compensation packages and attract, engage, and retain top talent.
In this guide we’ll cover how the concepts of stipends has evolved over the last 10 years, and focus on the modern approach to stipends companies are now taking.
What is a stipend?
First, a quick definition:
A stipend is a fixed amount of money employers give their employees to cover various costs of business-related expenses, or lifestyle perks such as gym memberships, meals, or commuting expenses.
Traditionally, the concept of stipends was meant simply just for business-related expenses, such as a “relocation stipend” or “meal stipend for travel.” These were centered around needs and requirements to make work possible.
As more companies recognize that employee stipends enable them to offer a wider range of perks within the same budget, they are adopting stipends as a flexible solution that allows employees to choose their own benefits. This approach not only addresses employees’ needs during work hours (9-5), but also extends support beyond the workplace, focusing on the ‘5-9’ — the time employees spend outside the office.
Overview:
Traditional stipends = relocation stipend, meal stipend for travel, and housing stipends.
For the purpose of this post, we’ll be focusing on the modern approach as these are more common due to their strategic benefits for employers and employees.
Key Attributes of Stipends
There are several key elements to stipends that make up a modern stipend program, which we’ve outlined below.
Stipends can be designed to be one-time or recurring.
One-time stipends are great for new hires or special projects, as they provide a one-time boost in compensation (think: a work from home stipend for remote equipment).
Recurring stipends are paid out to employees on a monthly, quarterly, or annual basis. They’re best for ongoing expenses, like gym reimbursements, subscriptions, cell phone bills, and health and wellness benefits.
Most companies offer stipends of some kind. A few examples:
A report from Samsung and Oxford Economics found that 98% of companies provide a full or partial stipend to compensate employees using their personal mobile phones for work purposes.
The stipends you choose to offer depend on your company’s goals, budget, and what matters to your team. It’s best to survey your employees to see which benefits matter most to them.
What are the key differences between a stipend and a salary?
The main difference between a stipend and a salary is that the latter is regular employee pay for work performed.
Conversely, the modern approach to employee stipends are a form of financial support used to cover lifestyle or workstyle benefits.
Although a stipend and a salary are considered a fixed sum, salaries are often modified based on merit and output. In contrast, a stipend remains a fixed amount regardless of performance.
Psst: Get in touch with someone on our team to learn how quickly you can put employee stipends in place with Compt.
Another difference between is a is paid to W-2 employees, who are subject to minimum wage requirements and overtime pay. The federal minimum wage is currently $7.25 per hour for covered nonexempt employees and $2.13 per hour for employees who receive tips. The employer must make up the difference if the minimum wage and tips received don’t equal at least $7.25 per hour. Overtime pay is 1.5x your regular pay rate for any hours worked over 40 in a workweek.
In contrast to paying hourly or regular salaries, a stipend is given only at the employer’s discretion. Under the Fair Labor Standards Act (FLSA), stipends may be lower than the minimum wage as long as they’re reserved for trainees.
Although you can’t pay a W-2 employee with a stipend rather than hourly wages or a regular salary, you can bestow a recurring stipend upon said employee as additional compensation to their base pay. In this manner, stipends serve as fringe benefits or bonuses in a comprehensive benefits package.
While regular pay for W-2 employees is subject to tax withholding by employers, stipends aren’t classified as wages. Therefore, employers will not withhold income, Social Security, or Medicare taxes.
However, the Internal Revenue Service (IRS) considers most stipends taxable income, which means employers are responsible for payroll taxes, and recipients still have to pay federal and state taxes on the amount.
HR leaders considering stipends as fringe benefits for their workforce should check with the IRS regarding tax implications.
For example, the IRS considers taxable income stipends related to health and wellness initiatives. Conversely, stipends for parking and public transit expenses can be funded by employees’ pre-tax dollars up to a designated limit. As of 2025, the IRS allows employers to withhold up to $325 per month for pre-tax commuter benefits, such as qualified parking, commuter highway vehicle transportation, and transit passes.
When filing their tax returns, recipients must record their stipends. Students who receive stipends (also called ‘taxable scholarships’ or ‘taxable grant scholarships’) should report the amounts used for incidental expenses, such as room and board, travel, and equipment, as well as amounts received as payments for teaching, research, or other services.
The IRS considers stipends for tuition and fees required for enrollment or attendance at an educational institution or for fees, books, supplies, and equipment required for courses tax-free and do not need to be reported.
Psst: Did you know that we offer a special module for professional development for easy approvals and streamlined workflows?
Types of stipends
Several common types of stipends cover the cost of work, travel, and living expenses.
Housing stipends (traditional stipend)
A housing stipend or housing allowance is a specific amount of money provided to assist with covering housing-related expenses. Typically offered by employers or educational institutions, housing stipends are often part of employee compensation packages or student benefits.
Unlike traditional salaries or wages intended for general living expenses, a housing stipend is designated explicitly for rent, mortgage payments, utilities, and other related costs.
For example, professional development stipends typically cover expenses like attending classes, workshops, and conferences.
With more workers interested in continuing their education, tuition credits have emerged as one of the most highly valued benefits in recent years. Through 2025, employers can continue to make contributions of up to $5,250 per employee annually toward eligible education expenses without raising the employee’s gross taxable income under Section 127 of the Internal Revenue Code.
Health insurance stipends
Employers may offer a health insurance stipend instead of enrolling trainees in their health insurance plan to mitigate the cost of coverage from another provider.
Academic research stipends (traditional stipend)
Institutions typically offer academic research stipends to cover expenses for graduate students and researchers. This allows them to focus solely on their projects rather than working a full-time or part-time job to make ends meet. A graduate student may also receive a stipend from a third-party organization interested in the research.
Why you should offer lifestyle stipends
Nearly half (46%) of American workers aren’t content with the benefits package their employer currently offers, according to a 2023 survey by Forbes Advisor. And they’ll do more than pout about it — 40% of employers believe workers leave their jobs to find employment that offers a better benefits package.
What’s more? A 2024 study by Economist Impact reveals that seven in ten full-time U.S. workers would consider switching jobs for improved benefits.
That’s why offering additional benefits like lifestyle benefits and employee stipends can increase morale, employee engagement, and ultimately, retention. Paying stipends can also enhance your recruiting efforts, as top talent expects more from employers than ever before.
Companies that offer stipends demonstrate that they’re invested in their employees and candidates holistically, providing financial support for non-work expenses like wellness purchases and pet care.
That raises their profile in a competitive labor market.
While there are countless options for lifestyle benefit stipends, we’ve found these are the most popular Compt offers:
Family stipends
With Compt, you can create a family stipend, a sum of money given to employees as compensation to help them pay for family-related expenses, such as child care, elder care, fertility services, adoption, and even pet care.
Build the perfect stipend program by mixing and matching from our 27 stipend categories. We handle all the tax complexity behind the scenes, so you and your team can focus on what matters — not year-end surprises or extra paperwork.
From a purely financial perspective, companies also benefit from stipends that employees haven’t used. Since most stipends are only used after employees seek reimbursement, the remaining funds can be recouped at the end of the monthly or annual cycle.
Ready to launch employee stipends?
Cater to workers’ physical, mental, and financial needs with an all-encompassing employee value proposition. Stipends help offset living expenses, training costs, wellness expenses, commuting costs, you name it.
We can help you implement a flexible stipends program that your people (and finance team) will love. Get in touch with us today to learn more.
Editor’s Note: Compt software supports the categorization and proper reporting of benefits according to IRS guidelines, helping businesses maintain compliance. However, Compt cannot provide tax advice, and users should consult their own tax, legal, and accounting advisors when necessary.
Originally published in 2023, this post has been recently updated for clarity and relevance for our readers.
Lauren Schneider is the Head of Brand and Communications at Compt, where she channels her passion for people-centric storytelling into shaping the future of employee benefits. With a knack for blending creativity and strategy, Lauren is dedicated to making workplaces more human and impactful. When she's not crafting content, you can find her making connections on LinkedIn, honing her improv skills, or enjoying time with family.
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