Employee perks are changing. The old method of selecting individual vendors for perks (think gym memberships, meditation apps, meal programs, or wellness platforms) rarely delivers the employee engagement companies expect and has become more burdensome for HR.
That’s why more companies are turning to employee stipends to solve both problems.
In 2026, employee stipends are most commonly delivered as reimbursement-based programs (often called Lifestyle Spending Accounts, or LSAs) that balance flexibility, tax compliance, and high participation.
This guide breaks down everything you need to know about employee stipends: what they are, how they work, common use cases, tax treatment, and why they’ve become the most flexible, inclusive, and future-proof way to deliver lifestyle benefits.
What is an employee stipend?
First, a definition:
Employee stipend (2026 definition):
An employee stipend is an employer-funded benefit that provides a fixed budget employees can spend on approved categories (such as wellness, professional development, food, or remote work), typically reimbursed after purchase to ensure tax accuracy and compliance.
You might also hear employee stipends referred to as:
- Lifestyle Spending Accounts (LSAs)
- perk allowances
- lifestyle accounts
- specialty accounts
- lifestyle benefits
- wellness wallets (a vendor term for a flexible wellness spending benefit; see definition in FAQs below)
Stipends can support wellness, remote work, food, family care, professional development, AI tools, and more.
Companies typically distribute stipends on a monthly, quarterly, annual, or semiannual cadence. Employees make a purchase, submit a receipt, and get reimbursed — a simple process that keeps employers compliant and employees free to choose what works best for them.
Table: How employee stipends typically work
| Step | What happens |
|---|---|
| Employer funds stipend | Sets amount and cadence (e.g., monthly, quarterly, annual, semiannual) |
| Employee spends | Chooses vendors freely within categories |
| Employee submits receipt | Via Compt’s reimbursement platform |
| Employer reimburses | Funds paid post-purchase for compliance |
Now let’s ground that in real-world data. Here are the 2026 employee stipend benchmarks from Compt’s 2026 Annual Lifestyle Benefits Benchmark Report (full-year 2025 Compt customer data).
2026 employee stipend and lifestyle benefits benchmarks (by company size, category, and cadence)
In 2026, most employee stipends are delivered through all-inclusive LSAs, funded quarterly, and measured by participation. Compt’s 2025 customer data shows small companies fund more per employee, while larger companies prioritize scalable, broad category design.
If you’re evaluating employee stipends in 2026, the most common question is simple:
What are other companies actually funding, and how are they structuring their stipend programs?
Compt’s 2026 Annual Lifestyle Benefits Benchmark Report (full-year 2025 Compt customer data) shows a clear shift toward consolidation, quarterly funding, and all-inclusive Lifestyle Spending Accounts (LSAs).
Benchmark methodology (2026)
The 2026 Annual Lifestyle Benefits Benchmark Report is based on:
- Full-year 2025 data from active Compt customers
- Participation = % of eligible employees who submitted at least one reimbursement
- Utilization = % of allocated budget that was spent
- Data excludes terminated employees
- Outliers may affect category-level maximums
Here’s what that looks like in practice.
How common are all-inclusive LSAs?
In practice, “Lifestyle Spending Account (LSA)” is the most common umbrella term for all-inclusive employee stipend programs:
- 64% of companies now offer an all-inclusive LSA, up from 55% the prior year.
- Most LSAs include 5+ spending categories (82%), rather than single-purpose stipends.
- Wellness performs better when embedded in an LSA (86% utilization) vs. standalone wellness stipends (62%).
This confirms a broader design trend: no matter the label, employers are consolidating scattered perks into one flexible structure. Employer-provided employee stipends give employees meaningful choice in their benefits while eliminating the complexity of managing multiple traditional perk vendors.
Average stipend funding by company size (per employee, per year)
| Company Size | Average Annual Stipend Budget |
|---|---|
| Small: Fewer than 100 employees | $1,675 |
| Midsize: 100–1,000 employees | $1,055 |
| Large: 1,000+ employees | $649 |
| Overall average | $850 |
Small companies continue to invest more per employee, while larger companies focus on scalable, broadly accessible structures.
Median annual funding by common category
| Category | Median Annual Amount |
|---|---|
| All-Inclusive LSA | $1,200 |
| Wellness | $735 |
| Professional Development | $800 |
| Cell and Internet | $1,080 |
| Food | $480 |
| Family and Caregiving | $2,500 |
(Full ranges vary by company size and design, with outliers extending significantly higher. See the 2026 Annual Lifestyle Benefits Benchmark Report for the full set of categories.)
Which funding cadence performs best?
Employee utilization varies significantly by cadence:
| Funding Cadence | Average Utilization |
|---|---|
| Quarterly | 85% |
| Semiannual | 70% |
| Annual | 65% |
| Monthly | 52% |
Quarterly funding consistently balances:
- Budget predictability for Finance
- Planning flexibility for employees
- High participation and utilization
As a result, most all-inclusive LSAs are funded quarterly.
What does “good” participation look like?
Across Compt customers in the 2026 Annual Lifestyle Benefits Benchmark Report (full-year 2025 data):
- 95% activation rate
- 93% participation rate among active users
- 89% utilization for all-inclusive LSAs
In 2026, participation — not just utilization — is the primary success metric for modern stipend programs.
What are employees actually spending on?
- 1 in 10 stipend dollars is spent at grocery retailers
- 70% of spend goes to local, regional, or niche vendors
- 20% of professional development expenses are AI-related
- 78% of total stipend spend is taxable (design-driven, not failure-driven)
Spending increasingly reflects everyday cost-of-living realities, not just discretionary purchases. At the same time, the core design of a stipend or LSA allows employees to choose where support matters most.
What this means for 2026 employee stipends and lifestyle benefits design
Modern employee stipends in 2026 are:
- Consolidated (LSA-first)
- Quarterly-funded
- Broad in category design
- Measured by participation
- Layered with selective nontaxable categories
If your program is still fragmented across vendors, funded monthly, or narrowly restricted, it may not reflect where the market has moved.
In short, stipends are the simplest way to offer flexible, personalized perks. These design choices are why stipends keep growing in 2026: they boost participation, simplify administration, and give Finance clearer tax handling, without adding more tools, vendors, or overhead.
Example of an employee stipend
In the example above, Sam’s company has allocated $100 per month to her and other employees to spend on the following perk categories: continuous learning, health and wellness, and food.
This month, Sam:
- Bought two books
- Renewed her gym membership
- Grabbed lunch with her team
She still has $20 left to use on anything that fits the categories before the month ends.
How would you spend $100 this month?
Examples of leading organizations using stipends today
We’re living in the age of personalization. Everything in our daily lives — what we watch, how we shop, the devices we use — is tailored to us and our unique preferences.
Employee benefits are no different.
Organizations are moving away from one-size-fits-all perks and toward employee stipends (or Lifestyle Spending Accounts) because they give people real choice. They’re the best method for companies looking to introduce more personalization to employee benefits without adding complexity.
While funding amounts and categories vary, most modern employee stipend programs follow similar design patterns: clear funding cadence, defined spending categories, and reimbursement-based administration. The examples below show how companies structure employee stipends in practice, including monthly, annual, and layered approaches.
Here are examples of companies using employee stipends to support their teams in flexible, human ways:
- Webflow: A monthly stipend employees can use toward work and wellness expenses, including cell phone service, internet, gym memberships, meditation apps, and more.
- Qualtrics: A $1,800 annual “Experience Bonus” employees can use for concerts, trips, sports, events, or charity; a $1,200 annual wellness stipend; and up to $10,000 reimbursed for adoption or surrogacy expenses.
- Evernote: A $1,000 annual vacation stipend to encourage employees to take meaningful time off.
- Buffer: A comprehensive stipend program that includes a $1,000 home-office setup stipend, an annual family support stipend ($3,000 per year per child, for up to four dependents), a $250 AI tools stipend, a coworking/working-smarter stipend, and annual learning and development funds.
- GitLab: A monthly remote-work stipend employees can use for home-office supplies, ergonomic equipment, and workspace needs.
- Fictiv: A 13-category stipend program powered by Compt (including cell phone, internet, continuous learning, remote work, and team events) with 95% employee participation.
- ButterflyMX: A $300/quarter “Self-Care Stipend” administered in Compt that covers wellness, groceries, fitness, pet care, and more across 10 countries.
- Carrot Fertility: Multiple stipends delivered through Compt, including a new-hire tech stipend, a productivity stipend, wellness spending, and meal-related spot bonuses.
- Quickbase: A flexible lifestyle stipend program set up in Compt that consolidates multiple vendors and supports spending across more than 1,300 vendors.
- TEN7: A comprehensive stipend program managed in Compt that includes a $900 annual tech stipend, a $250 annual professional development stipend, a $3,600 annual professional coaching stipend for leadership, and a $100 annual mental wellness stipend, along with a new-hire stipend for workspace setup and spot bonuses throughout the year.
Note: These examples reflect employee stipend programs publicly shared by each company. Benefit structures may evolve over time as organizations update their total rewards strategies.
Across these examples, the structure is consistent: companies are consolidating perks into flexible stipend programs, funding them predictably, and allowing employees to choose vendors that fit their lives. Whether delivered as a single all-inclusive LSA or layered category-specific stipends, the goal is the same: flexibility without administrative sprawl and one-off perks.
Want to see more examples? Check out “53 Examples of Employee Stipends at Leading Organizations.”
What does typical spending look like?
Check out how Compt customers use their professional development stipends
After analyzing our customers, we can see the data is clear: Delivering choice to your people matters.
Types of employee stipends offered by companies
Compt offers 28 different stipend categories, including the following:
- All-inclusive employee stipends, also known as Lifestyle Spending Accounts (LSAs)
- Wellness stipends
- Learning and development stipends
- AI tools stipends
- Remote work stipends
- Food and grocery stipends
- Travel or experience stipends
- Family and caregiving stipends
- Cell phone stipends
- Equipment stipends
- Company swag stipends
According to our 2026 Annual Lifestyle Benefits Benchmark Report, all-inclusive LSAs are the most common type of employee stipend, with 64% of Compt customers offering an LSA. LSAs combine categories like wellness, family care, food, and personal essentials into one flexible benefit employees can use in the way that fits them best.
All-inclusive LSAs allow multiple spending categories under a single stipend policy, reducing admin overhead while increasing employee choice.
What are the benefits of employee stipends?
Recent benefits research shows that employees are reevaluating what they value most at work. Forbes Advisor reported in late 2024 that almost half of American workers are not satisfied with their benefits, and one in 10 would take a pay cut to access better ones. A separate Economist Impact study found that 70% of U.S. workers would switch jobs for a better benefits package.
This new approach to employee perks has seen a lot of media attention (and attention from HR influencers) because it solves many common problems of traditional perk programs and addresses the trends shaping the future of work.
So, what exactly are the benefits for companies and employees? Let’s dig in.
Why are stipends more flexible than point-solution benefits?
Employee stipends give your team access to the lifestyle benefits they actually want and need.
Pet insurance, in-office yoga, and financial planning services are all excellent perks, but often only a small percentage of a team can or will use them. As you already know, low utilization is a quick way to burn cash and burn yourself out (because you’re the one managing them all!).
Stipends create a flexible, personalized perk experience. Because your employees have more control over how they use the benefit, they’re more likely to engage. This makes stipends and LSAs the ultimate inclusive benefit.
That’s a budget win!
Table: Stipends vs. traditional perk vendors
| Feature | Employee stipends with Compt | Vendor-based perks |
|---|---|---|
| Vendor choice | Any vendor | One or few |
| Employee fit | Personalized | Limited |
| Utilization | Higher | Often low |
| Admin overhead | Low | High |
| Tax handling | Automatic based on IRS rules | Often manual |
Why do employees prefer stipends?
Stipends provide more value than extra money in a paycheck. In a recent employee benefits study, Fractl surveyed 2,000 employees and found that 80% would take additional benefits and perks over a pay raise.
Many of your team members want to be healthier, happier people. So they’re more likely to invest in their own well-being if you offer them a budget for it.
How do stipends simplify HR workflows compared to forms and spreadsheets?
HR no longer has to pick the “perfect perk” manage a long list of disconnected vendors. With stipends, you save time and money on implementation and ongoing administration. You can even set one up in an hour or less.
“I’m probably in Compt twice a month for a few minutes. It’s self-sufficient.”
— Dani Adelman, Director of Operations, TEN7
When you choose stipends, you manage one program instead of many point solutions.
With Compt, you also tap into our employee reimbursement system that supports unlimited vendors and customizable spending categories, which streamlines the process of setting up spending categories with unlimited vendors. This level of flexibility is only possible with a stipend reimbursement model.
Employees can buy what they need and get reimbursed through the platform. They can shop anywhere from major retailers like Target or Amazon to their favorite local bookstore or ice cream shop. In the past year, Compt customers made purchases across 64,000+ unique vendors, from major retailers to local businesses —without requiring HR to manage vendor contracts.
Want to see how much your perk vendors are costing you today? Visit our Vendor Calculator.
Learn more about the benefits of all-inclusive Lifestyle Spending Accounts.
Unlock the power of Lifestyle Spending accounts with our comprehensive guide on benefits and setup, plus examples from companies of all sizes.
How do stipends support accuracy, compliance, and security?
If you’re managing stipends manually right now, you know the significant effort required to ensure accuracy, tax compliance, and the privacy and security of employee data.
When you opt for software like Compt, your CFO and IT team will be able to sleep comfortably at night knowing your perks are appropriately taxed, error-free and secure. And, they have you to thank for that.
How employee stipends are taxed (taxable vs. nontaxable)
- Some stipend categories are taxable by default (e.g., wellness, food)
- Others may be nontaxable when structured correctly (e.g., cell phone, internet)
- Reimbursement-based platforms classify expenses automatically to reduce errors
Which expenses are eligible vs. ineligible under an LSA or employee stipends?
In most employee stipend programs, eligible expenses are defined by category and verified by receipts, while ineligible expenses lack documentation or fall outside the policy. Taxability depends on the category and how the policy is structured.
The framework below breaks expenses into three buckets: commonly taxable eligible expenses, conditionally nontaxable expenses (when structured properly), and commonly ineligible expenses.
Commonly eligible expenses (taxable categories)
| Category | Examples |
|---|---|
| Wellness | Gym memberships, yoga classes, therapy apps, fitness equipment, supplements |
| Food and Groceries | Grocery purchases, meal kits, food delivery |
| Professional Development | Books, courses, certifications, conferences, AI tools |
| Remote Work | Desk, monitor, keyboard, coworking memberships |
| Family and Caregiving | Childcare, elder care, fertility-related support |
| AI Tools | ChatGPT, Claude, research tools, productivity software |
These categories are typically treated as taxable income and processed through payroll.
Conditionally nontaxable expenses (when structured properly)
| Category | Notes |
|---|---|
| Cell Phone and Internet | Often nontaxable if tied to business use and documented |
| Commuter Benefits | Must follow IRS transportation guidelines |
| Work Equipment | May qualify as business expense reimbursement |
| Safety Equipment | Generally nontaxable when required for role |
| Home Office Expenses | May be nontaxable when treated as business reimbursements and documented |
These require clearer policy documentation and payroll coordination.
Commonly ineligible expenses
| Not Allowed | Why |
|---|---|
| Cash withdrawals | No receipt verification |
| Alcohol | Not aligned with wellness or business categories |
| Luxury personal goods unrelated to category | Outside policy scope |
| Expenses without documentation | No audit trail |
Gray areas to clarify in your policy
Some purchases fall into mixed-use territory, such as:
- Personal laptops used partly for work
- Hybrid wellness + cosmetic services
- Subscription bundles
- Shared household internet
In these cases, reimbursement-based administration creates a clearer audit trail and reduces classification errors.
Why clear eligibility rules matter
Clearly defining eligible and ineligible expenses:
- Reduces employee confusion
- Prevents payroll errors
- Protects against audit risk
- Supports Finance alignment
- Increases participation by eliminating guesswork
Most modern employee stipend programs define broad categories upfront and rely on reimbursement-based verification rather than restricting vendor choice.
How do stipends help companies reduce waste and improve utilization?
With Lifestyle Spending Accounts, companies no longer waste money on unused perks. There are no expired snacks, unused event tickets, or under-attended in-office fitness sessions.
Choosing Compt also means you don’t have to pre-fund debit cards or accounts that employees may never use. A reimbursement model ensures that the only money you pay is the money employees actually spend.
Which metrics help finance prove ROI of stipends?
Employee stipends typically outperform one-size-fits-all perks on ROI because participation is higher and employers only pay for what employees actually use. The most useful ROI metrics are participation rate, cost per engaged employee, and admin time saved.
Employee stipends deliver ROI in measurable, operational ways — not just employee sentiment. In 2026, leading HR and Finance teams evaluate stipend programs using participation, administrative efficiency, and cost-per-engaged-employee metrics.
Unlike point-solution perks that rely on vendor-reported usage, stipend ROI can be measured directly through reimbursement data and participation rates.
Core ROI metrics for employee stipends
| Metric | What It Measures | Why It Matters |
|---|---|---|
| Participation rate | % of eligible employees who use the stipend | Indicates real adoption, not passive enrollment |
| Utilization rate | % of allocated budget actually spent | Shows benefit relevance and design effectiveness |
| Cost per engaged employee | Total stipend budget ÷ active users | Compares value against vendor-based perks |
| Administrative time saved | HR hours spent managing benefits | Converts operational efficiency into labor savings |
| Unused budget avoided | Funds not pre-paid to unused vendors | Protects against sunk costs |
| Reimbursement cycle time | Time from submission to payout | Impacts employee satisfaction and trust |
In modern stipend programs, participation rate has become the primary performance indicator, because unused benefits generate zero ROI.
Simple ROI comparison: stipend vs. vendor-based perk
Consider this simplified example:
- A company pays $40,000 annually for a wellness vendor.
- 35% of employees actively use it.
- Cost per engaged employee = $40,000 ÷ active users.
Now compare that to:
- A $40,000 stipend budget.
- 85–93% participation (aligned with 2026 benchmarks).
- Cost per engaged employee decreases as participation increases.
- No upfront vendor contract — you keep any funds that go unused.
Because stipends are reimbursement-based, employers only pay for actual employee spending — not projected engagement.
Additional cost efficiencies
Employee stipends also improve ROI by:
- Eliminating overlapping vendor contracts
- Reducing HR administrative hours
- Avoiding prepaid debit cards with unused balances
- Simplifying payroll classification through automated tax handling
In many organizations, the time saved alone offsets a meaningful portion of the stipend program cost.
What “good” ROI looks like in 2026
High-performing stipend programs typically show:
- 80%+ participation
- 65–85% utilization depending on cadence
- Quarterly funding structure
- Broad, flexible categories
- Minimal HR time spent per month on administration
When participation is high and administrative overhead is low, stipends outperform most one-size-fits-all perk vendors on both employee satisfaction and operational efficiency.
How LSAs align with DEI and inclusion strategies
Employee stipends support inclusive benefits strategies by letting employees choose vendors and expenses that fit their geography, culture, accessibility needs, and life stage—something single-vendor perks rarely do.
Employee stipends support DEI goals by replacing one-size-fits-all perks with flexible budgets that accommodate different cultural, geographic, caregiving, and accessibility needs.
A single vendor rarely meets the needs of an entire organization. For example, a LinkedIn Learning subscription only works for certain roles and interests.
The consequences of this type of cookie-cutter point solution mean you’re investing time and resources into programs that not everybody wants or likes.
| Traditional Perk Limitation | How Stipends Improve Inclusion |
|---|---|
| Single-vendor access | Employees choose vendors that reflect their culture or preferences |
| Office-based benefits | Remote and hybrid employees receive equal access |
| Fixed program design | Employees allocate funds based on life stage or caregiving needs |
| Geography-restricted perks | Global teams can use stipends locally |
| Role-specific benefits | Broad categories serve multiple job functions |
For example, stipends allow:
- Parents to allocate funds toward childcare or elder care
- Global employees to use benefits in their local currency
- Employees with disabilities to choose tools that meet accessibility needs
Stipends help companies move away from point solutions and toward flexible spending categories. For example, a “Continuous Learning Stipend” allows people to choose from LinkedIn Learning, Udemy, Coursera, extension universities, books, conferences, coaching, learning AI tools, and more.
This flexibility allows companies to design benefits programs that scale equitably across diverse workforces.
Get in touch today to learn more about professional development stipends.
How do stipends align with company mission, values, and goals?
A strategic stipend program helps companies gain a competitive edge by aligning perks with mission, values, and culture. It creates a benefits experience that reflects what matters most to the business and the people who work there.
Learn more about how real Compt customers use employee stipends.
The benefits of employee stipend management software
Why do companies use stipend management software?
If you already offer your team a stipend, awesome! You’re ahead of the curve, and you’re likely experiencing a tremendous number of benefits. High-five!
However, you’re also likely dealing with one major challenge: the admin work.
Unless you’re using software to streamline the management of your employee stipend program, you’re likely spending countless hours managing tasks such as:
- Fielding questions around which perks qualify
- Documenting which categories and vendors apply
- The approval workflow after an employee makes a purchase
- The reimbursement process once a receipt is submitted
- The IRS tax compliance of the taxable and nontaxable perks
- Communicating with employees around their remaining balances
The time spend on these tasks adds up quickly. Some companies we’ve spoken to at Compt told us they spent 20+ hours a week managing these details for a company with fewer than 200 people. That is half of one full-time employee’s week, or more realistically, a portion of several people’s time.
By contrast, Compt customers have realized real savings in time and energy:
- Quickbase reduced benefits processing time from days to 90 minutes.
- TEN7 now spends 5-10 minutes per month administering their Compt program.
- ButterflyMX achieved 100% IRS compliance, reducing the manual burden on HR and Finance.
If these administrative tasks are becoming too much, consider implementing a stipend management software like Compt.
Get 18x more employee engagement with Compt
What do employees buy with their stipends?
Are you curious about how people spend their stipends?
Across stipend categories, employees tend to spend on everyday needs, wellness, and productivity tools rather than novelty perks, while leaving space for spending on things that bring them joy.
Here are some examples of real purchases from Compt users:
Health and wellness
- Gym memberships
- Yoga classes
- ClassPass
- Peloton subscriptions
- Fitbit and other wearable devices
- Oura ring
- Aaptiv app
- Calm app
- Massages
- Acupuncture
- Groceries
- GLP-1 support
Learn more about health and wellness stipends.
Remote work
- High-speed Wi-Fi
- Desks, monitors, keyboards (and other items also purchasable through a one-time equipment stipend)
- Groceries, delivery, and healthy food kits
- Coffee, teas, specialty sodas, and other beverages
Learn more about remote work stipends.
Continuous learning
- Books (audio, Kindle, and hard copy)
- Classes and courses (e.g., Udemy and LinkedIn Learning)
- Udacity Nanodegree
- Sales or marketing courses or coaching
Learn more about educational stipends.
Family
- House-cleaning services
- Dog-walking services
- Babysitting and daycare services (e.g., Care.com)
- Elder care services and support
- Museum passes
- Meal delivery kits (e.g., Blue Apron or Purple Carrot)
- Fertility benefits
Learn more about family stipends.
AI tools
- ChatGPT Plus/Pro, Claude
- Prompt libraries and research tools
- Online courses and certifications (e.g., on Udemy, LinkedIn, Coursera)
- AI note-taking, writing, and design subscriptions (e.g., Fathom, Notion AI, Otter.ai, Granola)
- Paid AI newsletters or research reports
- Any AI solution aligned with team workflow productivity
Learn more about AI tools stipends.
Looking for an even more comprehensive list? Check out our ideas for stipend spending, including suggestions from the various other categories.
How do you know if stipends are right for your organization?
Whether you’re creating a perks program or a lifestyle benefits program from scratch or planning updates to an existing one, adding personalization to your employee benefits can help you achieve the same goals as traditional perks with more impact and less complexity.
Companies usually begin looking to employee stipends when they want to:
- Offer perks, but lack the time to manage various point solutions
- Increase utilization rates or employee satisfaction with fringe benefits
- Update perks to be inclusive of everyone, not just a few
- Support a remote or hybrid workforce
- Decrease the administrative burden to manage perks
- Offer the same benefits as competitors and/or improve employer brand
- Raise employee engagement or eNPS scores
- Manage stipends without worrying about tax compliance or security
How to create an employee stipend program at your company
Setting up a traditional perk program from scratch takes constant tweaking to get it right. Employee stipends or Lifestyle Spending Accounts make it easy to offer flexible, personalized perks without managing a long list of vendors.
The steps below reflect how companies typically design an employee stipend policy that balances flexibility, compliance, and predictable budgeting.
Follow these steps to set up your program.
- Identify your employee count and total budget.
Determine how many employees will be eligible and how much money you can allocate overall. This helps you calculate a meaningful amount for each person.
- Decide how much to offer per employee and how often.
Choose your cadence. Stipends can be monthly, quarterly, semiannual, annual, or offered as a one-time benefit (aka a “spot bonus”).
- Select the categories employees can spend in.
Choose categories that align with your mission and values or keep them fully flexible. Popular options include health and wellness, continuous learning, family, food, travel, student loans, productivity, company swag, and AI tools.
- Set up your stipend program.
Using software like Compt takes about 15 minutes, and your Customer Success representative will be with you every step of the way to make sure you get it right.
If you manage stipends manually, create a spreadsheet or form to track spending, collect receipts, calculate taxes, and monitor balances. - Communicate the new benefit to your team.
Share the what, why, when, and how, and follow these best practices. Use an email announcement and an internal wiki page, and consider using a feedback form or hosting office hours to answer questions.
When designing your policy, you’ll also need to decide how specific categories should be structured. One of the most common design questions in 2026 involves phone and internet stipends, especially whether they should be offered as flat allowances or reimbursement-based benefits.
Example: What policy should we set for phone/internet stipends (flat vs. reimbursement)?
Flat allowances are simplest but are usually taxable. Reimbursement-based phone/internet policies provide stronger documentation and may be nontaxable when tied to business use and supported by clear policy rules.
The right structure for a phone or internet stipend depends on your company’s risk tolerance, payroll complexity, and documentation standards. In general, reimbursement-based stipends offer stronger compliance controls, while flat allowances offer simplicity.
Here’s how to evaluate the tradeoff.
Flat allowance vs. reimbursement model
| Policy Structure | How It Works | Pros | Considerations |
|---|---|---|---|
| Flat allowance | Employees receive a fixed amount each pay cycle (e.g., $75/month) without submitting receipts | Simple to administer Predictable payroll processing No receipt review required | Often treated as taxable income Less documentation for business-use justification Harder to differentiate personal vs. work usage |
| Reimbursement-based | Employees submit receipts for eligible phone or internet expenses and are reimbursed | Strong documentation trail May qualify as nontaxable when tied to business use Greater compliance control | Requires receipt submission Slightly more administrative oversight |
When a flat phone or internet stipend may make sense
- Small teams with limited administrative bandwidth
- Fully taxable stipend design
- Low audit-risk tolerance requirements
- Situations where tracking business vs. personal use is impractical
Flat allowances prioritize simplicity over classification nuance.
When reimbursement is typically the stronger approach
- Multi-state or global teams
- Companies aiming to treat phone/internet as business expense reimbursements
- Organizations with stricter compliance or audit standards
- Finance teams that want clear documentation for tax treatment
Reimbursement-based administration provides a clearer audit trail and allows companies to define eligible expenses precisely.
What most companies choose in 2026
Many organizations structure phone and internet support as part of a broader Lifestyle Spending Account (LSA), where:
- The category is clearly defined
- Expenses are documented
- Tax treatment is automatically classified
- Employees retain vendor choice
This approach balances flexibility with compliance, especially for distributed workforces.
Ultimately, the best structure aligns with your payroll processes, documentation standards, and overall benefits strategy.
Ready to set up stipends with Compt?
Traditional perk vendors charge more and deliver less.
With Compt, you get 18x more employee engagement than the average point solution, without spending a dollar more.
Request a demo today and see what better benefits looks like.
FAQ: Employee stipends and Lifestyle Spending Accounts
Employee stipends give people a flexible budget they can use with any vendor, instead of limiting them to a single provider or platform. Traditional perks often sound appealing but serve a narrower audience, which leads to lower utilization. Stipends shift the power of choice to employees while simplifying the work for HR.
How do companies decide how much to offer in a stipend?
Most organizations start by reviewing their benefits budget and comparing it with industry benchmarks. Typical ranges include $50-$200 monthly or $300-$1,000 quarterly for broader Lifestyle Spending Accounts. The right amount depends on your goals, your employees’ cost of living, and whether the stipend is intended to replace or complement existing perks.
Which categories are most commonly included in lifestyle stipends?
Wellness, remote work, continuous learning/professional development, family support, food, travel, and AI tools tend to be popular categories. These categories give employees a wide range of options that fit their real-life needs. Companies often start with a broad LSA and expand or refine categories over time based on engagement.
How do stipends support remote and hybrid employees?
Stipends help distributed teams access benefits evenly, regardless of geography. Employees can use them for home office upgrades, internet, meals, travel, wellness, childcare, and other recurring needs tied to remote work. This ensures benefits stay relevant even as work locations shift. With Compt, you can issue stipends in multiple currencies to account for different geographies and standards of living.
Can managers tailor stipend categories to their department’s needs?
Some companies customize stipend categories based on team needs, seniority, or location. For example, Compt customer TEN7 offers a professional coaching stipend only to leadership. Others offer a single, all-inclusive stipend to everyone to keep administration simple while still giving people broad choice. Either approach works as long as the program is clear, consistent, and aligned with company goals.
What’s the best way to manage stipends without adding admin work?
A reimbursement-based platform like Compt automates approval routing, tax handling, balance tracking, and IRS compliance so HR teams don’t spend hours managing spreadsheets or receipts. This also reduces errors and ensures employees get reimbursed quickly. The right software creates one simple workflow instead of a collection of manual tasks.
How do companies ensure stipends are handled correctly for tax purposes?
Clear categories and a system that labels taxable versus nontaxable expenses are essential for compliance. Compt was built with compliance in mind and automatically classifies and tracks transactions so Finance teams don’t have to do this manually. This also reduces audit risk and ensures accurate payroll reporting.
What types of purchases usually fall under professional development stipends?
Common examples include books, certifications, online classes, coaching, conferences, and skill-building programs. We sectioned out AI stipends separately above, but these can also fall under professional development if you choose to structure your program that way. With so much choice, employees can tailor their development path to their goals instead of being locked into a single platform. This helps companies support varied roles and skill sets more effectively.
How do stipends compare to corporate discounts or gift cards?
Corporate discounts often go unused because they only apply to a single provider or limited set of services. Gift cards can also expire or sit unused, plus you often pay extra for them because of markup. Stipends provide real financial value and flexibility, which leads to higher utilization and better employee experience.
What should companies look for when choosing stipend management software?
Key features include customizable categories, automated tax handling, flexible approval workflows, and global support for different currencies or stipends. A good platform should also give HR clear visibility into usage and help employees redeem perks easily. This ensures the program remains simple to run at scale.
Are employee stipends taxable income?
Employee stipends may be taxable or nontaxable, depending on how the program is structured and what the stipend is used for.
Most lifestyle and wellness stipends (such as food, fitness, or general well-being) are considered taxable income and are reported through payroll. Other categories, including cell phone and internet reimbursements, commuter benefits, or certain work-related expenses, may be nontaxable when they meet IRS guidelines.
Because tax treatment varies by category, companies typically use a reimbursement-based stipend model that clearly defines eligible expenses and automatically classifies transactions as taxable or nontaxable. This helps ensure accurate payroll reporting and reduces compliance risk for both HR and Finance teams.
What’s the difference between an employee stipend and an LSA?
An employee stipend is a broad term that describes any employer-funded benefit that gives employees a fixed budget to spend on approved expenses.
A Lifestyle Spending Account (LSA) is a specific type of employee stipend — usually an all-inclusive stipend that combines multiple categories (such as wellness, food, family care, and personal essentials) under a single policy.
In practice:
–Employee stipend = the general benefit concept
–LSA = the most common structure used to deliver flexible stipends at scale
LSAs are popular because they reduce administrative complexity, allow employees to shift spending as their needs change, and make it easier for employers to manage tax treatment and compliance within one unified program.
What is a wellness wallet?
A wellness wallet, sometimes called a wellness account, is typically a branded term used to describe a flexible wellness spending benefit. In practice, it functions similarly to a wellness stipend or a wellness category within a Lifestyle Spending Account (LSA). Most wellness wallets are implemented as reimbursement-based programs that allow employees to spend on approved wellness expenses like gym memberships, fitness apps, therapy, or wellness equipment. The main difference is branding; structurally, they are usually a category within a broader stipend framework.
What are modern perks this year?
Modern perks this year are shifting away from single-vendor point solutions and toward flexible stipend-based benefits. The most common modern perks include Lifestyle Spending Accounts (LSAs), AI tools stipends, remote and hybrid work support, caregiving stipends, food and grocery support, professional development budgets, and travel or experience allowances. These benefits prioritize employee choice, higher participation, and administrative simplicity over fixed vendor contracts.
How can I design a wellness program for employees?
You can design a wellness program using a stipend model by following five steps: define goals, set a budget, choose eligible categories, document clear policy rules, and communicate the benefit effectively. Many companies use reimbursement-based wellness stipends to increase flexibility and participation. Common mistakes include over-restricting vendors, creating unclear eligibility rules, or failing to measure participation and utilization. A simple, flexible framework typically performs better than a highly prescriptive program.
How do I ask employees what perks they want without over-promising?
You can ask employees what perks they want by framing surveys as exploratory rather than guaranteed commitments. Set expectations upfront that feedback will inform future benefit design but may not result in immediate changes. Effective survey questions focus on categories (wellness, caregiving, learning, food, remote work) rather than specific vendors. This approach gathers actionable data while avoiding promises the company may not be able to fulfill.
Which benefits categories see the highest ROI?
Benefits categories that see the highest ROI typically show strong participation and low administrative overhead. Broad categories like all-inclusive LSAs, wellness stipends embedded within LSAs, remote work support, and professional development often perform well because they apply to a wide range of employees. ROI is best measured using participation rate, cost per engaged employee, unused budget avoided, and admin time saved. Flexible category design generally outperforms narrow, single-vendor perks.
What categories can be covered in lifestyle stipends?
Lifestyle stipends can cover a wide range of categories, including wellness, food and groceries, family and caregiving, remote work, professional development, commuting, AI tools, travel, and productivity support. Within those categories, employees may purchase items such as gym memberships, childcare services, internet expenses, books, certifications, coworking memberships, or AI software subscriptions. The exact categories depend on how the employer structures the policy and defines eligible expenses.
How do stipends align with talent strategy and retention goals?
Stipends align with talent strategy and retention goals by increasing participation, supporting diverse employee needs, and reducing administrative friction. Flexible benefits can improve perceived fairness and relevance compared to single-vendor perks. Companies often use stipends to support hiring competitiveness, onboarding experience, retention efforts, and manager enablement. Because participation tends to be higher, stipends can serve as a stronger retention proxy than low-utilization perks.
How LSAs prepare companies for AI-driven future of work
LSAs prepare companies for an AI-driven future of work by allowing organizations to add AI tools as reimbursable categories without launching new vendor contracts. AI tools stipends can support subscriptions, research platforms, training courses, and productivity software. A reimbursement-based structure allows companies to set policy controls, define approved use cases, and manage security considerations. This flexibility enables faster adaptation as new AI tools emerge.
What are some examples of remote work stipends?
Remote work stipends commonly cover internet expenses, ergonomic equipment, desks, monitors, and home office supplies. Some companies offer flat monthly allowances, while others use reimbursement-based models for documentation and compliance. Global or multi-state teams often prefer reimbursement-based structures to manage tax treatment and local currency differences. Remote stipends are frequently included within broader LSAs to maintain flexibility.
What’s the ROI of LSAs compared to one-size-fits-all perks?
The ROI of LSAs compared to one-size-fits-all perks is often higher because participation rates tend to be significantly stronger. Instead of paying fixed vendor contracts regardless of usage, companies reimburse only actual employee spending. This reduces unused budget waste and lowers cost per engaged employee. LSAs also reduce administrative complexity and improve visibility into participation metrics.
What are the benchmarks for my size company for Lifestyle Spending Accounts?
Benchmarks for Lifestyle Spending Accounts (LSAs) vary by company size, but 2026 data shows clear patterns. Small companies (fewer than 100 employees) fund an average of $1,675 per employee per year, midsize companies (100–1,000 employees) average $1,055, and large companies (1,000+ employees) average $649, with an overall average of $850 per employee annually.
In 2026, 64% of companies offer an all-inclusive LSA, up from 55% the prior year, and quarterly funding is associated with the strongest participation rates. High-performing programs typically show 80%+ participation, with some all-inclusive LSAs reaching 89% utilization. Companies evaluating benchmarks should compare funding amount, cadence, and participation — not just budget size.
What are the benchmarks for wellness stipends?
Wellness stipend benchmarks depend on whether the stipend is standalone or embedded within an LSA. In 2026, the median annual wellness stipend allocation is $735 per employee, while all-inclusive LSAs have a median of $1,200 annually across categories.
Wellness performs significantly better when embedded in a broader LSA structure, with utilization reaching 86% when included in an LSA compared to 62% for standalone wellness stipends. Programs funded quarterly also show higher participation than monthly-funded structures. Companies evaluating wellness benchmarks should consider both funding amount and structure, as design strongly influences participation.
Editor’s note: Originally published in 2022, this post has been recently updated for clarity and relevance for our readers.
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.
