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Is a stipend the same as a salary?
Why do companies offer stipends versus additional pay?
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Is a stipend the same as a salary?
Why do companies offer stipends versus additional pay?
In most jobs, your compensation comprises more than just your salary. It also includes benefits and extra pay — which sometimes come in the form of a stipend.
Seeing this type of benefit as part of a job offer, internship description, or research position is exciting. A regular stipend can make a big difference in covering living costs or more specific expenses like gym memberships and internet bills. But the details might be unclear. What does “stipend” mean? How do stipends work, and how do they differ from a regular salary?
To help remedy any confusion and take full advantage of the opportunities stipends can provide, this comprehensive guide will explore what a stipend is, its meaning, and how to make the most of it.
The technical stipend definition is a fixed sum of money meant to cover specific expenses. The expense a stipend covers generally varies depending on the position, according to Investopedia. For permanent workers, stipends may facilitate personal and professional development opportunities, such as learning enhancements and wellness-related activities. Internships, fellowships, or academic research positions could also offer stipends in lieu of salaries to cover living expenses.
Stipends differ from salaries and wages because instead of acting as payment for a service, they give the recipient money to cover a certain cost. For example, a company might offer its employees monthly stipends for gym memberships, or a university might give a researcher a stipend check to cover living expenses for the year. You might not be able to access this money without proof, like submitting the receipt for your gym membership to the company so they can confirm the cost. In other circumstances, they might just give you the money with an intended but not required area to spend.
Although they both involve payment from a company or organization to an individual, stipends aren’t the same as salaries. Here are five main differences between them:
Stipends are typically a predetermined amount paid either in a lump sum or periodically on a weekly, monthly, or annual basis. Unlike a salary, they're not based on hours worked or performance, but are a fixed amount intended to help cover a certain cost. Often you’ll need to submit a receipt to receive reimbursement.
Stipends usually work in two ways:
Stipends can appear in a wide range of settings, but they’re most common for job trainees, academics, and employees. Here’s more about what a stipend could mean in each context:
Interns and trainees may not be entitled to minimum wage under the Fair Labor Standards Act (FLSA) if they fall under the category of “intern” or “trainee” for “for-profit” employers. Instead, their supervising organizations might use stipends to help them cover some or all of their living expenses. For example, the University of Arizona offers a $2,500 stipend for summer interns so they can focus on learning. Most internships are unpaid, and although stipends can vary widely, they make these opportunities more accessible even if they don’t cover all expenses.
Depending on the nature of their work and relationship with the institution, graduate students and researchers might not be entitled to compensation, according to the FLSA. Many institutions have stipend standards in place to cover living costs for master’s students and PhD candidates, such as Cornell University, which offers a minimum of about $32,500 per year for research assistantships and fellowships.
For contractors or permanent employees, companies might offer fringe employee benefits in the form of stipends. These stipends could cover anything from career coaching to work-from-home setups — it just depends on what the company values and wants to offer. They’re usually an addition to the regular salary or wage, and the recipient has to use it for the employer’s specific purpose.
Wellness stipends, a common type of fringe benefit, can cover gym memberships, subscriptions to mental health apps, or massages. Commuting stipends offset daily travel expenses, offering money to pay for transit passes or ridesharing. And learning and development stipends could cover additional training and certifications to enhance your performance.
If you’re applying for jobs and want to know what fringe benefits are out there, or if you’re interested in asking your company about stipends, here are a few common types to consider:
Many companies offer wellness stipends to cover health-related benefits like gym memberships, wellness programs, or mental health resources. Some stipends may be general, meaning you can spend them on anything wellness-related, and others might be more specific, like for health insurance. If you’re interested in exploring life coaching or professional coaching, your employer might also allow your stipend to be used for coaching purposes as well.
Travel stipends cover the costs associated with business travel, which could include attending conferences or commuting every day. This stipend ensures that travel expenses don't hinder professional development and collaboration. It could include flights and hotels, local commuting and meals, or even vacations to encourage rest.
Professional development stipends provide financial support for career-enhancing activities such as workshops, courses, or conferences. These stipends enable employees to pursue growth opportunities without worrying about the financial burden, fostering a culture of continuous learning and development. They might include online courses, industry certifications, or unrelated learning outside of work.
While generally considered taxable income, stipends may have unique tax implications depending on their use. Stipends that cover qualified educational expenses, such as tuition, books, and supplies, might be exempt from tax under certain conditions. But when it comes to wellness and development stipends from employers, they count as taxable income under fringe benefits.
Keep in mind that the method of reporting stipend income can differ from your salary or wages. Since stipends aren’t classified as wages, you shouldn’t report them as 1099 or W-2 income. You may need to report them on your tax returns as fellowship grants or other income, depending on their purpose. Your circumstances, including your residency status and the specific terms of the stipend, play a significant role in determining the tax treatment of the stipend income, so make sure you’re clear on the details before filing.
If your company is offering you a stipend for fringe benefits, you might be wondering why they’ve opted for a stipend instead of simply raising your salary.
The company could have made this choice for several reasons. Stipends help add to the value proposition of the position, prompting more people to apply. They can be more cost effective for the company than salary increases. Since stipends don’t count as regular wages, they often incur different payroll taxes and benefits costs than additional pay (excluding Social Security and Medicare taxes). That means the company doesn’t have to pay as much to give you extra benefits, and you still get the stipend for things like wellness programs or learning opportunities.
Although many workplaces offer set stipends that you can’t negotiate, you might be able to include stipends in your negotiation when you get a new job or seek a raise. Just like asking for a salary range, requesting stipends is about ensuring fair compensation for your efforts and expenses. Here are some negotiation tips:
Knowledge is power in negotiations. Start by researching the typical stipend amounts for the benefit you’re asking for. Take advantage of pay transparency and look into stipends for similar roles or positions within your field, considering factors like geographic location, cost of living, and the nature of the work or study. For example, if you work in tech, you might find that Salesforce’s $100 wellness reimbursement is a good average to start from.
A stipend's primary purpose is to cover a specific expense or group of expenses, so make sure the amount you’re receiving, or want to receive, matches those costs. If you find that gym memberships in your area are $60 per month but your stipend only offers $30, that’s a good reason to ask for an increase. Make sure that when you enter negotiations, you have solid proof of these average costs so the person you’re speaking with understands where you’re coming from.
Sometimes, a stipend is just one part of your overall compensation plan. Consider other benefits of the position, like career growth opportunities, travel allowances, or other stipends. Your company might not offer a stipend that covers perks like gym memberships and massages, but it might have a robust healthcare plan, which could be enough for you to balance those costs. Be realistic about your needs and what your company can offer.
Stipends help interns and academic researchers fulfill their roles without struggling financially, but they also give employees extra benefits. Understanding what a stipend is can help you make informed decisions about your pay and ensure you use it correctly. Whether this extra cash covers emotional well-being or travel expenses, it’s an exciting perk that can be a key player in earning the compensation and benefits you deserve.
Explore effective job search techniques, interview strategies, and ways to overcome job-related challenges. Our coaches specialize in helping you land your dream job.
Explore effective job search techniques, interview strategies, and ways to overcome job-related challenges. Our coaches specialize in helping you land your dream job.
Elizabeth Perry is a Coach Community Manager at BetterUp. She uses strategic engagement strategies to cultivate a learning community across a global network of Coaches through in-person and virtual experiences, technology-enabled platforms, and strategic coaching industry partnerships.
With over 3 years of coaching experience and a certification in transformative leadership and life coaching from Sofia University, Elizabeth leverages transpersonal psychology expertise to help coaches and clients gain awareness of their behavioral and thought patterns, discover their purpose and passions, and elevate their potential. She is a lifelong student of psychology, personal growth, and human potential as well as an ICF-certified ACC transpersonal life and leadership Coach.
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