Do you want to launch a stipend program that will help shape your company’s future? Employee stipends are a remarkable approach to reward staff and inspire them to put in the extra effort. These may come in the form of a salary, stock options, or other forms of payment.
However, before implementing an employee stipend policy as a fringe benefit incentive program, companies must choose which employee stipend would work best for their business. The numerous kinds of employee stipends are covered in this article along with how employers might use them in their organizations.
The rise of virtual teams has made stipends a more popular choice for businesses looking to set aside money for team lunches or virtual happy hours. Reimbursements are a practical way to allow personnel, volunteers, trainees, and other team members. But just what are stipends? And why are they so crucial in defining the ethos of your organization?
For you to launch an employee stipend policy, we’ve gathered all the information you’ll require in one article. You’ll get to know what stipends are, why they’re effective, and how simple it is to use them in your business. Stipends include all you need to know.
Read on to learn more about this topic! Click on the sections below to jump right to your specific question.
- What are employee stipends?
- What are the benefits of offering employee stipends?
- Can we pay employee stipends?
- Are stipends paid through payroll?
- Are employee stipends taxable?
- How do employers report stipends?
- How to administer an employee stipend program?
- How to create an employee stipend policy?
- 10 Popular Types of Stipends you can Offer your Employees
What are employee stipends?
An individual receives an employee stipend in addition to their wage. If a person works on a side project or in addition to their regular employment duties, they may be eligible to get this.
Additionally, it may act as a company perk or incentive, particularly if it is given in place of other work advantages like tax breaks or health insurance.
Employee Stipend Policy may cover living expenditures (when traveling for work and staying away from home), educational fees, or even medical expenses when an individual is unable to pay for them as a result of another’s irresponsibility. In addition to cash, stipend agreements may include “soft” incentives including stock options, incentives, and awards.
Stipendiary benefits are typically awarded when an individual puts in more time at work than they otherwise would have during a given week or month. These agreements are advantageous to full-time and part-time employees alike. To get a specific stipend, you may need to provide proof of your accomplishments as well as documentation of the job you did.
What are the benefits of offering employee stipends?
Below are a few benefits of providing employee stipends to employees in order to motivate them to give their all in their work. The benefits are as follows:
- With stipends, employers have total control over their benefit costs since they may establish monthly allowance limitations. Furthermore, unlike pay increases or account sponsorship, reimbursing workers through stipends guarantees that your benefit expenditures are utilized as intended.
- You’ll be able to keep track of all of your fringe benefits in one area by using an employee stipend program to manage your benefits, making it simple to issue different types of reimbursements from the same site.
- Employee stipends serve to enhance the working environment, which makes it simpler to retain and recruit personnel and grow your benefits program. More and more, employees demand perks that are specific to their own requirements from their companies.
- Create employee groups that you may specify as distinct to decide who is capable of taking part in the benefit. You can then customize your perks as you like.
Can we pay employee stipends?
Do you know that research suggests that happy workers are 12-22% more productive than unhappy employees? Therefore, increasing your team’s investment might be a great approach to increase employee productivity and satisfaction.
Employees who participate in the employee Stipend Policy receive additional remuneration on top of their regular pay. Stipends are normally not subject to taxation and may be used for whatever purpose the employer thinks appropriate, including vehicle allowances, travel costs, and provident funds.
To motivate or commend your staff for their work, you might provide them with stipends. Although it relies on your discretion and the stipend plan’s structure, these perks are often provided on a monthly basis. A worker may also utilize yours to replace a wage rise or to boost their current income.
Pay stub production is one method for implementing stipend programs. An automatic pay stub generator is available on many web platforms, simplifying the procedure for all kinds of organizations. Your post-processing time for handwritten pay stubs will take less time thanks to these generators’ simple and optimized methods.
Are stipends paid through payroll?
Stipends often fall below the minimum wage and are not subject to payroll, state, or federal income taxes. When deciding how much of a stipend to offer, employers frequently take into account living expenses and other expenditures the person would face while undergoing training or working for the firm.
Employees who get salaries are paid through a company’s payroll, but those who receive stipends are typically not. In the employee Stipend Policy, payments are sent to employees to help with certain expenses. You can even pay stipends to employees that are employed by an employer of record (EOR), on your behalf.
Are employee stipends taxable?
Stipends are not typically taxable income. Although you must record the stipend on Form W-2 or by filling out a Form 1099-MISC of your tax return, they can be taxed if they are for services provided outside of the company.
Employers must define what they mean by a taxable benefit and a non-taxable benefit since the Internal Revenue Service’s (IRS) regulations include certain ambiguities. Always consult your accounting staff or your tax advisors for formal guidance.
Because certain employee stipend policy constitutes taxable income, federal taxes may be owed at the conclusion of the fiscal year. State taxation on fringe benefits as well as the stipends’ intended use decides this.
Tax withholding is not necessary, as stipend payments are often not regarded as wages. Due to this, no taxes are deducted from Social Security or Medicare. However, since stipends are taxable income, it’s a smart option for employees to maintain track of them.
When you utilize stipend management software, it is generally much easier to be tax compliant while filing your tax return. Otherwise, read IRS Publication 15-B to learn about income tax and other tax concerns that may apply to you.
How do employers report stipends?
Stipends can be reported by employers on W-2 or 1099-MISC forms. The employee is responsible for determining whether they were compensated as an employee or an independent contractor.
How to administer an employee stipend program?
Here is a five-step summary of the employee stipend procedure that might assist in determining the future of your business if you’re new to providing staff stipends through an employee stipend policy:
1. Choosing your goals
First, identify what you want your employee’s perks to accomplish. Are you looking to hire new employees? Do you need to provide more substantial perks to differentiate yourself from the competition? Do you intend to replace office perks with new remote team benefits? You may pick the best perks for your firm with the aid of these questions’ responses.
2. Create your own benefits package
Once you’ve determined your objectives, you’ll be able to create a benefits package that is specific to your company’s needs. This involves deciding what types of stipends to give and how much to pay staff.
Remember that in order to make your plan compliant, you must adhere to anti-discrimination laws if you choose to provide different benefits to certain employee categories or give varying allowance amounts.
3. Inform employees about the perks
You’ll want to discuss and interact with your employees about the rollout of your new perks before you launch it. Sending an email to your staff informing them of your new stipend options is an important step in the communication process. Your notification should include information such as the stipends you’re offering, the start date of the benefit, and the amount of allowance you’re offering.
4. Review and repay expenditures
After you’ve established your employee stipend policy program, your workers will submit expenditures for approval. Once the cost has been reported, you may check the supporting paperwork to make sure it was used in the manner you had planned.
You’ll pay your staff when you accept or reject their costs. The majority of firms opt to pay employees back through payroll by including a separate line item on the payroll check. However, administrators can also handle a different cash or cheque payment.
5. Use evaluation
In order to make sure your employees are taking full use of their perks, it’s a good idea to examine employee engagement and involvement patterns after you’ve issued your stipends for a time. Which stipends are the most commonly used? Are employees use their entire allowance? How many costs are reported each month?
You may monitor these indicators closely to gauge the effectiveness of your benefits and make sure they’re accomplishing the objectives you set out for them in the first place. If they aren’t, you can better evaluate what modifications are required in your employee stipend policy to achieve your objectives.
How to create an employee stipend policy?
To manage purchases made by workers on the company’s behalf, a company’s reimbursement policy comprises rules. These policies will specify which items are eligible for reimbursement, as well as the manner and when an employee will be reimbursed.
A well-executed reimbursement strategy will safeguard both the organization and the employees from money mismanagement. Furthermore, it will prevent unexpected expenses and budget issues from showing up at the end of the month, helping to keep the finances in balance.
Let’s go over the stages of developing a good employee stipend policy.
- It would be the first step to list all potential costs that may be repaid. This will not be a simple process since you will need to meticulously ensure that all feasible expenditures are paid so that there are no future issues.
- After you’ve identified all the prospective charges, go over them to ensure that everything is covered. To make sure that all potential costs are covered, you might include staff from several departments.
- The best method of establishing the reimbursement policy would not be to need permission for each item. Sometimes, emergency costs can’t wait the required amount of time to get approved. As a result, you must decide:
- Which costs must be approved?
- In what conditions might permission be revoked?
- Who is in charge of handling approvals?
- Is there a cost-approval threshold?
- Do you require written approval?
You must guarantee that this procedure does not disrupt your workflow. You don’t want to lose consumers merely because an employee was unable to obtain clearance for an emergency charge in a timely manner.
- A robust expenditure recording procedure must be in place for both parties to be protected from losses and obtain their reimbursements. It won’t work to just ask for the money that was spent and choose how much to repay. You must have specifics about each transaction, which is why documentation and signatures are required to verify that corporate funds are not misappropriated. Some employers also opt to use a lifestyle spending account or lifestyle benefits to take care of their employee stipend policy, so that they don’t have to deal with administrative hassles (employers also use these accounts to set up innovative benefits such as day care benefits for employees, and cell phone reimbursement policy).
- Once all the reimbursement requests for the month have been submitted, they must be evaluated and approval provided before the payback can be finalized. For this, you will need to involve the accounting department, which can take over and finish the payments for the month. As such, you need to decide:
- The dates when refunds will be issued
- Who will make the final decision?
- The maximum time allowed to complete a refund request
- How will the employees be compensated?
- The eventual destination of the reports
- Once the employee stipend policy is established, it is time to introduce it to the employees. You must first educate them on the framework and have a few of the staff available to address any follow-up queries.
You should also be aware that these regulations frequently cause disagreements among employees. Likewise, you’ll also need to devise a strategy for resolving these disagreements calmly if they arise.
10 Popular Types of Stipends you can Offer your Employees
Employers have become more inventive in recent years when it comes to using stipends to enhance the working environment. The popular classic and contemporary employee stipend policy types that you may also provide to your staff are illustrated below:
- Professional Training Stipends
Stipends for professional development pay for job-related training, education stipends, tuition reimbursements, and courses. Several organizations provide specialized stipends for on-the-job training, enabling staff members to go to seminars or get certificates that will aid in their work and help them develop their abilities.
- Wellness Stipends
Employees and their families need health insurance and wellness initiatives to stay healthy and happy. In order to motivate staff to participate in classes, join gyms (some employers even offer corporate gym memberships or employee gym memberships), or buy products that will help them live better lives, several companies include wellness stipends or wellness reimbursements in their benefits packages or perk systems. Wellness stipends are also similar to setting up a robust fitness reimbursement program. Some insurance companies offer their own wellness reimbursement program as well, such as the Cigna gym reimbursement program, humana wellness program, or the Go365 program by Humana.
- Miscellaneous Stipends
Stipends from WFH cover home office expenditures, virtual meals, and power bills. Employee stipend policy includes miscellaneous stipends that may be provided by certain businesses to help employees with a variety of particular expenses, such as childcare, travel fees, or costs associated with working remotely.
- Fellowship Stipends
With the support of fellowship stipends, some enterprises give unique chances for outstanding young people to acquire key skills, gain fresh views, and form important contacts. For medical professionals including nurses, doctors, and dentists, fellowship stipends pay for living expenses as well as fees associated with academic research.
- Academic Research Stipends
Stipends for research pay researchers’ and students’ living expenses while they are enrolled in an academic program (mainly doctorate professionals). College graduates, interns (particularly those participating in unpaid internships), trainers, volunteers, and clergy are typical receivers of these types of stipends.
- Living Cost Stipends
Religious leaders and aspiring clergy are given stipends to help with living costs. Instead of paying employees a salary or hourly earnings, organizations like churches and colleges frequently distribute stipends that are meant to cover living expenses or to express gratitude to the recipient for their work. Some employers also offer their employees work from home stipends, and a travel stipend for employees to make their pay more equitable.
- Travel and Food Stipends
Per diems are used to reimburse employees for travel and food expenses. To provide their employees with a stipend that is more generous than the majority combined, some firms permit employees to refund a sizable sum of vacation money.
- Health Insurance
Stipends for health insurance for distant employees in other nations. In situations when companies do not offer healthcare insurance to their staff, they may instead issue health insurance stipends to assist staff in paying for medical expenses.
- Smartphones Insurance
A mobile phone reimbursement stipend, often known as a cell phone allowance, is money provided to employees by some businesses to use for cell phone plan purchases. Stipends are frequently awarded on a monthly basis. Employee stipend policy includes smartphone allowances for managers and sales representatives who conduct business calls.
- Education and Training Stipends
Education and training the corporation pays a stipend for work training. Employees are given a certain amount of money known as a learning or education stipend to use on learning initiatives specific to their needs and interests. Details of what they further include: Stipends for learning might be distributed monthly, quarterly, semi-annually, or annually. They are exempt from taxation.
You may give staff bonuses that complement your company culture with a corporate stipend program. The employee stipend policy program for your business should reflect the ethos of the organization. Perhaps your remote workers would benefit from having a budget for coffee, so they could work from their preferred coffee shop once a week, or perhaps your development firm wishes to provide benefits for employee training. If you would like to learn more about fringe benefits, check out this guide on the different types of fringe benefits you can offer.
However, you wish to express your gratitude for the diligent work of your staff. The majority of employer stipend plans are difficult, but stipends don’t have to be. We really hope that this blog has given you the solutions to express your gratitude to your staff and given you additional chances to make your organization a better place for all your personnel. Feel free to schedule a complimentary call with our team, to learn about the best practices for instituting an employee stipend program!