This article was written by Chris James, Payroll Specialist at Helpside
What is a stipend?
A stipend is a fixed amount of money that can be provided to people to offset expenses such as housing, food, and transportation or as an additional benefit to employees. Stipends are often paid to people that are pursuing unpaid work such as students, interns or members of the clergy, but may also be paid to employees in addition to their regular salary or wages to help cover additional costs, like training, commuting, or professional development.
How does a stipend work?
A stipend is different from a salary. A salary is paid for services provided or hours worked, while a stipend is used to help offset the cost of certain expenses. There are no minimum hours needed to work to obtain a stipend and the stipend amount does not have to meet the requirements for minimum wage. Instead, a fixed amount is determined based on the costs the employer is looking to offset for the employee. For example, and employer may provide a wellness stipend of $50 to help offset the cost of an employee’s gym membership or the cost of membership to a professional organization.
Because a stipend does not count as wages earned, no Social Security or Medicare taxes are withheld; however, a stipend does count as taxable income. It is recommended that individuals who receive a stipend set aside money for the taxes that may be owed on the stipend at the end of the year.
If you have questions about stipends or any other payroll related issues, please reach out to us at email@example.com