What is a stipend? Here is everything you need to know

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We’ve been hearing the word stipend a lot and had no idea what it was so we decided to look into it so we could write you this guide.

By definition, stipends are a fixed sum of money that is paid in addition to salary. It is intended to cover extra expenses you might incur as a result of your role.

The first thing that usually comes to people’s minds when they hear the word stipend are interns (because they are often ineligible to receive a standard salary for their work.) It’s true that stipends are very often used to cover this demographic’s cost of commuting, food, and other expenses.

However, stipends may be given to employees anywhere on the ladder, especially if they have extra business expenses, responsibilities, or training costs.

For example, a stipend can be an amount of money paid to the trainees to cover their costs of living.

According to Merriam-Webster’s Dictionary, the exact stipend meaning is “a fixed sum of money paid periodically for services or to defray expenses.”

The stipend meaning in real terms

The best way to understand the real stipend meaning is to fully understand the difference between a salary and a stipend.

So what is a stipend exactly? And how are a salary and a stipend different?

A salary is paid to employees in exchange for the work they perform and the purpose of a salary is for them to earn money. A salary may increase on the basis of performance.

On the other hand, a stipend’s purpose is often to increase an individual’s knowledge base, and it remains fixed regardless of performance.

What is the purpose of stipends?

Stipends are usually used to encourage certain actions, such as creating incentives for academic research.

Many academic institutions offer stipends to help with certain expenses such as computers or other necessary equipment. The nature of stipends is that they are unable to be used on any other activity than the one for which it was intended.

Employers may also use stipends to supplement an employee’s regular pay, help cover some of their costs (such as health insurance) or for education and career development that can help them with their job.

“Stipends aren’t performance-based or hours-based. They are usually calculated based on policies put in place by schools, training programs, or companies providing training to employees,” according to The Balance Careers.

“If you believe you might be or should be eligible for a stipend, ask your employer if you are able to receive one, and ensure you are given a written agreement acknowledging the stipend and when it will be paid. You may receive stipends at the company’s regular pay intervals or more frequently,” according to the article. “You should inquire how a company’s stipend pay process will work so that you can plan around the payments if you need to. You may want to inquire about the conditions under which a stipend would not be paid to ensure you do not do anything to jeopardize payment.”

But stipends don’t always have to be compensating for something. For example, N2 Publishing gives newlyweds $400 marriage stipends. This money is simply meant to help out, not to “fix” anything.

The fact is that stipends can be a great “tool” for companies to win trust, respect, and loyalty of their employees.

After all, employees don’t just need money from their employers, and it’s usually not what ends up making them stay.

Stipends and coronavirus

On May 4, the governor of New Hampshire announced a $300 weekly stipend for the state’s first responders.

The New Hampshire stipend is intended for full-time firefighters, EMS, corrections and police officers, both locally and statewide.

To put this move into context, over 2,100 businesses in New Hampshire had requested personal protection equipment (PPE) to protect themselves during reopenings.

In response, Sununu opened a “mask portal” online that would get the materials to these individuals. The equipment is completely free and is part of new mandatory guidelines intended to help communities ease back into work.

The stipend money, for example, could be used for cleaning costs and repairs, child care, or food.

This is a great example of a stipend.

“We are doing everything we can to make sure that those that are on the frontlines, those who are putting themselves at-risk, throughout this COVID-19 crisis … we want to be there for them,” Governor Christopher Sununu told Patch.com. “Not just financially but with PPE and support.”

What about the minimum wage?

If you meet the requirements to receive a stipend, the amount an employer provides is at their discretion. There is no minimum amount for a stipend, and it can equal less than the minimum wage per hour worked,” according to Indeed.

And taxes?

One of the most common questions we get in regards to stipends is how they are taxed, if at all.

“A stipend does not count as wages earned, so no Social Security or Medicare taxes get withheld. This means your employer will not withhold any taxes for you. However, a stipend does count as taxable income, so you will need to plan to set aside money for the taxes you will owe on your stipend at the end of the year,” says Indeed.

In regard to tax return reporting, “It’s important to ensure your stipend gets recorded on your tax return. You may see it referred to as a “taxable scholarship,” “non-qualified fellowship,” “taxable grant scholarship” or another similar phrase. Speak with a local tax person about what forms you need to report your stipend and how to fill them out correctly,” the Indeed article states.

What are the various types of stipends?

So what types of positions are most “prone” to receiving stipends? For one, they may be given for either volunteer or unpaid labor, and are often (but not always) intended to cover the expenses associated with this type of work.

Here are some common positions that frequently offer stipends of some kind:

Clergy work
Internships
Fellowships
Research
Apprenticeships
Job training