What is a stipend and how to know if you are eligible

In exchange for work or duties performed at a company or an organization, a stipend may be offered if the worker is not eligible to receive a standard salary for the work that is completed.  Often, this is a pre-arranged sum that can be paid to interns, students who are learning, or someone in a training program. This stipend is offered to offset expenses like travel, parking, meals or simply a small sum of money to pay incidental expenses. Companies may offer college credit instead of a salary and a stipend is offered in exchange for pay.

Stipends can benefit the employer and employee

Companies can benefit from hiring interns and trainees because they don’t have to pay an hourly or weekly wage or salary. A stipend is a way to encourage students, interns and those looking for some industry exposure to learn and experience a company’s culture.  A stipend  can offset associated expenses for a trainee or interns like parking, meals, transportation or other associated costs.

Academia commonly offers stipends

Stipends can be offered for researchers at academic universities or other organizations to assist with projects. “Much like grants, these stipends may be furnished by third-parties who wish to see a particular study or form of research advance further without fiscal distractions that might otherwise hamper the researcher,” says a post of Investopedia. Often, foundations and like-minded entities can fund stipends.

According to Investopedia, entities like the National Endowment for the Humanities offers grants in the form of stipends. The types of research projects eligible to receive such a stipend can include books, translations, articles, digital publications, or site reports on archeologic digs.

Who qualifies for a stipend?

As described, a stipend is a sum of money paid to a trainee to cover living expenses. “It’s not the same as a salary, and there are clear lines describing who is and isn’t eligible to receive one,” says Jesse Silkoff, co-founder and president of MyRoofingPal, an online marketplace that connects people with the best local residential and commercial roofers in 4,000 cities across the U.S.  The only way someone can legally qualify for a stipend is if all of these conditions are true:

1.) They’re undergoing training

2.) They aren’t receiving wages

3.) There’s no promise of a job after training is complete

Silkoff states it can be a tricky situation to navigate, and employers should really speak to a professional before deciding to issue stipends. “Employers should never under any circumstances use a stipend to pay an intern for things that could be considered part of a normal job, as legally it will be argued that this is payment to cover wages, making them an employee,” Silkoff says.

A stipend can be used for living expenses

If a trainee is working in a location for an assignment, a stipend will assist with these additional outlays. “These expenses might have to do with temporary rooming accommodations, food, or travel that are a result of job training or as an agreed-upon portion of the job,” says Chane Steiner, CEO of Crediful.com. “Often this shows up during a training period where new employees have to travel to a central location for training. In this example, these employees would be allowed a certain sum to cover a room, meals, and the cost of driving.”

Other expenses that can be covered by stipends

Joseph Puglise, senior director of executive search and recruiting at JMJ Phillip – a leading global executive search firm focused on the manufacturing, supply chain, and technology industries often guide candidates and clients through high-level job transitions, where stipends are often a focus, and says stipends can actually be used for work-related expenses too.

“A stipend is a predetermined amount of money that’s paid to employees to offset work-related expenses upfront. These are different from reimbursements, which are paid after a transaction occurs,” Puglise explains. “These expenses are typically associated with business travel, client entertainment, and admission to trade conventions/shows.” He advises those receiving stipends to work with a member of the HR department to discover what expenses are and are not covered by stipends or other allowances.

“Additionally, keep any and all receipts from business-related transactions in case your employer requests proof of purchase,” he advises.