A rising number of organizations utilize a stipend as an incentive for workers, researchers, instructors, interns, and volunteers. Here is a thorough overview of it, providing facts and advice regarding this tool to assist you in having a better grasp of the implications of receiving it.
List of Contents
What Exactly Is a Stipend?

A stipend is paid to a person for services rendered, additional labor, or training. In many circumstances, it is granted in place of or in addition to a normal wage. They are intended to offset specific expenditures and have a predetermined sum. Trainers, interns, students, apprentices, and clergy members get it. Individuals should be mindful of the tax consequences of it, which is taxable but not immediately.
Working Principles of a Stipend

A stipend is frequently granted as a fixed amount. Moreover, it is typically paid to the recipient in a flat sum. This kind of pay is occasionally referred to as an allowance. In addition, it is often granted daily, weekly, or monthly. Typically, a stipend is provided as remuneration for training rather than a salary for work purposes. Consequently, it enables people to undertake unpaid labor by helping to alleviate living expenditures.
Additionally, it is usual for interns, apprentices, fellows, and clergy to receive the stipend. Instead of being compensated for their efforts, they are provided with stipends to sustain them financially while doing the job or task. It sometimes includes additional perks like accommodation, board, and further education.
Department of Labor (DOL) regulations govern how firms and organizations use stipends. Students cannot be hired to replace current employees. Furthermore, they must be the primary beneficiaries of the job or training, not the corporation. It may also be less than the minimum wage if it is used to compensate trainees.
A Stipend Beneficiaries

Those who cannot receive a normal income or compensation in exchange for their services will get stipends. Common beneficiaries include researchers, graduate students, clergy, interns, and apprentices. To get it, employment must emphasize training and education. Moreover, the training must benefit the beneficiary more than the company. The beneficiary of an internship or apprenticeship may not be guaranteed a job after the training, nor may they be asked to perform the duties of a regular employee.
What Can a Stipend Be Used For?

A stipend can be used for nearly any purpose so long as it assists with living or work-related costs. In other instances, the stipend is given in advance and used to purchase supplies. Thus, you will not see the money. Suppose you are qualified for a stipend for your research project. The organization can then pay for your books and deliver them to you without sending you a charge.
5 Types of Stipends

As stated before, stipends are not hourly-based compensation. Moreover, businesses frequently utilize them as a low-cost alternative to pay interns or cover workers’ expenses while doing specific tasks. As a result, the amount might vary based on the firm or organization that pays it. Some businesses provide stipends for accommodation, food, and travel expenses. Here are a few examples of the available types of it.
Job Training Stipends
Some employers provide stipends to workers who desire to pursue extra training and classes that may benefit their professional growth. The company will compensate the employee for classes or further training that the employee enrolls in and pays for.
Wellness Program Stipends
Health and wellness are becoming integral components of the work-life balance promoted by many organizations. As a result, it is only logical that many firms give stipends for a range of exercise costs, including gym memberships, yoga lessons, and personal trainers, as part of a wellness program.
Health Insurance Stipends
Some companies may add health insurance funds to interns’ wages, although they’re not compelled to. Individuals can then use this additional money to pay for insurance premiums for coverage obtained through the healthcare exchange or directly from private insurers.
Expense-Related Stipends
Stipends may be provided to cover certain fees and expenses. During academic semesters, students might earn it that must be utilized towards purchasing or leasing computers. Alternatively, it may be granted to assist with the recipient’s transportation costs to and from the firm for training reasons.
Academic Research Stipends
Researchers at academic institutions and other organizations typically get stipends to assist them in concentrating on their tasks. Similar to grants, outside parties may contribute these stipends to let researchers pursue a certain topic or style of study without financial constraints. Foundations and related organizations may also grant similar stipends to assist researchers’ work and develop their initiatives.
A Stipend vs. Salary

A salary is paid for labor completed and is often a fixed sum paid annually. A stipend, on the other hand, is not considered payment for employment. It is rather financial support for various variables, such as expenditures spent while traveling or training or to cover specific living expenses. Typically, it is also of smaller value. As a result, they are frequently lower than minimum wage and are not regulated by the state; they are offered at the employer’s discretion.
Is a Stipend Taxable?

Generally, a stipend is taxable, and receiving one will cost you at tax time. Since the IRS considers it to be taxable income, this is the case. This will require you to pay federal and maybe state income taxes. However, as it is not considered income, you are not required to pay Medicare or Social Security taxes.
However, there is considerable wiggle room. Any portion of a stipend utilized for educational expenditures is not subject to taxation. Suppose you receive a $4,000 salary as a college teaching assistant. If $2,000 is utilized for tuition and school supplies, you will only owe taxes on the remaining $2,000.
Conclusion
A stipend program is a predetermined fee a company pays to inspire and enable workers to acquire industry knowledge, training, and experience. It is advantageous for both the company and the employee since it relieves the employer of the obligation to pay a salary and helps professionals finance their costs.
FAQs
A salary is frequently subject to minimum wage regulations and paid to employees who regularly work weekly or monthly with taxes, whereas a stipend is a predetermined amount of money provided occasionally and does not depend on the number of hours worked.
When an employee or trainee is not qualified for a typical salary, they will receive a stipend, which will cost less than a regular salary.
The cost of stipends varies based on the employer or business offering them, and they are frequently given to help the recipient with expenses like travel or living costs. However, the stipend’s conditions might specify which cost can be used to pay for.
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Source: Investopedia