What is a Stipend And How Is It Different From Salary?

“What is a stipend” is one of the most common questions university students and recent grads have when entering the workforce. Essentially, It refers to a type of fixed monetary compensation that is not an hourly wage or regular salary.

Interns, for example, may receive a small allowance to cover health insurance or other necessities while developing their skills, though they are not paid like regular employees. It can also be paid out to existing employees to cover job training, wellness initiatives, and other things that benefit the employer and employee but are not directly related to the role. Check out for some of the high paying position that works for you!

What is a Stipend? Here are Some Real-World Examples:

• Internship Stipends 

Interns are primarily paid in experience. They may also receive a small allowance to cover basic living expenses or healthcare.

• Job Training Stipends 

Employers may choose to reimburse employees who enroll in training programs outside work hours via a stipend. 

• Academic Research Stipends 

In academia, researchers may receive it from universities or even the government. Similar programs exist in the arts.

• Wellness Allowances 

To support employee wellness, organizations are increasingly providing employees with it for things like gym memberships.

How a Stipend is Different from Salary:

Stipends are generally low…and they aren’t required to be compliant with minimum wage requirements. That’s because they aren’t considered wage or salary. So, what is a stipend then? It is an allowance that is provided in exchange for a specific task, not compensation for work. The Department of Labor sets rules that govern when and how organizations can use it.

Tax implications of stipends:

In addition to wondering what a stipend is, job seekers also want to know the tax obligations and implications. It is counted as taxable income by the IRS, but they do not have taxes withdrawn for Medicare and Social Security. Though this means that a recipient of a $1000 stipend will be paid the full $1000 by the organization, taxes will still have to be paid at a later date.

Are stipends beneficial to employees?

The answer to this depends on the circumstances. It can be a great way for interns and apprentices to cover their basic costs when learning a new skill, but they can also be used to cheat trainees out of minimum wage compensation they are entitled. Similarly, that exists on top of a health plan is advantageous but a stipend that exists instead of a health plan can turn into a disaster.