What is a Stipend? Definition and How it Works

What is a stipend? There are several possibilities to advance your profession or academic study. You may be afraid to apply because many of these positions do not provide salaries or hourly earnings.

Consider a stipend-based opportunity if you want to explore an internship, apprenticeship, or new academic activity but need to earn money to support your living expenses.

what is a stipend

What is a stipend?

Unlike a salary or hourly rate, a stipend is a set amount of money that corporations, institutions, or organizations give to people – usually interns, graduate assistants, public servants, and trainees – to fulfill a specific duty. It can also be a fixed sum of money to cover work-related expenditures, such as traveling to a business function if the employee is not typically expected to attend.

During the summer, an intern may agree to work 4 hours a day, 3 days a week at a financial services business, doing filing, record keeping, and basic accounting chores. Instead of a salary or hourly payment, the company gives the intern a stipend of $2,000 that is set in advance.

Who gets a stipend?

In exchange for their efforts, people who are not entitled for a normal income or pay are given stipends. Typical recipients include researchers, graduate students, clergy, interns, and apprentices.

To qualify for a stipend, the employment must primarily focus on training and learning, with the training benefiting the beneficiary rather than the employer.

An employer cannot guarantee the recipient of an internship or apprenticeship a job at the completion of the program or have them work in lieu of a regular employee.

How do stipends work?

A stipend is money given to you by an organization to help you financially. While accomplishing work for the company, you can agree on how you wish to be rewarded. The intern can put the stipend toward anything they choose, including rent, meals, transportation, and other expenses.

Graduate assistants may be paid stipends by colleges. Instead of being paid $13 per hour, a graduate assistant may be paid a stipend of $2,000 to cover the work they accomplish over the course of a semester. The stipend may be provided by the institution to assist graduate assistants in covering the costs of meals or transportation to and from campus facilities.

Stipend uses

The most typical purpose of a stipend is to pay living, eating, and travel expenses. Stipends, on the other hand, stimulate particular activities, such as scholarly research or professional advancement via continuous education.

Some schools may provide stipends to offset the cost of technology devices such as laptops. To promote healthy habits, employers may give a stipend in addition to normal salary to cover health insurance or gym memberships.

what is a stipend

Minimum wage

If you fulfill the qualifications for a stipend, the amount you get is up to the employer's discretion. A stipend has no set minimum amount, and it might be less than the minimum wage per hour worked.

Taxes

Because a stipend is not considered income, no Social Security or Medicare taxes are deducted. This implies that your company will not deduct any taxes from your paycheck. A stipend, on the other hand, is taxable income, so you'll need to budget for the taxes you'll due on your stipend at the end of the year.

Tax return reporting

It's critical that your stipend be included on your tax return. A "taxable scholarship," "non-qualified fellowship," "taxable grant scholarship," or any similar term may be used. Consult a local tax professional to learn what paperwork you'll need to report your stipend and how to properly fill them out.

Negotiations

Depending on the organization, you may be able to bargain for a raise in your stipend.

Before you ask for a raise, do your homework and consider the following factors:

  • What other similar positions pay in stipends: If other similar positions pay more, try asking for that amount.
  • If the stipend is sufficient to pay your living expenses: Determine if your present stipend is sufficient to meet your usual living expenditures.
  • Other perks: In addition to requesting a stipend increase, consider other benefits such as tuition credit or room and board if a rise is not possible.

When requesting a stipend increase, express gratitude for the opportunity, explain your study findings, and indicate the amount you require.

Stipend vs. salary

Consider the additional perks that a salaried employment or stipend may provide. An apprenticeship, for example, may allow you to work directly under a professional in the sector you wish to pursue, giving you a competitive academic or work experience edge when you enter the workforce.

If you have a family or have a lot of medical costs during the year, the health insurance advantages of a wage employment may be more enticing to you.

Salaries

Salary features include the following:

  • Employees are compensated by the employer in a bi-weekly, weekly, or annual fashion.
  • Pays for services rendered or the number of hours performed.
  • Typically, biweekly or weekly payments are made.
  • Possibility of a raise depending on performance
  • Minimum wage restrictions apply.
  • Employer-imposed tax.

Learn about gross salary vs. net pay.

Stipends

Stipends frequently have the following characteristics:

  • Interns, apprentices, clerics, and trainers are all paid a certain sum.
  • It is not dependent on the services provided or the number of hours spent.
  • Minimum wage standards are not applicable.
  • The company does not levy any taxes on the employee (recipient must withhold own).

Employers often offer stipends for wellness programs, career advancement, job training, and cover expenses related to the job on top of regular pay/regular salary. The employee is reimbursed through a stipend payment.

Pro tip: If you're a regular employee, they must be paid at least minimum wage and may be eligible for overtime pay if they work more than 40 hours in a week. Employers may pay stipends to help defray certain extra costs related to the job. Stipends aren't considered wages so you don't pay Medicare taxes on them.

Types of stipends

A stipend is a fixed amount of money, intended to help provide financial support to a person. Here are the types of stipends that you could see.

Research

Researchers frequently get stipends from their institutions in order to focus on their work without the distractions of a full-time or part-time employment. Third-party interests may offer these stipends, similar to grants, since they are interested in seeing the study progress. Stipends are sometimes offered by foundations for similar reasons.

To be eligible for a stipend, researchers' projects must satisfy the following criteria: the study must go beyond data gathering and analysis, and the information obtained must be interpreted.

Universities usually refer to money paid to graduate students as a stipend, rather than regular wages.

Health insurance/gym/wellness

If the company does not provide these benefits, employers may give healthcare stipends to defray the cost of health insurance. Some businesses may also provide stipends to cover the cost of a gym membership, incentivizing employees to exercise and live better lifestyles.

Sometimes referred to as a "health insurance stipend."

Training

Employees who want to advance their careers with additional work training may be eligible for stipends from some employers. Stipends are paid to apprentices to cover their living expenses while they are working on their apprenticeship.

This could cover other expenses incurred advancing duties.

Internships

Stipends are provided by certain internships to cover the costs of accommodation and meals. Most firms establish a stipend for interns based on the typical cost of living in the area where they work. Employers want interns to be able to focus and perform well on the job without financial worry since internships typically lead to full-time jobs.

Fellowships

Fellowships give students with financial assistance and may include tuition assistance in the form of a stipend. Other than continuing their study, the student is not required to do any duties in order to earn the stipend.

Clergy

Clergy members may be given a stipend from congregational contributions. This stipend helps clergy to conduct their vocations without having to work another job to make ends meet. Clergy often receive a stipend so they don't have to take an additional job to cover their expenses.

What are stipend payments?

A stipend can be paid in a variety of ways depending on the organization, industry, or institution. Some employers may give a lump payment to interns or other employees, which is generally less than minimum wage. This manner, these people may utilize the money to cover the expenditures of their accommodation, transportation, and meals while working. Others may choose to pay on a weekly or monthly basis.

When it comes to stipends, however, there is one important guideline that all businesses, institutions, and organizations must observe. Companies can't pay in the form of a stipend if the job an employee accomplishes isn't deemed educational training or if the employer, organization, or institution benefits from the work completed, according to the U.S. Department of Labor.

Companies, colleges, and organizations must regard an intern or other individual as an employee in these situations. This implies that they must pay them at least the federal minimum wage.

Are stipends considered income?

Because stipends are not considered wages, businesses are not required to withhold income tax on stipends paid to employees.

However, because stipends are frequently considered income, you will be responsible for calculating and paying taxes on any stipends received, including Social Security and Medicare.

It is critical to discuss the tax consequences of any stipends with your employer.

In short, a stipend payment isn't part of your process when you go to pay taxes. And isn't considered taxable income, most frequently. A tax professional can assist you in determining if a stipend is taxable; the Internal Revenue Service (IRS) also offers a tool to assist you in determining whether the money you received is taxable income.

How often are stipends paid?

The frequency with which a stipend is provided to an employee depends on the institution and the conditions. Stipends can be paid weekly, monthly, or annually.

They are usually not provided annually since they are considered a source of support, and the individual may require that monetary amount at any time during the year.

Stipends are frequently handed out at the same rate as an employee's pay.

what is a stipend

Favorite Resources

Our favorite resources are included below.

Job interview resources

Resume and cover letter resources

Job search resources

free interview question and answer full guide

Interview Question and Answer Guide (PDF)

Get our full interview preparation guide. Complete with common interview questions and example answers. Free. No email required.

Grab the PDF
author: patrick algrim
About the author

Patrick Algrim is a Certified Professional Resume Writer (CPRW), NCDA Certified Career Counselor (CCC), and general career expert. Patrick has completed the NACE Coaching Certification Program (CCP). And has been published as a career expert on Forbes, Glassdoor, American Express, Reader's Digest, LiveCareer, Zety, Yahoo, Recruiter.com, SparkHire, SHRM.org, Process.st, FairyGodBoss, HRCI.org, St. Edwards University, NC State University, IBTimes.com, Thrive Global, TMCnet.com, Work It Daily, Workology, Career Guide, MyPerfectResume, College Career Life, The HR Digest, WorkWise, Career Cast, Elite Staffing, Women in HR, All About Careers, Upstart HR, The Street, Monster, The Ladders, Introvert Whisperer, and many more. Find him on LinkedIn.

Share

Help us by spreading the word