Stipend
What is a stipend?
Stipends are fixed amounts paid to certain individuals to cover expenses such as food, commute and housing. In some situations, people who perform duties for companies without receiving a regular salary may receive stipends. A student, intern, or trainee can receive a stipend. These amounts are generally smaller than salaries for these positions. The idea is that the stipend recipient will gain knowledge and experience with some remuneration.
How does a stipend work?
A stipend is given as a fixed sum monthly. In some places, it is known as allowance. It is different from salaries that are offered for employment - it is more of a compensation for training. Interns instead of getting paid for their services are given stipend as a financial support.
The Department of Labor (DOL) has outlined the rules surrounding how stipends can be used by organizations and companies. Some of the rules are - stipends cannot be used to hire college students to replace existing company staff. Also, the students must be the primary beneficiary of a stipend program and not the company. Given they are used to cover expenses, the stipend amount is relatively low. For example, interns can receive stipends anywhere between $250 and $500 per month. However, in some cases, it can be lower or higher.
Special Consideration for stipends
There are certain things you must consider if you receive a stipend. Stipends come with advantages, and one of them is - you keep what you earn as you do not have taxes withdrawn to pay for Social Security and Medicare. However, you must note that stipends are considered a form of taxable income. Individuals must be careful about how their payments are classified. If an organization identifies you as an employee, your stipend may be taxed, and you will not receive the full amount.
On the other hand, employees should ensure they are not considered trainees. It will lead to complications with their pay.
Understanding the Types of Stipends
Stipends are of various types and depend on the organization or the company that pays them. Some companies pay stipends to help cover housing, travel expenses, or food. Below are different types of stipends that are offered:
Academic Research: These are offered to researchers at academic institutions or other such organizations to help them focus on their projects. These may be furnished by third parties who need to study and wish to see a particular study or form of research advance without fiscal distractions that may otherwise hamper the researcher.
Expense related: In some cases, stipends are offered to cover specific expenses and costs. For example, the university will provide students with a stipend that can only be used for the purchase of computers (or laptops) during academic semesters. The stipends can be given to a student to help with the cost of transportation incurred to and from the company for training purposes.
Job training: Companies may offer stipends to employees who wish to take additional classes and training that may assist them with their career and job development.
Wellness Programs: Health and wellness are a crucial part of the work-life balance that many companies promote. Such companies offer stipends that can be used for a variety of fitness expenses such as gym memberships, yoga classes, or trainers, as part of a wellness program.
Who qualifies to get a stipend?
As discussed above, only certain types of work are eligible for a stipend. You are eligible to receive a stipend if you work anywhere in or as - Intern, Researcher, Assistant, Apprentice, Clergy, Trainee, or Junior Associate.
It does not mean that these positions cannot earn you a full-time or part-time wage or salary. It all depends on the agreement the individual has agreed to sign on. In most cases, these positions are either unpaid or compensated with a stipend.
How is a stipend different from a salary?
A salary is compensation you receive for the work you do for an organization, and it is given monthly and calculated yearly. A stipend, on the other hand, is not the compensation for work but rather monetary support provided by the company to help an individual with expenses incurred for living, food, and travel. These are lower in amount compared and often lower than minimum wage - they are not regulated by the state.
Is a Stipend Considered Income?
Stipends are not wages, so employers will not withhold income tax on any stipends made to you. However, stipends are considered income, so you need to calculate and pay taxes on any stipends received. It is essential to check with your employer on the tax implications regarding any stipends.
How Often Are Stipends Paid to an Employee?
It will vary depending on the institution and the circ*mstances. It can be paid annually, monthly or weekly. Very rarely, stipends are paid annually, as it won't be a form of support which is the underlying purpose of stipend.
Are stipends earned income?
Due to the fact that stipends do not count as wages, there are no Social Security or Medicare taxes withheld. Consequently, there will be no tax withheld by your employer. You will still be taxed if you receive a stipend.
Can stipend be considered as a bonus?
A stipend is typically awarded to employees periodically, after measuring their performance and cost-of-living increases. Bonuses and salary increases are typically based on performance and cost-of-living increases. Employees can choose whether to take advantage of stipends or not throughout the year, since the amounts change.
Can an employee receive a stipend?
Many reasons can be cited for paying an employee a stipend. Mileage reimbursem*nts or other types of reimbursem*nt, as well as payments for special events such as concerts, are commonly used as stipends.
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