What is a remote work stipend?

Allowing employees to work remotely can save employers a fair amount of money on expenses like building rent, supplies, maintenance, utilities, and even relocation costs. However, as more organizations adopt a hybrid or fully remote work environment, they must consider the hidden costs their employees will incur while working from home.

While remote work is preferable for many employees today, it does add more financial responsibility to their plates. One way you can offer financial assistance to your workers is with a remote work stipend. With a stipend, you can ensure all your employees have what they need to be productive while working from home without them—or you—breaking the bank.

If you have questions about setting up a remote work stipend, this article will cover everything you need to know about them, including how they work, what they cover, and how you can offer one at your organization.

To learn more about various employee stipends, check out our complete guide

What is a remote work stipend?

A remote work stipend, or a work-from-home stipend, is money given to an employee in addition to their base salary to purchase items and cover expenses incurred while working remotely. Remote stipends vary and are flexible. They can include everything from creating or updating a home office to covering the cost of working at a coworking space.

There are three ways you can offer your remote work stipend:

1. As a one-time payment: Stipends given as a lump sum are typically provided to newly hired employees to set up their home office. While this is the quickest way to administer your stipend, you may pay more than the employee ends up using.
2. On a regular, consistent basis: You can offer stipends to your remote workers up-front on a monthly, quarterly, semi-annual, or annual basis to purchase necessary items. With this structure, if an employee spends all their money before the next scheduled payment, they have to wait.
3. As expense reimbursements: This method allows you to reimburse your employees after they incur an eligible business expense. Reimbursements ensure you only pay for the exact costs your employees incur instead of paying them upfront for estimated operational costs. Within this method, you can offer a one-time reimbursement or set up monthly or annual allowances that will be paid out once an employee requests a reimbursement.

Stipends are generally taxable income for employees because they’re essentially extra money provided in addition to their wages. However, they’re exempt from Social Security and Medicare taxes because they’re not considered earned wages.

In some cases, employee reimbursements for remote expenses are tax-free for employees as long as the expense is eligible, business-related, and properly documented. This is because the IRS considers reimbursement under this arrangement to be an “accountable plan.”¹

If your benefit is recurring, like an up-front monthly or a one-time stipend, eligible employees will pay income taxes on the amount.

As with mileage reimbursement, the federal government mandates that all business owners must reimburse remote work expenses if those expenses lower an employee's net income to less than the state's minimum wage. Some states, like Illinois, California, Montana, and Iowa, have additional requirements.

Therefore, it’s important to check your state and local laws to ensure you’re complying with all regulations.

What can a remote work stipend cover?

Remote work stipends encourage employees to purchase necessary items that make their workspaces efficient and comfortable. This means there’s no limit to what your remote work stipend can cover. It's up to you to determine what’s eligible.

Most employers choose to cover the office essentials, like supplies, desk chairs, or internet access costs. But eligible items can include whatever you think would make your remote workers produce the best work and boost employee morale.

Some examples of eligible expenses that your remote stipend can cover include the following:

• Office equipment (i.e., laptops, monitors, computer accessories, etc.)
• Office furniture (i.e., desks, ergonomic chairs, bookcases, lighting, etc.)
• Office supplies (i.e., sticky notes, notebooks, printers, filing cabinets, planners, writing utensils, paper shredders, etc.)
• Noise-canceling headphones
• Webcams
• Music and podcast subscriptions
• Productivity apps
• High-speed internet and cell phone bills
• Job-specific tools
• Professional development
• Electric and utility bills
• Meals or groceries
• Home office decorations
• Under-desk ellipticals
• Coworking space fees

Your remote work allowance will vary depending on your budget and the average cost of the expenses you wish to cover. You can offer as much or as little allowance as you like. Although companies offer between $50-$250 per month or $1,000 each year on average².

To ensure your remote workers understand how their new benefit works, you should draft a company stipend policy. It should outline all pertinent information, including eligible work-related expenses, allowance amount and frequency, and whether or not they need to return their purchases to you if they leave your organization.

What are the advantages of remote work stipends?

Offering a remote work stipend isn’t mandatory in most states. However, there are many advantages to taking the extra step and providing one to your employees that work a hybrid or fully remote schedule.

1. They’re flexible and customizable

Employees who are uncomfortable in their workspace won’t be as efficient. Instead of a traditional perk, remote working stipends are customizable so employees can create an environment to ensure they produce their best work. Plus, they’re flexible, so all your employees can use them, no matter their location or work schedule.

Better yet, when employees are free to choose how to spend their benefit dollars, they’re more likely to make thoughtful decisions about where the money should go. This means employers won’t be putting their money towards benefits that will go unused.

2. They boost productivity

If you have remote employees, they need the same tools and experience as your in-office employees, so your whole team can be productive. Using a remote work stipend, you can ensure all your employees have what they need to succeed in their roles without their resources and working environment hindering them.

For example, if you have an employee that works from home but has roommates that also work from home, they can use their stipend to purchase noise-canceling headphones or a white noise machine. When your remote team has what they need to focus, productivity rises.

3. They increase recruitment and retention

With remote and flex work becoming the norm, companies need to entice potential candidates with an employee benefits package that stands out.

If you have candidates looking to work a hybrid or remote schedule, they’ll want fringe benefits that reflect that, like a remote work stipend. Additional benefits will also give you more remote talent to choose from and give you a competitive edge in your industry.

Offering various employee perks is also beneficial to retain your current employees. According to Glassdoor³, four out of five employees prefer new perks over a salary increase. By offering a stipend, remote employees will feel supported, valued, and appreciated on the same level as their hybrid and in-office counterparts, leading to lower turnover.

4. They showcase your company’s culture

In today’s modern workforce, organizations that implement remote work policies and benefits tend to have a more inclusive culture and stronger company values. A strong remote company culture can lead to improved employee engagement, a greater pool of job candidates, and increased morale. But offering a stipend as part of that culture is also a way to build trust.

When you give your employees personalized benefits, it says that you trust them to make decisions about the benefits that work best for them. Trust goes a long way toward building a positive culture that promotes your employees’ happiness and well-being, whether they work in a traditional office space or remotely.

How can you offer a remote work stipend at your organization?

If you think a remote work stipend is too challenging to administer on your own, a benefits administration platform can help you navigate the waters. With PeopleKeep’s WorkPerks stipend administration platform, you can reimburse your employees for their remote work expenses quickly and easily.

WorkPerks allows employers to customize their stipend. For example, your monthly remote work allowance can vary by employee classes (such as a certain amount for full-time employees and a different amount for part-time employees). You can even vary allowances based on location, which is especially beneficial if you need to comply with state requirements.

No matter where your employees live, stipends are flexible enough to meet their individual needs. They simply submit proof of purchase for an eligible expense, and you approve and schedule the reimbursement from your dashboard up to their allowance amount. With WorkPerks, you can ensure your money is spent how you intended.

Conclusion

If your organization wants to be competitive in attracting remote job candidates, you need to offer great benefits. With a remote stipend, you can help your employees set up a functional and comfortable r working environment so they feel better supported and appreciated while they work from home.

PeopleKeep’s WorkPerks stipend software solution can help you administer your remote benefits in just minutes per month. Contact our personalized benefits advisors, and we’ll set you up with customized perks that are sure to guarantee employee satisfaction.

1. https://www.irs.gov/pub/irs-pdf/p5137.pdf

2. https://buildremote.co/companies/work-from-home-stipend/

3. https://www.glassdoor.com/blog/ecs-q3-2015/