What Is a Work-from-Home Stipend? The Ultimate Guide
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Work-from-home stipends have become an attractive–and sometimes legally mandatory–benefit for remote employees.
According to the federal Fair Labor Standards Act (FLSA), employers must reimburse home-office expenses if the cost brings an employee's net earnings below their state's minimum wage. Certain states, like Illinois, California, Montana, and Iowa, have additional requirements for remote reimbursements.
Although giving WHF stipends to employees could seem like a burden on a company's budget, offering such a benefit is a great way to make your work environment stand out among remote companies.
Employers should look at this practice as a long-term investment in their employees and, by extension, the company itself. Helping employees to get a comfortable and functional home office space can increase employee satisfaction, performance, and retention.
Big names in tech, such as Buffer, Basecamp, and Linkedin, have embraced work-from-home stipends as a part of their benefits package. Let’s explore these stipends to understand why:
What is a work-from-home stipend?
A work-from-home stipend (also called a work-from-home allowance) is money an employee receives in addition to their base salary to make remote work productive and comfortable.
Work-from-home stipends come in many shapes and sizes. Some companies offer one-time stipends while others offer them monthly. Some companies offer employees a lump sum they can spend at their discretion while others cover specific home office setup items, like internet and cell phone services, office equipment, or luxury productivity apps.
Regardless of a stipend's specifics, management must create an expense policy that outlines the stipend's amount, the types of expenses it covers, and the amount of money each employee can spend on each. They might offer a one-time amount to employees to buy a stand-up desk and chair plus a monthly allowance for internet and phone bills.
What is the difference between a stipend and a salary?
An employee's salary is monetary compensation given to the employee in exchange for their work. A stipend is an additional, smaller sum of money that supports employees and their work.
- Salaries are much larger than stipends. Salaries are typically larger sums of money and must exceed the minimum wage wherever. If a company offers a stipend, it's typically far smaller than the employee's salary.
- Salaries fluctuate across the company. Work-from-home stipends are usually fixed across the company and determined by the cost of equipment and expenses. Salaries are formed based on the employee's position and performance.
- They serve different purposes. Salary is compensation an employee receives for the work they deliver to an employer, and they can spend it however they want. Stipends don't hinge on work delivered to the employer; instead, they help employees perform their work more efficiently and comfortably.
- Companies pay out salaries and stipends differently. Salaries are typically paid monthly or bi-monthly, whereas stipends can be one-time, monthly, or annual benefits.
Benefits of a WFH stipend
Even though it is not mandatory, giving a remote work allowance is a long-term investment in the company and its employees.
Home office stipends make companies more attractive to candidates
With remote work and flexible work becoming standard, companies that offer unique employee benefits and perks to make the experience more comfortable stand out. According to a Glassdoor survey, four out of five employees would prefer perks and benefits like a WFH stipend over a comparable increase in salary.
Home office stipends increase employee engagement and retention
Offering perks doesn’t just attract new employees. It makes them happier once they’ve joined. At Deel, we champion people-first values: first and foremost, it’s the right approach to work. Second, employees who feel valued are more motivated to do great work. And a supportive, comfortable employee experience is key to longterm retention.
Home office stipends increase productivity
If an employee is under-resourced or uncomfortable working from home, they won’t produce their best work. Companies managing a remote workforce should view home-office stipends as an investment in their employees. Letting them create a comfortable home office environment unblocks them and their work.
Is a work-from-home stipend taxable?
A work-from-home stipend is considered a taxable income in many parts of the globe, but the amounts differ between countries. Therefore, companies, especially those hiring internationally, must be on top of local regulations and laws to avoid penalties.
In the US, all monetary compensation is taxed regardless of whether it’s salary or stipend. This means work-from-home allowanced are taxed just like income. If employees are allowed to purchase a certain amount of equipment themselves and reimburse the amount as part of a stipend program, however, the amount is non-taxable (so long as all expenses can be reasonably justified as business-related).
If a company does not implement a reimbursement program or employees don't follow it, the allowance may be re-categorized as taxable income.
Across the globe, there are some notable exceptions. In Belgium, for example, companies can offer up to $130 (€114) to each employee, tax-free. This incentivizes companies to offer stipends since they would have to pay income tax if this money were part of employee paychecks.
Are work-from-home expenses tax-deductible for employees?
According to the Tax Cuts and Jobs Act, in law in 2017, work-related expenses are not tax-deductible for full-time employees (people who file W2 forms exclusively with an employer). However, self-employed people, independent contractors, and other “gig workers” can submit these kinds of expenses to the IRS as a tax deduction.
The decision to tax full-time employees was controversial once the coronavirus pandemic hit because so many people, including full-time workers, were sent to work from home and had to create a home office setup (often on their dime).
Meanwhile, in the UK, the situation is slightly different. Employees working from home may claim £6/weekly in tax relief on household costs, office furniture, and equipment they purchase for work. It also helps cover increased phone, internet, and other utility bills.
What should a work-from-home stipend cover?
It's up to the company to determine what a work-from-home stipend covers based on the equipment their employees need, their budget, and their local laws. The most common items included in work from home stipends include:
- Office hardware (laptops, monitors, computer accessories)
- Office furniture (ergonomic chairs, standing desks)
- Internet and phone expenses
- Access to coworking spaces
In some organizations, everything bought with a stipend belongs to the company so employees must return all equipment when they leave. Companies may offer additional stipend benefits, like wellness and learning stipends, but those aren't specific to work-from-home employees.
How much is a typical work-from-home stipend?
When first considering a practice of giving a work-from-home stipend, companies worry it will be too expensive and hard to manage. But, with so many reputable companies already doing it, every business can find a model that meets its needs.
The sum companies offer range from $250 per month to a $1000 one-time payment, a model introduced by giants such as Shopify and Basecamp.
The good thing is, a company can adjust its business expense budget and set a payment dynamic that does not harm the business and provides support to the remote team.
How to ask your employer for a WFH stipend
Most of us didn't have home office space prepared for the sudden, accelerated shift to remote work. As a result, everyone had to adapt quickly and create a productive workspace. One silver lining is that companies are more willing than ever to offer work-from-home stipends.
Here's how to create a proposal that will inspire your employer:
Determine hard costs
First, assemble the cost of all work-from-home expenses and equipment. See the list above of items typically covered, and gather receipts to understand how much you spend on those expenses. If you don't have receipts, shop around to develop an itemized total of your work-from-home expenses.
Identify factors that harm your workflow
Low-speed internet connection and inadequate remote office equipment can make you lose valuable time and cause delays. Create a list of barriers in your current work-from-home experience to demonstrate the problems that a work-from-home stipend will solve.
Research local tax deductions and legal requirements
As we mentioned earlier, work-from-home stipends involve laws and taxes specific to each country and state, so make sure to stay up to date with current regulations.
Prepare a document demonstrating the stipend's business benefits
Now, create a document that outlines all of the relevant benefits of a work-from-home stipend (listed earlier in this article), your current work-from-home expenses, relevant tax deductions, local legal requirements, and the barriers you face without the stipend.
Remember: your boss likely needs to demonstrate the business value of any expense before it's approved, so focus on the objective benefits to the business.
Schedule a meeting with your manager and submit it to HR
Send the document to your manager ahead of time, and use the meeting to discuss the challenges and benefits you've identified. Work together with your manager to punch up the proposal. Once it's ready, submit the proposal to your People Ops or HR team.
Have a backup request
If a company doesn't accept your proposal, ask for one-time expense reimbursement. For example, you could use it to purchase an extra monitor, headset, or any other piece of equipment that will help you get the work done.
Positive examples of remote work stipends
Facebook and Twitter provide remote work stipends to their employees, but they are not the only ones. These are the companies that offer such support to their team members.
- Google gives $1,000 to its employees to purchase equipment once the quarantine started.
- Shopify gives $1000 to their team members to buy everything they need to make their work from home effective and comfortable.
- Peloton offers up to $500 to their employees to cover their home workspace expenses.
Webflow, a company with 70% of its team members working remotely, offers a handsome collection of stipends, including:
- $200 per month to all employees for health and wellness
- $250 per month to remote workers.
- $1000 of a yearly stipend for continuous learning.
Offer a remote work stipend and drive your business forward
Remote work opened the door for employees to work in business worldwide. This is a great shift in power toward the employee; employers must step up their game to continue attracting and retaining great talent.
Companies that offer great employee experiences will win out in this new normal. When employees know they can count on their company, especially in a crisis, such as a pandemic, they are motivated and more productive. Remember, when workers feel appreciated and valued, they will spare none of their talents and abilities to help your business grow.
With Deel, work-from-home stipends are just the beginning. We partner with organizations across the globe so that companies who hire with Deel can offer their employees world-class perks. Learn more about Deel perks and request a demo today!