What is a work-from-home stipend

A work-from-home stipend is financial support provided to employees on top of their regular pay, designed to enhance their home office setup for a more efficient and comfortable remote work experience.

Work-from-home stipends have become an attractive–and sometimes legally mandatory–benefit for remote employees.

WHF stipends may seem like a burden on the budget but offering such a benefit is a great way to make your work environment stand out among remote companies.

Examples of work-from-home stipends

Work-from-home stipends come in many shapes and sizes. Some companies offer one-time stipends while others offer monthly stipends. 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 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.

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 WFH stipends

Even though it is not mandatory, giving a remote work allowance is a long-term investment in the company and its employees. Helping employees get a comfortable and functional home office space can increase employee satisfaction, performance, and retention.

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. 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.

Work-from-home stipends are usually taxable income

A work-from-home stipend is considered a taxable income in many parts of the globe, but the amounts differ between countries. 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 a salary or stipend. This means work-from-home allowances 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 €130 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.

Work-from-home expenses are mostly not tax-deductible for workers

In the US, the home-office deduction is not available for full- or part-time workers. The Tax Cuts and Jobs Act of 2017 prevents employees (those who receive a paycheck or W-2) from claiming expenses related to setting up and maintaining a home office.

Self-employed people, independent contractors, and other gig workers are allowed to include these expenses as a tax deduction.

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

• Postage

In some organizations, anything purchased with a stipend is considered company property so employees must return all equipment when they leave. Companies may offer additional benefits, like wellbeing and learning stipends, but those aren't restricted 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 stipends are flexible programs and any business can find a model that meets its needs. 

Companies with stipends tend to offer a range from $250 per month to a $1000 one-time payment. 

The good thing is, a company can adjust its business expense budget and find a balance that doesn’t impact the balance sheet and provides enough support to the remote team.

In the US, according to the federal Fair Labor Standards Act, 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.

Companies offering remote work stipends

Big names in tech, such as Buffer, Basecamp, and Linkedin, have embraced work-from-home employee stipends as a part of their benefits package.

• Google gave $1,000 to its employees for work from home equipment during the pandemic

• Shopify gave $1,000 to their team members to buy everything they need to make their work from home effective and comfortable.

• 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 now 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, they are motivated and more productive.

Deel makes work-from-home stipends simple for international teams with built-in expense adjustments and deep integrations with solutions like Expensify. We’ve also built partnerships with organizations across the globe so all clients can offer their employees world-class perks. Learn more about Deel perks and request a demo today to see how we’re enhancing employee and contractor experiences.