Your employees' mental health is just as important as their physical health. But not every health insurance plan covers it. A stipend program is a simple and low-cost way to support them.
84% of workers say their job or workplace conditions have contributed to at least one mental health challenge. And the vast majority (92%) agree on one thing: working for an employer that values their emotional and psychological well-being is paramount.
When something is important to your employees, it should be important to you. Prioritizing employee health and well-being leads to a happier and more productive workforce, lower turnover and absenteeism rates, and better overall employee satisfaction.
The most straightforward way to do that? A stipend.
Here's what we'll cover in this guide:
What is a mental health stipend?
How wellness stipends work
Reasons to offer mental wellness benefits
How employers can set up their own stipend program
Invest in employee well-being with a mental health stipend
A mental health stipend is a fixed amount of money an employer gives their employees for mental wellness services and activities. They are a type of health and wellness stipend, a category which also includes physical and financial wellness benefits.
Most companies offer mental health stipends on a monthly basis, but some choose to issue them as an annual or quarterly lump sum. Employees can use this money for anything related to mental health care, including therapy sessions, meditation apps, yoga classes, and self-care activities.
You might also hear them called...
Mental wellness stipends
Mental health and wellness stipends
Mental wellness allowances
Stipends are similar to reimbursements — both involve the company covering a portion of their employees' expenses. However, stipends come with more flexibility and fewer rules. They're designed to give employees the flexibility to seek out mental healthcare on their own terms, making them the ultimate inclusive employee benefit.
How mental wellness stipends work
Here's how a typical wellness stipend program works (as an employer):
You set aside a specific amount of money for each employee's wellness-related expenses.
You'll create a list of approved services/activities and set eligibility requirements.
Each month, you release the stipend amount through payroll.
Employees choose how and when to use their stipend, as long as it's on an approved service or activity.
Usually, companies offer somewhere in the ballpark of $50 to $250 per month, depending on the company's budget and employees' needs.
What expenses do they cover?
Mental wellness programs vary from one company to the next. The best way to promote employee well-being is to make yours as flexible and accommodating as possible.
That's the whole point of a stipend, isn't it?!
Here's a list of some commonly-covered services and activities:
Therapy sessions (in-person and virtual)
Medication costs
Telehealth services
Crisis helplines
Mindfulness and meditation apps
Mental health workshops and classes
Mental health books or workbooks
Stress management programs
Since physical and financial wellness are closely linked to mental health, some companies choose to allow employees to use their stipend for expenses like gym memberships, fitness classes, nutrition classes, or financial counseling services.
How do companies implement them?
You can offer a mental health stipend as a standalone payment, a stipend/reimbursement hybrid model, or part of a larger employee wellness program.
A standalone stipend — Each month, you'll release a fixed allowance through payroll and allow employees to manage their own mental wellness expenses. You may set limits on what employees can use it for, or you can say, "Anything that supports your mental health!"
A stipend/reimbursement hybrid — You might offer a stipend to support employees' day-to-day mental health and privately offer reimbursements for more significant expenses like therapy or intensive services for employees with a significant need.
Part of a wellness program — Workplace wellness programs could include wellness spending accounts (WSAs), lifestyle spending accounts (LSAs), or any combination of lifestyle benefits and on-site employee well-being resources.
Tax implications of wellness stipends
Unlike traditional health benefits like health insurance or services offered through employee assistance programs (EAPs), a mental health stipend is a taxable benefit paid to employees. Taxable benefits treated as additional income and subject to standard payroll taxes.
This means that...
Employers pay payroll taxes on the stipend amount.
Employees report their wellness stipend as taxable income when filing their tax return.
Employers include the stipend amount on employees' annual W-2 forms.
Any amount your employees forfeit from their stipend, WSA, or LSA is not taxable. For example, if you offer $100/month ($1,200/year in total) but an employee only uses 9 months of it, they'll only owe taxes on the $900 they used.
Improves access to mental health resources
According to research from Amwell, more than half of employees either don't have access to mental health benefits or aren't sure if they do. 85% of those with access through their health plans don't use them. Roughly two-thirds say they'd use digital resources if they could access them through their employers.
Additional research shows that 42% of Americans who needed care in the last 12 months didn't receive it due to costs and other barriers.
The issue here is access. Health insurance coverage is notoriously complicated and often leaves employees feeling unsure of what they have access to. Providing a mental health stipend makes it easy for employees to access exactly the resources they need without worrying about what's in their network.
Higher employee engagement and productivity
The primary reason companies choose to offer stipends? To support their employees' mental health and well-being.
And what comes along with that? A happier, healthier, and more engaged workforce.
A 2022 study from MetLife found holistically healthy employees are 79% likelier to show job satisfaction, 59% likelier to feel engaged at work, and 53% likelier to be productive.
Lower rates of absenteeism and turnover
According to the American Psychological Association's 2023 Work in America survey, nearly all (92%) of employees say working for an organization that supports their mental health is important to them.
In addition to the clear connection between poor mental well-being and declining engagement/job performance, the tangible (costly) impacts that follow shortly afterward are absenteeism and turnover.
In the short term, these employees take more time off for mental health issues or related physical symptoms. Long-term, they'll find an employer that supports their needs.
Long-term cost savings
If you don't see mental health stipends as a way to save money, we don't blame you. But there's more to it than money coming out of your pocket. You have to consider the costs of not supporting your employees' mental and emotional health.
On average, absenteeism costs employers $3,600 per hourly worker and $2,660 per salaried employee every year. As for turnover, it can end up costing 6 to 9 months of an employee's salary, all things considered.
With a mental health stipend program, you can increase retention and engagement rates for a couple hundred dollars per month per employee (at most). By extension, you'll reduce the abovementioned costs. So, really, it's more of an investment than an expense.
Leading companies make mental health and wellness a part of their culture.
We aren't just recommending mental health stipends because we sell stipend software. For the nation's best employers, supporting employee mental well-being is a no-brainer.
Atlassian offers employees an annual stipend reimbursement for mental health expenses in addition to its extensive wellness program.
Basecamp offers employees $100 per month toward mental health expenses, including therapy sessions and meditation apps.
Palo Alto Networks offers employees $250 every quarter exclusively for their health and well-being.
Peloton offers $500 per year in reimbursements for wellness initiatives.
Salesforceemployees have $100 per month to use for anything health and wellness-related.
The Zebragives employees $100/month to put toward their mental and physical health needs.
Zoom has a unique wellness reimbursement program that includes mental health care.
Building stipends into your wellness program
One employer's wellness programs will always differ from the next. How exactly you choose to promote your employees' mental and physical wellness will depend on your team's unique needs and interests.
But thanks to the versatility of stipends, you have a lot of room to get creative.
Here's a step-by-step guide to help you get started:
1. Pinpoint your employees' needs.
Before you implement any employee benefit, you want to make sure it aligns with what your employees are looking for. Otherwise, it won't be as impactful.
You can get a better understanding of your employees' needs through employee benefits surveys, focus groups, and one-on-one meetings. Ask them what types of resources they would find most helpful for managing their mental and physical health.
2. Consider different stipend options.
Once you have a good idea of what your employees need, consider which type(s) of stipends make sense for your company and budget.
You have two main options:
A general wellness stipend that employees can use on anything health and wellness-related, including mental health expenses.
A dedicated mental health stipend to cover therapy sessions or medication costs.
How exactly you choose to offer this benefit will depend on your current company-sponsored mental health resources.
If you already provide access to services like telehealth counseling, meditation app subscriptions, and corporate gym memberships, a general wellness stipend is probably enough. If you don't offer these benefits and your employees express significant interest, you'll want to address it head-on with a dedicated stipend.
3. Decide how much to offer.
Next, you'll need to consider how much you can realistically allocate to these stipends each month or quarter.
Most employers offer somewhere between $50 and $250. Any lower than that, and it isn't useful. Any higher, most employees won't take full advantage.
4. Set eligibility requirements.
You may or may not have a larger health and wellness program. The great thing about stipends is there are fewer strings attached and they're easy to offer.
So, you can offer them to more of your valued team members.
In addition to your full-time salaried workers, you might extend a small stipend to:
Summer interns
Part-time workers
Contractors working 30+ hours per week
5. Benchmark against your competitors and the job market.
Ultimately, your ability to compete in the talent market depends on how your health and wellness benefits stack up against other employers'.
Start by researching what benefits your industry competitors offer. Then, broaden your scope to look at companies outside your industry but similar in size, location, and employee demographics.
Perhaps most importantly, your wellness stipend program needs to be easy to understand and execute. It'll just create back-office headache if it isn't. And nobody will enroll.
Stipend software is the starting point for an integrated approach. You can use it to:
Automate creating and distributing stipends
Track how much each employee has spent and how much they have remaining
Make compliance easy with annual reporting of taxable benefits to the IRS
That way, you can focus on getting your employees the resources they need without overcomplicating things.
Custom perk stipend: Companies combine one or more of the stipends above together to create a general perk stipend that gives employees even more flexibility to choose what matters to them.
Sarah Bedrick
Chief Marketing Officer
Prior to Compt, Sarah worked at HubSpot for 6+ years, where she helped to build, scale, and grow the HubSpot Academy division. She is obsessed with understanding what makes a company culture great, being a career and life coach to people in tech, and creating cherished memories with her husband and two young kids. Her favorite Compt stipend category is Health & Wellness.
See how Compt is helping companies like yours
What HR leaders are saying about why they love using Compt for their stipends
“Prior to Compt, we offered a corporate gym membership with two local gyms. As we completed our annual benefits and perks analysis, we wanted to offer a broader stipend to support our global employee base. Compt helped us achieve that global reach and flexibility.”
Kelley Nekota
People Operations Specialist, Nextdoor, Inc.
It’s been a really easy and fun way to offer perks to our employees, which has added to the experience our employees are having. It’s low lift on the HR side which goes a long way with employees.
Leslie Neitzel
CHRO, Carrot
We asked ourselves ‘if we were to design a perfect employee wellness program that fit our needs, what does that look like?’ With all of our research, Compt was the obvious way to do everything we would want at once.
