Perk Allowances, Stipends & Lifestyle Spending Accounts: The Definitive Guide

Everything you need to know about your employee's favorite perk. 

Perk stipends aren't new, but as the old way of offering perks becomes less valuable for employees, and more administrative-heavy for HR, companies are leaning on them to solve both problems while further delighting their people.

That's why we developed this guide with what you need to know about this fringe benefit: perk stipends.

Here's what is covered in this guide:

  1. What is a perk allowance/stipend
  2. Examples of perk stipends
  3. Popular types of stipends
  4. Benefits of perk stipends
  5. Best times & situations to offer them
  6. How to set up a perk stipend
  7. What people spend their stipends on

What is a perk allowance?

A perk allowance, is an employer-funded account dedicated to employee perks.

Instead of guessing what perks their employees want, perk allowances (also called perk stipends or lifestyle spending accounts) help employers put the money and choice in the hands of employees so they can get the perks they need most.

They are becoming increasingly popular in today’s work climate because they dramatically improve both the process of offering perks for HR team members and more importantly, the experience for employees. 

sam's sample perk stipend

Example of a perk allowance

In the example to the left, Sam's company has allocated $100 per month to her and other employees to spend on the following perk categories: continuous learning, health & wellness, and food.

This month, Sam purchased books, a gym membership, paid for a lunch with her team, and still has $20 remaining.

How would you spend $100 this month?

Companies using perk stipends today:

We're living in the age of personalization. Everything in our daily lives, from our Netflix subscriptions to Spotify playlists to iPhones is customized to us and our preferences. 

Perk stipends and lifestyle spending accounts are the best methods for companies looking to introduce more personalization, without adding unwanted complexity.

Here's a short list of companies using perk stipends:

Common types of perk stipends

Depending on how you set up your stipend, you can create multiple or one large one. Below are some of the more popular stipends we see at Compt.

Usage per platform for Continuous learning perk

Example: Buffer's $20/month Continuous Learning stipend.

As mentioned above, Buffer offers their employees a $20/month continuous learning perk stipend.

After analyzing their employee's usage of the perk stipend, they noticed that their people were using many different platforms to learn.

15 unique platforms to be exact.

How could an HR or People Operations professional create a program that supports this diversity of need?

This is the power of a lifestyle spending account.

ultimate guide to lifestyle spending accounts

Learn more about the benefits of Lifestyle Spending Accounts

Don’t have time to go through this comprehensive guide right now? Want to read this content later and take advantage of some additional information about perk stipends while you’re at it?

Benefits of offering Lifestyle Spending Accounts:

This new approach to employee perks has been gaining a lot of media attention lately because it solves so many common problems of traditional perk programs, and it also addresses the trends that are shaping the future of work.

So what exactly are the benefits for companies and employees?

  1. Flexible for Employer & Employees
  2. Easy-to-Manage
  3. Strategic & Holistic

1. Flexible for Employer & Employees

  • Lifestyle Spending Accounts make sure employees get the perks they want and need most. Pet insurance, in-office yoga, and financial planning services are excellent perks, but often only a small percentage of a team will use them. Lifestyle Spending Accounts create a 100% personalized perk experience, and since employees get more control over how they use it, they're more likely to engage. 
  • Solve for all employees, not just ones located in local HQ. In-office and remote employees alike love LSA's.

perk allowance

2) Easy-to-Manage

  • Resources-saving. HR is no longer is forced into trying to pick the "perfect perk" with their limited budget available.
  • Decrease the administrative burden on HR. Less time-consuming and labor intensive tasks, and more automation.
  • Always IRS compliant. Finally, your CFO will be able to sleep comfortably at night knowing your perks are appropriately taxed. And, they have you to thank for that.


3) Strategic & Holistic

  • Make the most of every company dollar spent on perks. With Lifestyle Spending Accounts, companies no longer experience expired food, wasted event tickets, or under-attended in-office fitness sessions.
  • Encourage a more equal distribution of perks and who they solve for. Beer might sound like a great idea, but what percentage of your team actually likes beer? Avoid usage for the sake of usage, start saving money and resources by offering more inclusive perks.
  • Better align with company mission, vision, values, and goals. Gain a competitive edge by approaching perks strategically and aligning them with what matters to the business.

Want to see more benefits? Click here to learn more.

When do companies consider using Lifestyle Spending Accounts?

Whether you're creating a perk program from scratch or looking to make updates to an existing one, adding personalization to your perks program can achieve many of the same goals that traditional perk programs do, while giving you (and the rest of your organization) more benefits.

Companies usually begin looking to LSA's when they:

  • Want to offer perks that offer any of the benefits mentioned above (e.g. personalized, cost-effective, scalable, cater to remote teams, and want to be IRS-compliant).
  • Want to offer more comprehensive and diverse perks to their employees without actually having to purchase and manage individual perks and vendors. Why invest time researching, buying, and managing pet insurance or and in-office smoothie bar, when only 5% (or less!) of your team will use it?
  • Want to offer perks, but lack the money and time to manage a personalized perks program.

The 5 simple steps to setting up a perk allowance or Lifestyle Spending Account:

Setting up a traditional perk program from scratch takes seven steps and constant tweaking to get it right. Lifestyle Spending accounts aren't too far off, but the process is much easier and in the end, employees are much happier.

Follow these 5 steps to set up a perk stipend program:

1) Identify your current number of employees and your total budget for employee lifestyle spending accounts.

2) Determine how much you'd like to spend per employee per timeframe. Timeframes could be monthly, quarterly, semi-annually, annually, or a one-time basis.

3) Select categories for employees to spend in. These could align with company mission, values, goals, or be 100% open to give employees complete freedom over their perks. Some popular categories include: health & wellness, continuous learning, family, food, and travel. Some of of Compt’s perk stipends (categories in which employees can spend their perk money in) are the following:

4) Set up your program. If you use a perk management software like Compt, this could take 15 minutes. If you're doing it manually - develop a spreadsheet/form where you can manually track the individual perk expenses, total amounts remaining within each time-frame, collect receipts, account for taxes, data for finance, and status of each perk expense.

5) Last, but not least, communicate it to the team. Draft up an email, or better yet, a page on your internal wiki to communicate the new perks plan. Remember to explain the why, what, when, and how details. Lastly, supercharge your communication plan by creating a forum for people to provide feedback, whether it's a form for them to complete or holding a series of office-hours.

Learn about how Compt is helping companies go from one-size-fits-all perks to individualized and meaningful ones (in less time than it takes to eat lunch).


See how perk stipends stack up

The approaches to perks have grown over the last two years. Whether it's selecting vendor aggregators, discount platforms, debit card programs, or Compt -- our goal is to help you select the best perks program for your situation.

That's why we've created a helpful comparison graphic. 


What people buy with their lifestyle spending account:

Curious what people actually spend their perk stipends on? We've pulled together some actual purchases from Compt users.

Continuous Learning:

Health & Wellness:

  • Gym memberships
  • Yoga classes
  • Classpass
  • Fitbit wearable
  • Aaptiv app
  • Calm app 
  • Massages
  • Acupuncture

Family:

Want a more comprehensive list? Check out our ideas for perk spending which also includes suggestions from the various other categories.

Ready to see how a perk stipend would work at your company?

We've got you covered. We're here to talk through your company's current goals and challenges with perks, and see if perk stipends can help you achieve greater success.