An employee perk stipend is a sum of money given to employees dedicated to perks.
Perk stipends help employers put the money and choice in the hands of employees so they can get the perks they need most.
They're also referred to as:
lifestyle spending accounts
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.
Example of an employee perk stipend
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 lunch with her team, and still has $20 remaining.
How would you spend $100 this month?
Leading organizations 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, or lifestyle spending accounts, are the best methods for companies looking to introduce more personalization without adding complexity.
Here's a short list of companies using perk stipends:
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
Employee stipends 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. Stipends 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.
HR is no longer is forced into trying to pick the "perfect perk" with its 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
Happy hour might sound like a great idea, but what percentage of your team actually likes drinks, or have time or desire to attend the event? 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.
The number of software options to manage perks has grown tremendously in the last few years (trust us, we know). We want to help you select the best perks program for you, so we've built this handy worksheet with all the Compt details you need when evaluating vendors.
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 perk stipends when they want to:
Offer perks, but lack the time to manage a clunky perks program
Increase mindfulness with a meditation app. Learn and network at a virtual conference. Fix a broken hot-water heater. Buy professional development books. Set-up their home office workspace. Buy an air purifier for their office. Sign up for virtual yoga classes. Access a convenient lunch. Buy a Peloton. Hire a health nutritionist. Eat nutritious foods. Cover daycare costs. Get fitness coaching. Buy running sneakers. Sip on healthy juices. Access fertility benefits. Splurge on their favorite beverage or snacks. Track their steps or sleep with wearables. Run a half marathon. Take fencing lessons. Pay down their student loan debt. Cover their cell phone bill. Pamper themselves with a massage. Take their children on a vacation. Level-up with an online course. And so much more.
How to Create an Employee Perk Stipend for Your Company
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 benefit 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 your company's mission, values, goals, or be 100% open to give employees complete freedom over their perks. Popular categories include: health & wellness, continuous learning, family, food, and travel.
Below are some of Compt’s most popularly used perk stipends (categories in which employees can spend their perk money in):
Or 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.
To supercharge your communication plan, create a forum for people to provide feedback. A simple Google form can help, or hold a series of office-hours.