The Ultimate Guide to Employee Perk Stipends

Everything you need to know about HR & your employees' favorite perk

    

As the old way of selecting individual vendors for perks becomes less valuable for employees, and more administrative-heavy for HR, companies are leaning on employee stipends to solve both problems while further delighting their people.

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

Here's what is covered in this guide:

  1. What is an employee perk stipend?
  2. Helpful examples of stipends
  3. Popular types of stipends
  4. Benefits of employee stipends & why they're so great
  5. Best situations to offer them
  6. How to set up a stipend
  7. What people spend their stipends on

What is an employee perk stipend?

First a definition:

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:

  • perk allowances
  • lifestyle spending accounts
  • specialty accounts
  • lifestyle benefits

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 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 employee stipends:

[Want to see more examples? Check out 63 Examples of Employee Perk Stipends at Leading Organizations.]

Usage per platform for Continuous learning perk

Example of typical spending

for 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 HR create a program that supports this diversity of needs?

This is the power of an employee stipend. 👉

Common types of perk stipends

Below are some of the more popular stipends we see at Compt:

ultimate guide to lifestyle spending accounts

Learn more about the benefits of Employee Perk Stipends

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?

What makes stipends so great?

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 can or will use them.

Stipends create a flexible, personalized perk experience, and since employees get more control over how they use it, they're more likely to engage. 

2) Easy-to-Manage & Administer

  • Resource-saving

HR is no longer is forced into trying to pick the "perfect perk" or perfect vendors with its limited budget available.

[Want to see how much your perk vendors are costing you? Check out our Perk Vendor Calculator.]

  • 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.

Looking for a detailed description of their benefits? Click here to learn more.

[Actively comparing various perk vendors? Check out our guide, Comparing Perk Software: Everything You Need to Know]

The benefits of a perk stipend management software

If you're already offering a perk stipend, awesome! You're ahead of the curve and you're likely experiencing a tremendous amount of the benefits mentioned above. High-five!

However, there's likely a problem you're encountering right now and that is: the admin work.

Unless you're using software to streamline the management of your employee stipend, you're likely spending countless hours managing the following:

  • Questions around which perks qualify
  • Documentation on which categories and vendors apply
  • The approval process workflow once a person purchases a perk
  • The reimbursement process once a perk is purchased
  • The IRS tax compliance of the taxable and nontaxable perks
  • Questions around employees' remaining balances.

If these found familiar, you're not alone. Some companies we've spoken to Compt told us they were spending 20+ hours a week managing these details for a company with less than 200 people. That's 50% of one person's week, or worse and likely more accurate, a percentage of multiple peoples' time invested just on managing the process.

If you feel like the cost of managing the administrative tasks and work is too much to handle, consider implementing a perk stipend management software.

Below is a graphic we created to highlight the impact switching to Compt can have on your organization and your people.

ROI of perk stipend software

See how Compt's Perk Stipends stack up

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.

When do companies switch to perk stipends?

Whether you're creating a perks program or a lifestyle benefits program from scratch or are 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:

  1.  Offer perks, but lack the time to manage a clunky perks program
  2.  Increase engagement rates with perk program
  3.  Update perks to be inclusive of everyone, not just a few
  4.  Support a distributed workforce
  5.  Decrease the administrative burden with managing perks
  6.  Become IRS compliant

Perk stipends growing popularity [recent news]

Tucked inside every article about top perks you'll find a bunch of perk allowances or stipends. From AirBnB's $2,000 a year travel stipend to Facebook's $5,000 baby bonus. 

Below are some recent examples of perk stipends in the news, highlighting their traction:

Help your people get what they need most, not what you think they want.

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):

4) Set up your program. 

If you use a perk management software like Compt, this could take 15 minutes.

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.

[Starting with stipends? Check out this detailed guide on how to set up your perk stipend.]

What people buy with their stipend:

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

Remote Work Stipend:

  • High-speed wifi
  • Desks, monitors, keyboards (and other items also purchasable through a one-time equipment stipend)
  • Groceries, delivery, and healthy food kits
  • Coffee, teas, specialty sodas, and other beverages 

Continuous Learning

Health & Wellness:

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

Family:

  • House cleaning services
  • Dog walking services
  • Babysitting and daycare services (i.e. Care.com)
  • Museum passes
  • Meal delivery kit (e.g. Blue Apron or Purple Carrot)
  • Fertility benefits

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

Here's what people bought with their stipends

We peaked into our own data on what perks tens of thousands of employees purchased in 2020 through their employer’s stipend program, and it gave us all the feels.

Ready to see how an employee stipend would work at your company?

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.

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