Everything you need to know about your employees' favorite perk.
As the old way of offering perks becomes less valuable for employees, and more administrative-heavy for HR, companies are leaning on perk 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: perk stipends.
A perk stipend, is a sum of money given to employees dedicated to perks.
Instead of guessing what perks their employees want, 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 a 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 a 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
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.
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.
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.
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 money and time to manage a perks program
The 5 Steps to Setting Up a Perk Stipend 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 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 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:
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.
The software available to manage perks has grown over the last two years. Whether it's selecting vendor aggregators, debit card programs, or Compt -- our goal is to help you select the best perks program for your situation.