So you got an internship or the opportunity to conduct research through an organization, and you are being offered a stipend instead of a salary or wage. What exactly does that mean?
While stipends might sound confusing if you're not using to them, they're actually quite simple to understand. Here's everything you need to know about what a stipend is and how a stipend works in the event that you're offered one.
A stipend can be defined as "a source of funds that is provided to an individual, such as through a scholarship, which allows the individual to pursue a particular interest, such as an internship," according to Business Dictionary. "Stipends usually do not cover all expenses associated with the pursuit of the interest."
A stipend may also be paid if you don't have eligibility to accept a regular salary for your work. Ultimately, a stipend offers students, interns, apprentices, fellows and other recipients financial support while engaging in services or tasks instead of paying them for those services or tasks.
There are different types of stipends, of course. For example, a college student may be offered a stipend to conduct research in their field. An intern might receive a stipend that intends to cover the cost of transportation to and from the office. Meanwhile, a volunteer might get a stipend that covers the cost of their housing and meals each week, even though they're not paid an actual income during their volunteering time.
Even if you get a stipend, however, you probably won't be able to live off of just that money and no actual income. That's because a stipend amount typically just covers the bare necessities and leaves little room for anything else. Even a good stipend just covers the cost of housing, transportation and food, as well as any other inevitable costs accrued when doing the specific job or service.
If you're wondering, 'how much is a stipend?' that depends on the company or organization's funds and a number of factors involved, such as the population in the city, type of city, your location, the company or organization's location, the nature of the work you're doing or the services you're providing and so much more.
"If you meet the requirements to be considered a trainee rather than an employee, the amount of the stipend is at the employer's discretion," according to Quicken. "You do not have to be paid at least the minimum wage per hour worked."
If you're traveling overseas to conduct research, for example, you may be offered a higher stipend to cover the cost of your transportation and housing than you would be if you were interning in the same city. Whatever the case, a stipend is a fixed amount that doesn't really have to do with your experience or the time you put into work at all.
"Stipends aren’t performance-based or hours based," according to The Balance. "Rather, many companies that can't afford to pay their interns on an hourly basis offer stipends to help students cover expenses that typically occur during the course of an internship. This includes costs related to travel, housing, food and entertainment."
Stipends are simple since they're of a fixed amount. There's not much math that goes into it, though you can certainly negotiate your stipend amount (even though most companies and organizations have a predetermined amount they pay). Most employers will pay out stipends on a weekly, bi-weekly or monthly basis, but it's important that you work out the exact details of your stipend if you're offered one.
If you're wondering, 'does a stipend count as employment?' the answer is, ultimately, yes. Whether remuneration is called a "fee" or a "stipend" rather than a salary doesn't necessarily matter. They're still considered employment.
This means that stipends are subject to employment taxes and should be reported on W-2 forms. How are stipends taxed? If you are paid a stipend, while it isn't considered a wage so you won't pay Social Security or Medicare taxes on it, it does count as taxable income for income tax.
|Definition||A salary is the compensation that's paid to an employee for their services provided for a company.||A stipend is a fixed amount of compensation that's paid to trainees to cover certain costs.|
|Paid To||Employees||Interns or Apprentices|
|Increments||May Increase over Time||Fixed|
While most companies and organizations already have predetermined amounts that they're willing to pay when it comes to stipends, you can still negotiate. In fact, in some cases, you should negotiate.
Just like you'd negotiate a salary, you can talk to your prospective company or organization about working out a stipend amount that makes sense for both of you. While you can look at what other companies pay to figure out the industry standard when it comes to negotiating salaries, however, there are no standards when it comes to stipends. And because your stipend isn't based on your experience or skill levels like a salary takes into consideration, you can't negotiate on those accounts either.
You can, however, talk to your prospective employer or organization about the costs of your transportation and housing for which you'll need to pay by doing services or taking on tasks for them. If, for example, you live in the suburbs and need to commute into the city, you may want to ask for a bigger stipend to cover commuting costs like gas. The company or organization might have a fixed stipend in mind only for those who live in the same city and take public transportation that may cost less.
That said, your prospective company or organization has likely already taken into account your personal transportation and housing costs since they considered hiring you. Just make sure that their estimates add up and, if they don't, have a conversation about it. You may be able to negotiate it.
AnnaMarie Houlis is a feminist, a freelance journalist and an adventure aficionado with an affinity for impulsive solo travel. She spends her days writing about women’s empowerment from around the world. You can follow her work on her blog, HerReport.org, and follow her journeys on Instagram @her_report, Twitter @herreportand Facebook.
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