Work from home stipends are an incredible benefit for employees who work remotely at a company. However, the technicalities of a WFH stipend can seem confusing at first: Is a WFH stipend mandatory?
Is it taxable? How much does a standard work from home stipend cost? In this article, we will answer all your burning questions about work from home stipends from an employer and employee perspective.
At NoHQ, we write about all things remote work, and we aren’t strangers to the idea of WFH stipends and other advice you may need about transforming your company into a remote-first business. Let’s dive in!
What is a Work From Home Stipend?
A stipend is an amount of money paid out either on a regular basis or in a one-time payment as an allowance to cover the costs of working from home and provide reasonable benefits the employee would receive if they worked in the office.
The stipend covers employee expenses that an employer would otherwise cover if the person was working in a company office. The work from home stipend evens out the pay for remote and office-based employees.
For example, if you have a cafeteria on-site with free hot drinks, free lunches, and snacks, it would be reasonable to reimburse your remote workers with an allowance in the form of a WFH stipend to cover their food and drinks costs during the working day.
A WFH stipend can be paid out whenever is convenient for you, with many companies choosing to pay their stipends monthly, quarterly, or yearly.
There are various forms of stipends, and in a previous article, we covered education stipends for remote teams. However, today we are focussing on work from home stipends.
Is a Work From Home Stipend Included in a Salary?
The stipend is given in addition to your current salary and isn’t considered part of your wages.
Typical Costs of a Remote Work Stipend
As mentioned, there are multiple types of stipends. However, according to the Employers Council, the average work from home stipend lump sum is $358, although some employers prefer to pay an average monthly sum of around $66.
In Build Remote records they suggest the average lump sum for a WFH stipend is around $800, while an average monthly WFH stipend is $160. Therefore, the WFH stipend amount can vary a lot from company to company.
General expenses a work from home stipend will cover:
- Electricity to heat their home, keep the lights on and run their computers, etc
- Internet and phone cover
- Printer and various printing supplies
- Laptop or computer
- Other computer hardware such as a keyboard, mouse, monitors, headphones
- Pens and paper
- A desk and desk chair
- Access to coworking spaces
- Postage fees if they are expected to send hard copies of their work
- Food and drink during the working day
Examples of companies providing a WFH stipend:
- HubSpot is a ‘remote-ish’ brand and they offer $60 per month as a WFH stipend.
- Google offers up to $1000 as a one-time payment to cover equipment and other office expenses for their remote employees.
- Shopify also provides the same amount of $1000 to their employees.
- Webflow offers three stipend schemes for their workers. This includes two general payments for all employees (in office and remote workers) of $200 per month health stipend and a $1000 per year education stipend. Plus, they offer a work from home stipend policy of $250 per month for all remote workers.
- Gusto offers a one-time payment of $500 to set up a home office, and then employees receive $40 monthly to cover ongoing expenses, such as internet costs.
Financial Savings of Encouraging Remote Work
You may be worrying that these stipends of sixty-odd dollars per month could add up to be a huge cost if you have several remote employees or a fully-remote team. However, studies have shown that employers can save an average of $11,000 per year if they allow all employees to work at home 2 to 3 days per week.
Moreover, this can also benefit the employees. Forbes estimates that the average worker saves $400 per year by working at home. This saving reflects the typical costs of commuting, buying office attire, and their work lunches. Therefore, it is likely they will also be happier and more fulfilled in their role as it would appear their take-home earnings are increasing at no extra cost to the employer.
Why is a WFH Stipend Important?
You can use a WFH stipend to cover your employee's expenses or allow them to receive reasonable perks that in-office employees receive. The stipend can improve employee satisfaction, team unity, and equality. These benefits can help improve employee retention and improve your business's taxes at the end of the financial year.
Benefits of a remote work stipend include:
- They are available for full and part-time work-from-home employees, making regulating and recording them easier for you.
- Employees will be happier when they can choose their benefits and rewards.
- Reduced time managing team perks or financing office supplies etc.
- Employees will purchase items that suit their own working needs. This also helps ensure employees with certain needs, such as back pain, are able to buy equipment that can help reduce their discomfort while working, which in turn helps meet their needs and allows them to improve their motivation and productivity.
- Providing a work from home stipend can help improve employee retention rates, saving you money and time in the long run.
Are WFH Stipends Mandatory?
A WFH stipend might feel like a burden. Especially when you are already likely covering the costs of certain software that you use company-wide or if your employees only need a laptop for work.
However, the stipend is necessary, so your employees don’t feel burdened with these expenses or miss out on team perks and rewards. Therefore, it is reasonable for employees to expect compensation for these expenses and the same perks as other employees.
To conclude, a WFH stipend is not mandatory. However, there are many benefits to providing one, as mentioned previously in this article. So try and think of WFH stipends as an additional investment in your company and your employees who drive your business forward.
It’s also worth noting that there are specific expenses you must reimburse your employees for by law if your employees are forced to work from home due to circumstances such as the pandemic.
How to Request a Work From Home Stipend as an Employee
A study has shown that since the pandemic, 68% of organizations are considering adopting a more flexible working day with reasonable work from home policies for their employees. Therefore, even if your employer seems reluctant to allow you to work from home, it is almost 70% likely they are already considering adopting this policy.
But once they agree to allow you to work from home, how do you approach the subject of asking for a work from home stipend to cover the expenses of your home office?
Points to consider before you approach your boss to propose a work from home stipend policy.
- Determine your actual costs. Don’t pluck numbers out of thin air. Write down the costs for each piece of equipment you need to set up your home office and your monthly recurring expenses.
- Show your employer a list of benefits of providing a WFH stipend to employees using specific examples of how your performance may improve. Suggesting that a good work setup can improve your performance in the job is less likely to get your employer to see the value in a WFH stipend than ‘a faster internet speed means I will spend less time finding documents and reduce my work frustration’.
- Research other similar-sized companies that are providing WFH stipends. Do your research to show what other companies are offering.
- Know the law and legal requirements in your area. The law will vary depending on your location so make sure you know if you are entitled to anything before broaching the topic.
Now you are ready to schedule a meeting with your boss to discuss these points. Prepare a short document to summarise your main points. Then answer any questions they have before submitting your formal proposal to your HR team.
Have an alternative proposal if your employer seems adamant that a work from home stipend is too much effort to implement or that they will ‘add it to their future to-do list’.
For example, you could request a one-time payment to cover the expenses of setting up your home office or ask them to provide you with the equipment that would usually be provided to a person working in the office. This payment could cover a desk, desk chair, a computer monitor, etc.
Is a Work From Home Stipend Taxable?
As a Stipend is not a salary, it isn’t considered part of your wages. Therefore, you do not need to pay Social Security or Medicare taxes on them. However, you will need to include the additional amount of each stipend payment to count against your taxable income.
Generally, a WFH stipend is a taxable income. However, it may also depend on where you live as some countries allow employees a small tax-free allowance for stipends. For example, Belgium offers up to $130 tax-free stipend allowance per person. Unfortunately, if you are based in the states, you will have to report your stipends to the IRS as they are typically a taxable amount of money.
It can also be confusing as your employer does have the option to cover the taxes before you receive the money. So always check with your boss or the finance department in your company before you file your tax return.
Is an Increase in Salaries the Same as Offering a WFH Stipend?
Ok, so if a WFH stipend is generally taxable income, why not just increase the salaries of those who work from home to cover their extra expenses?
Generally, a WFH stipend will stay static for several years and will be the same for each employee, regardless of their company level. Whereas salaries are variable among employees and will increase over time. Therefore, it is usually easier to offer a WFH stipend over increasing salaries.
Offering stipends also help your company look more attractive to potential employees when advertising to fill new job roles.
Additionally, according to a recent survey, 80% of employees would prefer their employer to provide perks and job benefits, including a work from home stipend over an increase in their salary.
Since the pandemic, remote work is only becoming increasingly popular. As companies had to pivot to working remotely, they realized it was easier than they expected for employees to work together harmoniously without being in the same building or even in the same country. Consequently, more people will likely be working in their homes or from abroad in the near future.
Therefore, if you are a business owner, you should expect to implement WFH stipends into your yearly finances and create a precise work from home stipend policy to follow. And if you are an employee, you should ask to speak to your manager about your employer covering your reasonable remote work expenses through a stipend in addition to your salary, so you are fairly compensated for your expenditures.
For more information about working remotely, visit the NoHQ blog where you can find a wealth of high-quality information to help you make a seamless transition to a remote-first brand or get your thinking about whether remote working could work for you as an employee or freelancer today.