As companies seek a new normal, many are shifting to flexible work arrangements after positive experiences with remote work during the pandemic. And many employees have come to realize they would rather not to go back to the office full time.
For most employers, keeping their employees happy is key. One way to do this is with stipends – a fixed amount of money paid to an employee in addition to their basic salary, with the goal of covering extra costs associated with working remotely. These stipends can be paid once as a lump sum or monthly and can cover things like home office equipment, fitness and internet allowances, help with continued education and more. Alternatively, employers may reimburse recurring remote employee expenses, like internet access or a cell phone plan, rather than provide a fixed-sum stipend.
No matter how they’re paid, remote work allowances can benefit both the employer and the employees, enhancing productivity, retention, and growth.
The average amount of a home office stipend varies from employer to employer. Some tech companies like Twitter, Shopify, and Basecamp offered a $1,000 one-time payment to help employees set up their home offices. Smaller employers may find it works better for them to offer lower, more regular payments instead, such as a monthly stipend.
In Commuter Services’ recent employer survey, 48% of employers said they plan to use a hybrid work approach. Of the companies surveyed, only 14% had a remote work stipend.
When deciding on a remote stipend, employers should budget for at least the essential resources their remote workers need to do their best work. While it’s not cheap, disregarding employees’ basic needs can cost more in the long run if employees seek out more appealing work environments elsewhere. Gallup research shows that 54% of employees sa
id they would leave their jobs for one that offers more flexibility.
Here are some other real-world examples of stipends for remote workers:
$100 / month co-working space stipend
$100 / month fitness allowance
$200 / month for “Working Smarter” stipend for coffee shop working purchases
$200 / year for tech/office needs
Internet reimbursement stipend
$1,000 / year continuing education allowance
$1,000 / year matching charitable gifts stipend
Are remote stipends equitable?
Evidence shows that both employer and employee benefit from remote work arrangements, but the question remains: Is there equity in the quality of the work experience of onsite vs. remote employees? At the office, employees are provided with a desk and chair, computer, monitor, office supplies, access to printers and scanners, etc. The employer pays to light, heat, cool, and clean their work environment, and for phone and internet service. Should the same apply to remote workers?
Most remote employees have to pay their own internet, heat and cooling and electricity costs. While it’s true they pay those costs anyway, they do need to keep the heat or AC going all day, instead of adjusting the temperature when they leave for the office. In a June 2020 report, the U.S. Energy Information Administration reported that residential energy use went up 20% during work-from-home orders at the start of the pandemic. Aside from utility costs, employees who can’t afford dedicated office furniture and equipment often have to make do with a dining room On the other hand, remote employees do save money on gas or transit, lunches out, etc.
There is no easy formula to help employers figure out how best to compensate remote employees. Every employer will need to decide how much of a stipend to offer and how to offer it. It seems that in the coming years, employers will face increasing pressure to help cover the home office expenses of remote workers. Employers who act now can position themselves as a leader and gain an advantage when it comes to the hiring and retention of employees.
Are remote stipends taxable?
Think of stipends as cash by another name, and cash is always taxable. However, like any rule, there are exceptions and it’s all about the context.
The following items may or may not be taxable:
Stipends for internet access. Stipends themselves – simply paying employees a flat dollar amount every month – are taxable. However, reimbursing employees for the business use of their home internet is tax free, provided they record their work and personal use daily. They are also required to provide copies of their service provider bills to their employers.
If an employer health plan covers telehealth services, i.e. online counseling, then reimbursements to employees would be tax free, subject to deductibles and co-pays.
Financial counseling may be tax free but only if it’s offered as part of an annual 401K review by your broker.
Childcare costs that are reimbursed might be tax free if they are offered as part of a dependent care assistance plan, up to the annual limit.
The list of non-taxable items is shorter, and includes the following:
Identity theft protection
Job-related online courses
Non-job-related educational courses that help employees cope with this new normal, up to a $5,250 limit.