3 Tips to Create a Fair and Attractive Work Stipend
Compensation weighs heavily in the balance when employees consider whether to join a new company or stay with their current employer. While base salary is often the most important factor, stipends can also come into play when assessing what constitutes fair compensation.
Offering flat-rate stipends for things like office expenses, health care or new technology is a common practice, but it can be problematic, particularly in a remote workplace where individual circumstances can vary greatly. For that reason, an increasing number of companies have begun offering different rates based on employees' location.
Yet, in 2020, Facebook sparked debate when it announced employees working outside of San Francisco would receive a smaller salary than others because of their location. Many companies like VMWare agreed and followed suit, while others, such as Reddit, doubled down on their promise to maintain wages regardless of location.
So, how can companies provide fair compensation and create a policy equitably across multiple work styles? Here's a look at the challenge.
How Are Stipends Determined?
A stipend, which in a nutshell is a sum of money given to an employee to offset expenses, has traditionally been used to support teachers, researchers, interns and people in jobs where they are in a training phase and are not yet eligible to receive full benefits and salary. Stipends are intended to support basic necessities, but what that means has changed over time — and even more so with the remote workplace.
For example, in 2021, Deloitte announced a change to their employee benefits to include a work-from-home technology subsidy of $500 and a wellbeing subsidy of $1,000, along with additional time off and support for mental health. Like Deloitte, many other companies are choosing to invest in their employees by updating their policies to the new reality of work.
The traditional definition of stipend has changed, and establishing appropriate stipend amounts can be difficult.
“Monetary stipends can often get complicated to calculate,” said Kathy Bennett, CEO of Montana-based manufacturer Bennett Packaging. “For example, do you award a higher stipend based upon hours worked? Or do you award it based upon rank? I’ve found that stipends in the form of covering monthly membership or subscription fees are best."
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How Companies Can Support Employees
There are two common areas for companies looking to implement or update stipend policies to better support employees in the current environment: utilities and health.
Working from home means most employees spend more on utilities. Research published in the summer of 2021 showed an 8 percent increase in residential energy consumption during the Q2-Q4 period of 2020, coinciding with an 8 percent decrease in commercial energy consumption. To help employees with this increase in living expenses — and buff up their benefits package — remote companies can provide stipends that cover internet and energy consumption costs, for instance.
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As social restriction guidelines continue across the country, a stipend for mental health is an increasingly popular option for companies.
“During the pandemic, I provided all employees with a stipend of a bundle of Spotify and Headspace to support their mental health under the strain of remote working in COVID-19,” said Bennett, who says health stipends can also include subscriptions for healthy meal delivery services or gym memberships.
3 Tips to Create a Fair Stipend Policy
Creating a stipend policy that is fair for everyone can be challenging, though. Here are some tips:
Set Your Starting Point
Companies that don't yet have stipend policies should start by setting a budget based on their workforce. “You’ll want to determine how much you’d like to spend per employee, per time frame,” said Amy Spurling, CEO of Compt, a perks and rewards software company. Once the budget is established, it makes it easier to determine which services are covered by stipends, all while ensuring the policy aligns with the company’s mission.
Rewards plans are a great way to attract and retain workers, as long as they have value for employees. Companies should, therefore, make sure they create policies that appeal to their employee base. Individual circumstances vary, but aiming to provide stipends that appeal to 90 percent of the workforce can be a great target when building the program.
"It’s essential to give employees as many options as possible regarding stipends, as what may appeal to one may be of little value to another,” Bennett said. Asking employees what they find valuable can demonstrate your desire to better support them and make the program design that much easier.
Personalize the Perks
Just like circumstances and living situations, what's valuable to one may not work for another. For some employees, getting healthier might mean joining a gym, whereas it might mean getting support in therapy or coaching for others. A one-size-fits-all approach does not support a diverse workplace, so stipend policies should provide for some level of flexibility and room for personalization.