What is a work from home stipend?
Work from home stipend
A work-from-home stipend, also known as a remote work allowance, is an amount of money employers pay beyond an employee’s base salary to cover expenses related to remote work. Companies can either provide the stipend as a single lump sum or a repeat payment on a chosen schedule (e.g., monthly or yearly). For companies with remote or hybrid structures, offering work-from-home stipends is a great way to stand out and appeal to more employees.
Are work-from-home stipends required?
U.S. law does not currently require companies to offer work-from-home stipends. However, each state has different laws governing employment and the responsibilities employers have to their employees. California and Illinois, for example, both require employers to reimburse employees for their necessary remote work expenses. These expenses include phone bills and internet access.
Similarly, every country has its own legislation and guidelines for offering work-from-home stipends and reimbursements. Some countries offer flexibility when covering expenses, while others focus on the increase in utility usage or equipment purchases and maintenance.
Is a work-from-home stipend taxable?
A common question from employees and employers alike is whether work-from-home stipends are taxable. In the U.S., work-from-home stipends are generally considered taxable income because they’re monetary compensation. Employees who receive these stipends must report the amount to the Internal Revenue Service (IRS) and pay taxes on that income.
By contrast, if employees purchase equipment to work from home and receive reimbursement for those expenses from their employers, that income is typically not taxable. How a company implements work-from-home allowances will dictate whether the company and its employees must pay taxes on that money.
Companies hiring internationally must consider local laws and tax regulations before offering work-from-home stipends to remote workers abroad. Each country and region may have different tax laws governing non-salary compensation, like work-from-home stipends.
In Belgium, for instance, employers may provide each employee with up to around €130 tax-free each month to cover expenses related to remote work. Employers are responsible for filing the appropriate tax forms to report these stipends. Canada and the Netherlands also offer tax relief on set employee allowances per day worked from home, while Spain does not put a cap on the amount. The country does, however, require workers to be working from home for at least 30% of their hours within a 90-day period to qualify.
By contrast, the U.K. limits its tax relief to workers who either live far from their company’s office or work for a company that doesn’t have a physical office. The types of expenses that qualify are also restricted to business phone calls and utilities in the work area.
Australia also allows workers to deduct work-from-home expenses from their taxes. These workers can choose between a fixed-rate method, where they calculate the increase in their running expenses due to working from home, or an actual cost method based on all the expenses incurred while working from home.
What are the benefits of work-from-home stipends?
For employees, the main benefit of work-from-home stipends is that they offset some or all of the increased costs associated with working from home. Remote workers may need to purchase supplies like a desk, desk chair, and computer monitors. They may also end up spending more on utilities like electricity and water due to the additional time they spend at home every day compared to working in the office. Work-from-home stipends should cover some of these expenses and make remote work more comfortable.
Though work-from-home stipends increase compensation costs for employers, they also offer several benefits. Providing stipends to remote workers is a great way for companies to stand out and attract the best talent. Stipends for working from home also help companies retain high-performing employees by making them feel valued. Your remote employees may be more engaged and productive when they can afford to buy the best equipment for their home offices. For many businesses, the initial cost of work-from-home stipends will be easily offset by the benefits of offering them.
Work-from-home stipend examples
Each company sets its own work-from-home stipend structure if they choose to use one. Here are some examples:
- Facebook allows full-time employees to work remotely if they choose. For employees who choose remote work, Facebook’s work-from-home stipend is a one-time $1,000 payment.
- T-Mobile USA provides its employees with an annual work-from-home stipend of $2,000 as part of its benefits package.
- Webflow uses a monthly structure for its work-from-home stipend policy, offering $250 per month to employees who work remotely.
- Like Facebook, Google’s work-from-home stipend is at least $1,000 in a lump-sum payment to cover expenses employees incur setting up their home offices.
- During the pandemic in 2021, the Salesforce work-from-home stipend was $500—two $250 payments for office equipment and tools.
The average work-from-home stipend ranges from $250 to $2,500 in total. Companies should consider offering stipends on the higher end of this range to attract top talent, especially in the technology industry, where work-from-home stipends are more common.
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