Thanks to the Coronavirus pandemic, people across the globe today have warmed up to the idea of remote working and even prefer it over traditional offices. That’s why employers should seriously think about remote work stipends.
Remote work stipends are fixed or varying amounts of money paid to a remote employee in addition to their basic salary for their home office setup, coworking space expenses, or paying electricity bills.
These stipends are generally optional for employers. However, some regions have laws requiring employers to cover their work-related expenses.
In this article, we’ll take a closer look at what a remote work stipend is, how employees can utilize it, and whether your organization should consider remote work stipends. We’ll also cover three easy steps to set up a remote work stipend and some of its tangible benefits.
This article covers:
(Click on a link below to jump to a specific section)
- What Does Remote Work Stipend Mean?
- Are Employers Obligated to Pay Remote Work Stipends?
- Why Pay a Remote Work Stipend?
- 3 Easy Steps to Set Up Remote Work Stipend
- 4 Tangible Benefits Of Remote Work Stipend
- Is Remote Work Stipend Tax-Free?
Let’s get started.
What does remote work stipend mean?
A remote work stipend is a sum of money given to employees to access additional benefits like ergonomic chairs or better Internet connection while working remotely. Some of these costs are setting up a home office and maintaining it, Internet connectivity, and energy bills.
This amount is in addition to the employee’s base salary that aims to cover only their necessary expenditures.
As more and more companies are looking for remote work options post the COVID-19 lockdown, they need to acknowledge the hidden costs of working remotely.
You can choose whether to pay a fixed stipend to every employee or reimburse employee expenses individually. Both have their pros and cons.
- Fixed stipend: Paying a fixed stipend to each employee rather than reimbursing individual expenses reduces the operational time. However, the downside of fixed payment is that you may end up paying more than what the employee spends for work-related expenses.
- Expense reimbursement: On the other hand, expense reimbursement for individual employee expenses makes sure that you pay for exact costs instead of estimated costs. But, it’s extremely time-consuming, and you might need an employee to monitor such tasks.
You can pay this stipend as a lump sum annually or small amounts at regular intervals. It can be a weekly or monthly stipend or however your organization sees fit.
So, it’s up to you to decide which one suits you best.
But is it mandatory to pay remote work stipends for your employees?
Are employers obligated to pay remote work stipends?
Although a remote work stipend isn’t compulsory and you don’t necessarily have to pay them, it would be great if you did it.
According to a survey conducted by OwlLabs in 2020, only 20-25% of companies share the cost of remote working expenses like furniture, equipment, and utilities.
However, employee-friendly companies understand that their best assets are their people. And, it’s in their interests to look after their employees to create a better work environment.
For example, big tech companies like Google, Basecamp, and Shopify provided employees with special work stipends to cover remote work expenses. Google provided their employees with $1,000 to buy remote office equipment when quarantine started.
Additionally, there’s also a legal risk of not having a reimbursement policy. Some states in the US, like California and Illinois, have laws requiring employers to reimburse employees for business expenses.
This way, companies hoping to avoid litigation and public embarrassment may find it in their interest to reimburse their remote workers.
Why pay a remote work stipend?
Since your remote workforce doesn’t have access to onsite perks, they can also use the stipend for food, improving their mental health, or personal well-being.
Let’s look at the three most common applications of remote work stipend in detail.
1. Office furniture
Your employees may not have access to ergonomic furniture, standing desks, or other home office setup at home.
As home furniture isn’t suited for sitting for long hours, it can cause health problems like back pain, neck pain, and other related issues.
That’s why, while designing their remote work office, your employees may like to replicate their physical office setup.
A remote work stipend will enable them to set up a comfortable and professional workspace at home that can prevent health problems and improve their productivity.
2. Electricity bills
It’s a well-known fact that electricity bills represent a significant necessary expense at the end of the month.
Onsite workers who access your company’s equipment like air conditioners, fans, or desktop computers don’t need to worry about the electricity bill. However, remote workers need to pay the bills from their own pockets while using these facilities at home.
This can put remote employees in a dilemma of wanting to use these facilities and dealing with increased energy bills. So, your employees can use a part of the remote work stipend to pay their electricity bills.
3. Internet service
But without a stable Internet connection, they just wouldn’t be able to maintain seamless communication. Moreover, your employees may not have considered installing high-speed Internet at home as they only used it for personal entertainment prior to remote working.
A remote work stipend can help them cover the cost of a stable Internet connection.
Next, we’ll find out how you can set up a remote work stipend for your workforce.
3 easy steps to set up remote work stipend
Here’s how you can set up remote work stipends for your employees.
1. Determine the amount
First, it’s important to determine how much you want to offer your employees and for how long.
For example, you can offer your employees $100/month, $500/quarter, or $2,000 annually. Before this, you also need to consider what you’re reimbursing for. Initially, you can include only the most obligatory expenses that are crucial for remote work.
Essential costs can include computer desktops, printers, office furniture, etc. You can also provide excess reimbursement afterward that your employees can use based on their needs.
However, you can change the amount and time frame as per the requirement.
2. Personalize to suit different needs
Some employees will spend the stipend on health and wellness, while others may want to upskill themself.
To help them, you can create a custom offering for your employees.
For example, within a monthly budget of $100, an employee may spend $50 on Internet and stationery. On the other hand, someone else may use the whole amount for healthy meals and bills.
Your accounts department can even develop a voucher system for a certain set of pre-approved employee needs.
3. Setup and manage an approval process
Once you have all the information regarding the amount and type of stipends, you need to manage the approval process.
You can do this by setting up a process to track purchases, receipts, and balances as well as for rejections or ones which need further review.
Use tools like Google Forms or Excel Sheets to track the entire process, ensuring that you have all the minute details of all employees together in one place. Make sure your employees know what bills and documents need to be submitted to the accounts department in order to avail the stipend.
But how does your organization benefit from this stipend?
4 tangible benefits of remote work stipend
Let’s look at some tangible benefits of a remote work stipend within your organization.
1. Creates uniformity across the company
Offering remote work stipends to your employees is a great way to align them with your company’s core values.
For example, if your organization prioritizes employee education and skill development, providing stipends can ensure that all employees enroll for a good-quality training course without worrying about its cost.
Additionally, a remote work stipend ensures that your remote team members can access the same level of ergonomic furniture, Internet quality, etc.
This is especially important if you operate a hybrid work model so that your remote employees don’t miss out on the perks and benefits their in-office counterparts receive.
2. Makes your employees feel more appreciated
Employees tend to be happier in companies that have a remote work policy, which includes remote work stipends in addition to the base salary.
A well-designed home office can reduce the chances of daily fatigue, isolation, and burnout. All of this means that employees can fully enjoy the benefits of remote working.
Furthermore, you are more likely to retain employees this way and attract the best talent.
3. Improves engagement
According to a study conducted by Society for Human Resource Management (SHRM) regarding employee loyalty, 71% of employees who are satisfied with their benefits are more likely to stay with their employers.
When employees are loyal to their workplace, they’re more willing to go the extra mile and invest in their work. This will greatly benefit your organization in the long run.
Additionally, a remote job can get lonely sometimes, but acknowledging employee needs can give your employees a sense of belonging. This is important because employees who’re happy with their job perform better, resulting in improved productivity and engagement.
Additionally, higher employee morale leads to an overall happier workplace, improved company reputation, and a higher retention rate.
Want to keep your remote employees engaged and inspired?
Read our guide on remote employee engagement.
4. Allows you to compete with the best
Big tech companies have already led the way by offering sizable work-from-home stipends, and many other remote companies (both big and small) are trying to do the same.
Offering a comprehensive remote worker benefits package will help ensure you remain attractive to top-tier talents.
As an increasing number of employees choose full-time remote jobs, they will prefer employers who offer a stipend to manage their home office expenses. By acting now, your company can gain an advantage in hiring and retaining remote workers.
Additionally, you can also get income tax benefits depending on the country you live in. In the next section, we’ll explore the tax benefits of remote work stipends.
Is remote work stipend tax-free?
Remote work stipends are considered taxable income in many countries. However, the amount of tax to be paid can differ from country to country.
In Belgium, employers can pay up to €129.48 (approximately USD 146.17) per month to each employee and must pay all employees equally. This amount has been increased to €144.31 (USD 163.58) in the second quarter of 2021.
And like many countries, Belgium makes remote work allowances tax-free. Belgian employers can pay tax-free stipends to their employees who are working remotely on a structural and regular basis.
The employee can use this home office stipend for coworking space, creating home office space, or other work-related employee expenses. Additionally, employees who are telecommuting are entitled to a tax deduction to cover the costs of working from home.
On the other hand, only self-employed people in New Zealand and the United States can benefit from tax deductions while accepting remote work allowances.
It’s been nearly two years since the COVID-19 lockdowns started and remote work gained popularity.
Given that remote work is here to stay post-pandemic, it’s possible to keep remote workers happy by offering them stipends to cover home office expenses.
This can increase productivity, loyalty, and engagement.
You can take a look at the tips we’ve mentioned to set up remote work stipends for your employees.
Liam Martin is a co-founder of Time Doctor which is software to improve productivity and help keep track and know what your team is working on, even when working from home.