What Is a Stipend? Definition, Types and Tips You Can Use
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A variety of opportunities exist to further your career development or academic learning, some of which provide a form of monetary compensation called a stipend. This term refers to a fixed amount of money sometimes provided to those taking part in an internship, apprenticeship or new academic endeavour. If you want to pursue one of these opportunities, consider seeking an opening that offers this form of payment. In this article, we explain what a stipend is, who might be eligible to receive one and the different types available that can help you further your education or career.
What is a stipend?
A stipend is a fixed amount of money provided to people pursuing unpaid work to help offset expenses such as housing and food. This form of payment may exempt a person partially or entirely from salary employment. Compensation through a stipend is usually meant to offset some living expenses they might incur while participating in their program. Institutions might give this benefit to individuals who are ineligible for standard payment or when the recipient is still in the process of learning the skills they need to succeed in their role.
Who receives a stipend?
Institutions provide this benefit to those who may be ineligible to receive a regular salary or wage in return for their services. Researchers, graduate students, clergy, interns and apprentices are common recipients. Normally, to receive this type of play, a person's job must focus on training and learning, and the training must primarily benefit the recipient rather than the employer. For internships and apprenticeships, an employer may not promise the recipient a job at the end of the training or have them do work in place of a regular employee.
Stipend vs. salary
Before accepting or negotiating a stipend, it can be useful to understand the differences between these compensation structures. In addition to the information below, you may also wish to confer with a financial professional to ensure you are free from any of the tax implications of each type of payment. To get started, consider these key differences between a stipend and a salary:
Stipends often have these characteristics:
Fixed amount paid to interns, apprentices, clergy and trainees
Independent of services or hours worked
Not subject to minimum wage requirements
Not usually taxed by the employer (recipient may need to pay their own)
Some of the key characteristics of salaries include:
Compensation for employees
Pays for services or amount of hours worked
Typically paid out biweekly or weekly
Opportunity for an increase based on performance
Subject to minimum wage requirements
Usually taxed by employer
Remember, any additional benefits a salary position or stipend may offer. For example, an apprenticeship may allow you to work directly under an expert in the field you want to enter, which gives you an academic or job experience advantage when entering the workforce. The health insurance benefits of a salary position may be more appealing to you if you have a family or incur large medical expenses over the year.
Types of stipends
Many types of stipends exist to cover the expenses of various voluntary and unpaid work. The government may tax you differently for stipends for different situations and industries, so be sure to research the financial specifics of each type that applies to you thoroughly. To help start your research, here are some common situations where employers may offer stipends:
Institutions commonly offer stipends to researchers to allow them to focus on their projects without the distractions of a full-time or part-time job. Similar to grants, third-party interests may provide these awards because of their interest in seeing the advancement of the specific research. Foundations also sometimes offer stipends for similar reasons.
For researchers to receive a stipend, their projects often must meet the following criteria: the project goes beyond the collection of data and the information gathered gets analysed and interpreted. If you're considering a research opportunity that may provide a stipend, research the specific requirements as part of your decision-making process.
Health insurance and wellness
Employers may offer healthcare stipends to cover the cost of health insurance if the employer doesn't provide these benefits. Additionally, some employers may offer flat rate payments to cover the cost of a gym membership, encouraging employees to exercise and live healthier lives. Taxes for stipends and salaries may vary depending on the context, so be sure to ask plenty of questions and speak with a tax professional for more information regarding your specific situation.
Job training and apprenticeships
Some companies provide stipends to employees who wish to further their careers with additional job training. Apprentices, for example, may receive one to cover their living expenses while completing their apprenticeship programme. Consider asking your employer whether this may be an option for you. If you're seeking employment, consider looking for training and apprenticeship opportunities that provide this type of compensation.
Some internships provide stipends to cover the cost of housing and food. Most companies have a set stipend based on the average cost of living in the area the intern works. Internships often lead to full-time positions, so many employers want to ensure interns can focus and perform well on the job without financial stress. You might pay taxes differently when you receive a stipend for an internship, compared to an internship that awards hourly pay, so be sure to research these requirements carefully.
Fellowships provide financial aid to students and may offer support in the form of a stipend. The student often may not need to perform any services to receive this funding other than continue to pursue their education. Some fellowships, such as teaching fellowships, do require recipients to complete specific tasks or duties, in addition to their scholarly work.
Clergy members may receive a stipend paid for by congregation donations. This allows the clergy to practice their ministries without needing another job to cover their living expenses. The tax requirements for these types of payments may vary, so research the specifics of your situation or speak with a tax expert for further clarification.
Tips for deciding if a stipend is right for you
If you're deciding whether a stipend role is the right option for your situation, these tips might help:
Consider your goals
Identify your personal and professional goals when deciding whether a position that offers a stipend is right for you. Determine what types of objectives you'd like to achieve and when. Compare the outcomes of a particular role with these goals, and evaluate the relative value of the monetary award to you. Consider using the SMART goal framework, in which you develop goals that are specific, measurable, achievable, relevant and time-based in the context of your compensation.
Know your budget
Your personal budget may affect your decision whether to accept a role that offers a stipend. This form of compensation may be lower than a regular salary because organisations typically award them to individuals who are not yet experts in their field. Compare your expenses to the amount you would receive to determine if it makes sense for your budget. Determine if there are ways to eliminate or minimise expenses if necessary.
If you find that you may need additional income, consider whether you'll be able to earn income in another way while performing the duties of the role for which you are receiving a stipend. Remember the importance of retaining time for wellness and self-care to ensure you can perform and feel your best.
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Think about the future
When deciding whether a position that offers a stipend is right for you, consider your long-term future goals and your immediate needs. If a particular position can help you reach a higher level in your career later, you might select a position that offers a stipend over a role that pays an hourly rate or salary. Consider non-monetary benefits such as networking, mentorship and the opportunity to learn important skills that may serve you later in your career.
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