6 Types of Stipends: Differences Between a Stipend and a Salary

A stipend (from the Latin “stips” and “pendere,” meaning small payment) is a fixed amount of money that institutions and businesses offer certain individuals to cover specific costs. In some cases, universities and churches may provide researchers, clergy members, and students with stipends instead of regular pay to cover living costs or other expenses. Businesses may offer employees a stipend along with a regular salary or wage system to help cover additional costs, like training, commuting, or healthcare costs, or classes and books related to career development. In the United States, most stipends are considered taxable income, which means that recipients will need to pay taxes on the amount they receive. However, the Internal Revenue Service (IRS) does not consider stipends earned wages, which means that employers and institutions will not automatically withhold Medicare or social security taxes from the total amount. Instead, the recipient will need to set aside a portion of their stipend to pay federal and state taxes through their tax returns at the end of the fiscal year. Stipends range widely depending on the organization and the stipend’s purpose—here are a few common types: 1. __Living-cost stipends__: Institutions, like churches and universities, often offer stipends in place of a salary or hourly wages, intended to cover expenses like living costs or to thank the receiver for the work they’re doing. Common recipients of these kinds of stipends include graduate students, interns (especially in unpaid internships), trainees, volunteers, or clergy. 2. __Academic research stipends__: Research stipends often fund research at academic institutions and are paid to student researchers or graduate assistants to allow them to focus on their projects rather than spend a portion of their time working outside jobs. 3. __Career development stipends__: Some companies offer specific stipends for [job training](https://www.masterclass.com/articles/on-the-job-training-explained), allowing employees to attend conferences or receive certifications to help them with their work and advance their skills. 4. __Wellness stipends__: Some organizations offer wellness stipends as part of a benefits package or perks system, encouraging employees to take classes, enroll in gym memberships, or purchase items to help them live healthier lives. 5. __Health insurance stipends__: In cases where employers don’t provide healthcare insurance to their employees, they may instead offer health insurance stipends to help employees cover health-related costs. 6. __Miscellaneous stipends__: Some institutions or employers may offer small stipends to cover a wide range of specific costs, like commuting costs, [remote work](https://www.masterclass.com/articles/pros-and-cons-of-remote-work) expenses, or childcare costs. While both stipends and salaries are ways to pay individuals for work, they operate very differently in: - __Function__: Stipends are offered as financial support to cover specific costs (like training costs or living expenses), and in some cases, the recipient may be required to document how they spend their stipend. On the other hand, companies pay salaries to regular employees as earnings for their work without any expectation of how they will use the money. - __Amount__: The amounts of stipends and salaries vary widely, but in general, a stipend amount is a small sum of money, whereas salaries or hourly wages are subject to minimum wage requirements and must be above the state-mandated minimum. - __Payment plan__: Institutions and businesses pay out stipend in a lump-sum payment at the beginning of the recipient’s term of service or, less frequently, as a monthly stipend or reimbursement afterward. Conversely, salaries and hourly wages are paid gradually on a set schedule. - __Variability__: In most cases, a stipend is a fixed sum of money and isn’t adjusted according to the amount of work performed, the cost of living, or the recipient’s individual needs. Salaries and hourly wages, however, are subject to much more variability and can increase or decrease depending on overtime pay or the amount of time worked. - __Taxes__: The US tax laws governing stipends and salaries are slightly different. While the IRS considers stipends and salaries taxable income, salaries have taxes withheld automatically; with stipends, the recipient will need to pay taxes on the amount at the end of the fiscal year. Get the [MasterClass Annual Membership](https://www.masterclass.com/) for exclusive access to video lessons taught by business luminaries, including Sara Blakely, Chris Voss, Robin Roberts, Bob Iger, Howard Schultz, Anna Wintour, and more. A stipend is a small sum of money that employers or institutions may offer to cover specific costs.