Pay & Salary

What Are Stipends and How Do They Work?

May 6, 2021

A stipend can help you cover your expenses while you take academic courses or develop your career. A variety of opportunities exist, but many of them do not provide salaries or hourly wages. A position that includes a stipend can give you the funds you need to pay all your bills while you participate in an internship, an apprenticeship or a new academic endeavour. In this article, we explain what stipends are, who is eligible to receive one and the different types of stipends that can help you grow your career, further your education or explore a new life path.

What is a stipend?

A stipend is a fixed amount of money provided to people who pursue unpaid work. It helps offset expenses, such as housing and food. Unlike a salary, a stipend is not a payment for hours worked or services provided. Stipends do not have to meet minimum wage requirements, and receiving a stipend does not make you an employee. People who receive a stipend don't have a right to overtime, vacation days, pay statements or regularly scheduled, predictable payments.

Corporations and universities usually consider the expenses of living in the area and any other costs you could incur when they determine the amount of a stipend. They may also consider the type of training or the work you will perform. Some organizations offer other benefits as well as a stipend, such as:

  • funds for education
  • a place to stay with no charges
  • free or discounted food
  • a gym membership
  • health insurance

Who receives a stipend?

Stipends are usually for people who are ineligible to receive a regular salary or wage in return for their services. Researchers, clergy members, graduate students, interns and apprentices are sometimes the recipients of stipends.

For an intern or apprentice to qualify to get a stipend, the position should focus on providing valuable education and training, not actual employment. The training is beneficial for the intern or apprentice, not the company or the academic institution, meaning that the intern can't replace any regular staff members. Interns and apprentices also shouldn't expect to get a job automatically once training is finished. If they want to continue working at the company, they'll have to apply for an open position and compete with other applicants. A permanent position is not guaranteed.

Some companies offer a stipend to help new employees pay for student loans or to help them set up a home office. Even though the recipients are employees, this money isn't considered part of their regular salary because it goes toward expenses related to the job.

Stipends and tax reporting

While a stipend isn't a salary, the Canadian government still considers it as taxable income. However, you can offset the amount of tax you have to pay by accounting for expenses related to work such as travel expenses (e.g. food, accommodation, transportation) and, if you work from home, energy bills. You typically need to pay taxes on the money that you spend outside of business-related expenses. Money isn't deducted automatically from stipend cheques to pay for taxes, so people receiving stipends should set aside the amount they need to pay after deductions. Some universities categorize stipends as research grants, and other stipends may be considered nontaxable scholarships.

Read more: Gross Pay vs. Net Pay: Definitions and Examples

Types of stipends

Many types of stipends exist to cover the expenses of voluntary and unpaid work. Here are some common situations where employers may offer stipends:

Health insurance and wellness

Organizations can provide their own health insurance or offer a stipend to help people cover the costs of health insurance, gym memberships, counselling and other health- and wellness-related expenses.

Academic research

Universities commonly offer stipends or grants to researchers to allow them to focus on their projects without the distractions of a full-time or part-time job. A third party, like a business that needs detailed research data, can also offer stipends to researchers or research assistants. Most organizations also require researchers to analyze and interpret the data they gather.

The types of projects eligible for a stipend can include scholarly articles, translations, books, digital publications and reports about archaeological digs. Nonprofit foundations sometimes offer stipends for similar reasons. A stipend or grant acts as the budget for many research projects, paying for the expenses of researchers, specialized equipment and transportation to research sites. The project leader decides how to distribute the grant for the project.

Job training, internships and apprenticeships

Some companies give stipends to their best employees. That way, they can develop their skills and improve their careers with more job training. Apprentices often get stipends to cover living expenses like rent, food and utility bills while they complete their apprenticeship, internship or job training. These positions can lead to full-time work, so employers want to make sure their interns can focus and perform well on the job without worrying about their finances.

Read more: Finding Internships and Internship Alternatives During COVID-19

Fellowships

Fellowships provide financial aid in the form of a stipend. A research fellow has more knowledge than an intern, and fellows often have advanced degrees. For example, many doctors complete fellowships after they attend medical school and a residency program. A fellowship allows them to learn about a subspecialty, such as dermatology, ophthalmology, urology or neurology.

Clergy

The Catholic Church offers a stipend to priests who perform mass. This type of stipend is considered a gift because demanding payment for a sacrament would be simony, the sale of sacred things. In many other churches, donations from the congregation pay for the expenses of preachers or priests. They let these people focus on their work without getting a paying job. Larger churches often act as nonprofit organizations, and they may pay clergy members a regular salary instead of offering a stipend based on donations.

Specific expenses

For this type of stipend, money can only be used for certain expenses. For example, a student may receive a stipend to buy a laptop, pay for books and supplies and get reliable transportation or Wi-Fi service. A delivery driver could get a stipend for fuel expenses and wear on their vehicle.

Volunteering

Some organizations give volunteers stipends as well. These are considered thank-you gifts or payments for expenses, and they're worth much less than an employee would make for a similar job. They can help cover transportation expenses or the cost of lunch, or they can be one-time gifts to thank the most dedicated volunteers. If volunteers travel, the organizations could pay for the plane ticket or the hotel room. However, they still wouldn't be paying for the volunteers' work.

Applying for a stipend

Most internships, volunteer opportunities, apprenticeships and similar positions don't offer stipends, so getting one can be difficult. Like a regular job, you can expect to compete with multiple applicants. You typically need to submit a professional resume, complete an online application and attend an interview with one person or a panel of multiple deciders. You should tailor your resume for each position, write a unique cover letter, apply for positions that fit your experience and check for errors carefully.

To help get your application noticed as soon as possible, use the keywords mentioned in the job description. You can also ask people in your network for referrals or recommendation letters.

Read more: Why Quality Over Quantity Matters in Your Job Applications

Can you negotiate a stipend?

Depending on the organization, you may have the opportunity to negotiate an increase in your stipend. Do your research and consider what people in similar positions receive for stipends. If other organizations offer more, you may be able to get a comparable amount. If possible, apply for multiple internships, fellowships or apprenticeships. That way, you can choose the one with the best compensation. Remember to consider the expenses in the area as well. Taking a position with a lower stipend in a place with less costly rents and other expenses could leave you with more money to spare than a higher-paying position.

If a stipend won't cover all your needs because you have medical expenses, a dependent family member or other costs, let the organization know what you need to work there. You can also mention increasing utility, transportation or food expenses. Talk about your potential value to the organization, your education and experience and how you can help accomplish its goals. Prepare an outline of your key points and practise them with a friend to make sure that you're prepared before you ask for an increase in your stipend.

If the answer is no, be ready to negotiate. Think about the benefits that your supervisor can provide besides cash. They could offer a more flexible schedule, more access to laboratory equipment, mentoring from one of the leaders in the field, child care or other benefits. Decide what the minimum amount you'll accept is, with and without additional non-cash benefits.

Related

View More 

How to Negotiate Your Salary During COVID-19

In this article, we discuss why negotiating salary and benefits is still possible during COVID-19, how to find your professional value, and tips for negotiating.

Gross Pay vs. Net Pay: Definitions and Examples

Need help understanding the definition of gross pay, and how it differs from net pay? Indeed's career resource guide can help you figure out your gross pay.