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Summary: The WFH stipend is also known as a remote work stipend and is paid to the employee for costs that would traditionally be covered when working at the office.
Work-From-Home Stipend
A work-from-home (WFH) stipend is an allowance that a company gives to an employee to supplement the costs of working remotely.
The WFH stipend, also known as a remote work stipend, is paid to the employee for costs that would traditionally be covered when working at the office.
Alongside cost-of-living adjustments and other allowances, a WFH stipend is an important part of an employee’s total compensation package.
Why do employers pay work-from-home stipends?
With more workers looking for remote or hybrid positions, many companies are actually able to save money on office resources. When they move positions from on-site to remote environments, they may be able to save on office rent, utilities, computers, furniture, and other equipment. At the same time, it can be seen as unfair to pass all of these costs on to remote employees. In some states, like California and Illinois, companies are legally required to reimburse remote employees for their work-related expenses. This is the main reason that many companies offer WFH stipends.
Other reasons include:
- Enabling a remote worker to create a safe, healthy, and comfortable work environment
- Reducing the costs of working remotely for the employee
- Encouraging employee retention
- Increasing employee productivity
- Producing an attractive benefits package to attract top talent
What expenses does a work-from-home stipend typically cover?
Working remotely is still very much a new and under-regulated phenomenon. In most places, there are no guidelines for work-from-home stipends, so employers either create their own or follow trends in their industries.
Typically, a WFH stipend will cover many or all of an employee’s work-related costs, including:
- Utilities: Electricity (for lighting and climate control), internet connection, phone
- Hardware: Computers, monitors, printers, outboard devices (ergonomic keyboards, mice, webcams, headphones, etc.)
- Furniture: Desks, chairs, filing cabinets
- Tools: Monitoring equipment, trade tools
- Services: Postage, couriers
Some companies that offer many workplace benefits may supplement their employees for similar items. Companies can give stipends for health, food, continuing education, or anything else they deem appropriate.
Remote work stipends can be paid in lump sums, like Google’s $1,000 one-time payment for remote employees to set up their home offices. However, it’s more common to see monthly payments like the $60/month that HubSpot gives its remote workers or mixed solutions that combine lump sums for setup with ongoing support.
How can employers determine the appropriate amount for a work-from-home stipend?
There are several factors that employers need to take into account to make sure that the stipend they offer is fair, equitable, and even attractive to remote workers. Some of these include:
- Cost savings: Employers can calculate their savings on office expenses and use this as a baseline to estimate an appropriate WFH stipend amount.
- Necessary equipment: If an employee needs a computer, desk, and chair to work, these items can be easily priced out and budgeted for.
- Utility supplements: Faster internet connections or other services can be budgeted for. While an employer wouldn’t pay for a worker’s entire internet or electricity bill, a fair and accurate estimate of its portion of the cost is easy to calculate.
- Compliance: Some jurisdictions have set standards for employees’ environmental conditions that must be adhered to.
- Enhanced productivity: Enriching a home office can make an employee more productive, and this increase can justify an attractive WFH stipend.
- Fairness: All employees deserve safe, healthy, and comfortable work environments, but some may require greater support to achieve this same level of quality. Personalizing WFH stipends may, therefore, contribute to workplace equality.
What are the tax implications of a WFH stipend?
There’s an important distinction to recognize between a work-from-home stipend and reimbursable expenses. In many areas, the WFH stipend is considered a part of the employee’s taxable income since this money comes as part of a compensation package. In these cases, the stipend would become part of the employee’s gross total income for tax purposes. At the same time, all of the equipment and materials bought with the stipend would be considered the employee’s property.
Alternatively, asking remote workers to make their own home office purchases and then reimbursing them for these expenses wouldn’t add to their taxable income. However, these purchases could become deductible business expenses for the employer. In these cases, all the hardware and materials purchased by the employee would technically become the property of the employer.
This difference in tax implications might inform whether or not a company offers a work-from-home stipend to its employees or simply lets them be reimbursed for their spending.
Andrew (Drew) joined the Remote People team in 2020 and is currently Director, Regulatory Affairs. For the past 13 years, he has been a trusted advisor to C-Suite executives and government ministers on international compliance and regulatory issues. Drew holds a law degree from the University of Otago, a PhD from the University of Sydney, and is an enrolled Barrister and Solicitor of the High Court of New Zealand.
