What Is a Remote Work Stipend?

Once an occasional necessity and now a widespread demand, working from home has been well and truly cemented in modern workplace culture. As a result, remote work stipends or allowances have become a popular benefit among leading remote-friendly companies. Whether you’re a start-up, scale-up, or enterprise business, remote work allowances can benefit both you and your employees, enhancing productivity, retention, and growth.

This comprehensive guide will help you create a competitive benefits program, and build a world-class remote team, by answering the most common questions about remote work stipends.

What Is a Remote Work Stipend?

A remote work stipend is a fixed amount of money paid to an employee in addition to their basic salary, which aims to cover the extra costs incurred by working from home. This stipend can be paid once as a lump sum or regularly - monthly, annually, or however your company sees fit.

Alternatively, your company may choose to reimburse recurring remote employee expenses, like internet access or a cell phone plan, rather than provide a fixed-sum stipend. But remember, your company expense policy should also include specific guidance on what employees can expense and for what amount - for example, a budget of up to $200 for a desk chair.

Providing a fixed-sum remote working stipend generally requires less administration than reimbursing individual expenses. The downside is the employer likely won’t end up paying the exact costs the employee spends on their home office expenses.

On the other hand, reimbursing employee expenses ensures that the employer only pays for actual costs rather than estimated costs. However, this can be more time-consuming. Ultimately, it’s up to you to decide which option works best for your business.

Remote work stipends and reimbursements are generally optional for the employer, but some regional employment laws stipulate that an employer must cover work-related expenses for remote employees. This is the case in Spain, where employees who work at least 30% of their total hours remotely within three months are entitled to reimbursement.

Benefits of Offering a Remote Work Stipend

While remote work stipends are usually optional for the employer, we highly recommend them if your goals are employee satisfaction and gaining an edge over your competition. There are many benefits to including a remote work stipend within your compensation and benefits package, including:

Competitive edge in talent acquisition: Big tech companies have led the way by offering sizeable work-from-home stipends, and many other companies are hot on their heels. Offering a comprehensive remote worker benefits package will help ensure you remain attractive to top-tier talent.
Better employee engagement and retention: By paying for work-from-home expenses, your remote employees will feel more valued, leading to better employee engagement and retention. This is particularly important if you operate a hybrid work model, as it means your remote workers don’t miss out on the benefits and perks their in-office counterparts receive.
Increased productivity: Remote stipends help ensure that each employee’s home office is set up correctly so they can focus on doing their best work to drive the business forward.

Now that you know how beneficial remote work stipends and allowances are, let’s cover the practicalities of offering one.

How Much Is a Stipend for a Home Office Setup?

Remote employee stipends are fixed and paid outside of normal earnings. The average home office stipend amount varies from employer to employer, depending on their budget and what expenses they wish to cover.

For example, some tech companies like Twitter, Shopify, and Basecamp introduced a $1000 one-off payment to help employees set up their home offices. Smaller companies may find it more financially viable to offer lower, more regular payments instead, such as a monthly stipend.

When building a remote-friendly or remote-first benefits package, you should budget for at least the essential resources your remote workers need to be comfortable and work at their best. While it’s not cheap, disregarding your teams’ basic needs will cost you more in the long run as employees seek more attractive work environments elsewhere.

Below, you’ll find some of the things that a work-from-home stipend can cover.

What Do Work-from-home Stipends Cover?

A stipend for remote workers should cover the essentials needed for them to work from home effectively, such as:

High-speed internet and cell phone packages
Office equipment like ergonomic chairs, laptops, and extra monitors
Role-specific tools
Access to co-working spaces so employees can work in an office-like environment if they wish.

Some home office stipend policies also include so-called ‘soft’ employee benefits, which go beyond the standard offering but help keep employees engaged, productive, and happy. This stipend could cover meals or occasional treats, access to well-being tools and services, a learning and development budget, and a host of other perks.

Your company could also cover costs for general household services, like childcare and cleaning services, which give employees more headspace to focus on their job during working hours.

Where Are Remote Working Allowances Available?‍

Remote working allowances, including tax reliefs, deductions, or exemptions, are available in many countries, such as Belgium, the UK, Australia, France, and South Africa, among others. These benefits aim to ease the financial burden of working from home by covering expenses like office supplies and utilities. However, in some countries, these allowances were introduced as temporary measures during the pandemic and may no longer be available. It’s essential for businesses to stay updated on changing regulations to ensure compliance when hiring staff globally.

On the flip side, not all jurisdictions have embraced remote work tax allowances. For instance, in the USA, there is no federal law requiring remote employees to receive tax deductions or relief for home office expenses. Instead, such decisions are left to individual states, and most currently do not permit remote workers to write off or be reimbursed for these costs. This highlights the importance of understanding local regulations and tailoring benefits packages to meet both legal requirements and employee needs.

Are Remote Work Stipends Taxable?

In many countries, remote work stipends are considered to be part of an employee’s taxable income. The amount of tax to be paid will vary from country to country, so you need to be familiar with local laws and regulations when hiring globally to avoid repercussions.

In some countries, remote work allowances can be made tax-free. In Belgium, for example, employers can pay their staff who work from home on a structural and regular basis a tax-free remote working allowance to cover office-related expenses. They can pay up to €129.48 per month to each employee, and all employees must be paid equally. The employer must then file the relevant tax claims.

Elsewhere, remote employees may be entitled to tax deductions to help cover the cost of working from home, which you can read all about in our remote work allowance guide.

How Are Working from Home Tax Deductions Calculated?‍

Various methods are used to calculate the remote work tax allowance, and again, it depends on the tax authority in question.

In the UK, for example, remote employees can claim tax relief on £6 a week, with no evidence needed. Alternatively, they could claim tax relief on the exact amount of expenses incurred instead. In this case, evidence, including bills and receipts, is required.

In Australia, multiple calculation methods are also available:

Shortcut method: A temporary method to calculate tax allowance for home expenses during the pandemic (for 2019–20 and 2020–21 tax returns). This may be extended depending on when work patterns return to normal.
Fixed-rate method: A long-term solution through which employees receive AUD 0.52 in tax deductions per hour of home office work. Unlike the UK’s £6-a-week allowance, the Australian tax authority requires evidence of the additional expenses incurred.
Actual cost method: Another long-term solution that is used to calculate tax allowance calculation based on actual costs.

While these methods may seem cumbersome, for many, they’re well worth the trouble to alleviate the costs incurred by remote working, which may lead to increased engagement and productivity.

How to Apply for a Remote Working Allowance

In most applicable countries, employees have to apply for remote work allowances individually when they file their taxes. In some countries, like the UK, there are specific application forms available.

Employers generally don’t need to get involved with this process. However, knowing where and when your staff can access remote work tax allowances is highly recommended. If you want to support your remote team members, fuel their productivity, and foster a culture of care, you should make them aware of any relevant allowances they’re entitled to receive.

How to Implement a Remote Work Stipend Program

Implementing a remote work stipend program might seem daunting, but with the right approach, it can be a seamless process that yields significant benefits for your business and employees. Here's how to get started:

Assess Your Budget and Needs: Determine how much you can allocate per employee and identify the essential expenses you want to cover.
Create a Clear Policy: Develop guidelines that outline what the stipend covers, how employees can access it, and any documentation required.
Communicate with Your Team: Ensure that all employees understand the stipend program, its benefits, and how it supports their work-from-home experience.
Monitor and Adjust as Needed: Regularly review the program's effectiveness and make adjustments based on employee feedback and changing needs.
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