{"id":3875,"date":"2024-03-06T22:00:00","date_gmt":"2024-03-06T22:00:00","guid":{"rendered":"https:\/\/compt.io\/stipends-vs-extra-money-on-paycheck\/"},"modified":"2025-05-05T15:06:59","modified_gmt":"2025-05-05T21:06:59","slug":"stipends-vs-extra-money-on-paycheck","status":"publish","type":"post","link":"https:\/\/compt.io\/blog\/stipends-vs-extra-money-on-paycheck\/","title":{"rendered":"Thinking of Adding a Stipend to Paychecks? Read This First."},"content":{"rendered":"\n

If you’re thinking of offering employees some extra cash for things like a cell phone allowance or gym membership, you’ve probably considered just adding that money onto their paycheck. <\/p>\n\n\n\n

While adding a few extra dollars to an employee’s paycheck may seem like a straightforward and simple way to enhance their total compensation, it’s not as effective as offering lifestyle benefits in the form of lifestyle benefits like stipends<\/a> or Lifestyle Spending Accounts<\/a>.<\/p>\n\n\n\n

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Lifestyle benefits<\/a> are a simple yet powerful way to make employees feel valued-and the good news is: you don’t need an enormous budget to drive an impact.<\/p>\n\n\n\n

Of course, we have to say that this assumes you’re paying employees their market rate. If your employee pay is below market rate, then there are several ways you can start to bridge the gap<\/a>! <\/p>\n<\/blockquote>\n\n\n\n

There are several reasons why providing lifestyle benefits through stipends represents a more strategic approach to employee benefits. <\/p>\n\n\n\n

Let’s go over a few of them:<\/p>\n\n\n\n

The Consequences of Adding More Money to a Paycheck<\/h2>\n\n\n\n

First things first. When you just add money to a paycheck, it certainly offers a level of administrative convenience for HR and finance. That’s because the amount is predictable and the process is automated. We understand why this is the first reaction, but it still falls short in a few different ways:<\/p>\n\n\n\n

Tax Inefficiencies<\/strong><\/h3>\n\n\n\n

Many benefits, like commuter allowances or cell phone reimbursements, can be offered tax-free through a Lifestyle Spending Account (LSA)<\/a>, saving both the company and employees money. Paycheck additions are subject to payroll taxes, resulting in overpayment for all parties involved<\/strong>.<\/p>\n\n\n\n

Reduced Recognition<\/strong><\/h3>\n\n\n\n

Here’s the thing: Paycheck additions often go unnoticed. With traditional paper paystubs becoming obsolete, employees may not even remember receiving the offered benefit, which cancels out any perceived value and intended purpose. If you received an extra $5 or $10 in your paycheck, would you notice? Likely not. This is akin to lighting your budget on fire, because no one will pay attention.<\/p>\n\n\n\n

Missed Opportunities to Promote Specific Values<\/strong><\/h3>\n\n\n\n

A well-rounded benefits program can help attract talent and encourage retention. That\u2019s something that\u2019s much harder to do with just a bit of extra cash.<\/p>\n\n\n\n

Forgettable Benefits<\/strong><\/h3>\n\n\n\n

In a recent conversation with Compt’s Head of Customer Success, Mary Migiano, she had this to say about the paycheck approach, “Our customers often share that they choose Compt because they know (and have seen sometimes first-hand) that an extra $50 in a paycheck disappears, but a $50 stipend becomes a story with real, tangible impact.\u201d <\/p>\n\n\n\n

When stipends are added to paychecks they feel more like a small raise, than an actual benefit. And as a result, they up getting lost in the shuffle of life’s expenses and are forgotten about.<\/p>\n\n\n\n

What Reimbursement Stipends Offer that Paychecks Can’t<\/h2>\n\n\n\n

Employee stipend programs address the shortcomings mentioned above and unlock additional advantages:<\/p>\n\n\n\n

Memorable Benefits<\/strong><\/h3>\n\n\n\n

By offering stipends through a reimbursement model, employees login to their accounts and see how much extra money you’ve given to them and the various ways they can spend it. With reimbursements, employees are able to spend on whatever vendors (big box to local), and in their moment of need which leads to stories rich of impact. <\/p>\n\n\n\n

Speaking of real stories of impact, below are a few quotes from real Compt users (anonymized) about how their companies stipends are impacting their lives:<\/p>\n\n\n\n