The number of Americans working from home tripled from 2019 to 2021, quickly making the home office stipend a mainstay of the modern benefits package.
Unsurprisingly, tech companies have pioneered some generous home office stipend policies, quickly setting a high bar for ensuring remote employees have comfortable workstations:
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Basecamp, Shopify, and Google each give new employees $1,000 to furnish their home offices
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Stack Overflow’s new hires get $2,000 to ensure they can work comfortably
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Sprig gives each team member a whopping $3,500 to create an ideal workspace
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Reddit team members get $1,800 to cover home office costs
Should you follow suit and offer a home office stipend? Are there any legal requirements you should know about? How can you set up a stipend?
We’ll cover it all, including:
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The employee and employer perks of home office stipends
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What you should know about federal and state regulations
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2 crucial differences between home office stipends and reimbursements
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Home office costs that are commonly included in a stipend
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How you can easily set up a home office stipend
Here we go.
Understanding the Home Office Stipend
First things first: Let’s make sure you’re clear on what a home office stipend is and isn’t—and how regulations could affect your policy.
What’s a home office stipend, exactly?
A home office stipend is a fixed amount of money given to your employees to cover the costs of working from home. The stipend is paid as taxable income in addition to their salaries and may be given as a lump sum or a recurring payment.
While company policy and state laws may dictate some variance in how employees use a home office stipend, a stipend is typically spent on equipment or expenses required for remote employees to adequately perform their jobs or have more productive, comfortable working experiences—such as computers, office furniture, internet bills, and software subscriptions.
Are you required to offer a home office stipend?
Although federal law doesn’t require employers to reimburse costs incurred by employees who work from home, some states mandate it. The specific laws around covered costs, timing of payments, and how payments are made vary from state to state.
Be sure to check your state laws to determine whether you’re required to offer a home office stipend. Here’s a list of states that have specific laws pertaining to home office stipends:
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California
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Illinois
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Iowa
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Massachusetts
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Minnesota
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Montana
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New Hampshire
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New York
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North Dakota
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Pennsylvania
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South Dakota
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Washington, DC
Employee circumstances also may factor into whether a home office stipend is required. If any of your employees meet the following criteria, there’s a good chance you’re required to offer a home office stipend:
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Required to work remotely
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Aren’t within a reasonable commuting distance of the workplace
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Have disabilities that make it difficult to successfully work in-office
Take note that the Fair Labor Standards Act has specific protections for lower-wage employees: If expenses incurred by employees to adequately work lower their earnings below minimum wage, the employer is likely required to cover the costs.
How is a stipend different from a reimbursement?
Stipends differ from reimbursements in 2 crucial ways:
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Ownership: The employee owns any items purchased with a home office stipend, while the employer owns any items that have been reimbursed. Ownership is maintained even after the working relationship ends, regardless of which party ends it.
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Tax implications: A home office stipend is considered taxable income for the employee and should be included on an employee’s W-2. (However, Social Security and Medicare should not be withheld from stipends since they’re not wages.)
Should You Offer a Home Office Stipend?
Human resources pros say yes. Home office stipends can increase satisfaction for both employees and employers.
While home office stipends are an easy way to show additional appreciation and consideration for your remote workers, there are perks for you as the employer, too: Comfortable workstations can improve efficiency and productivity, reduce the negative effects of sitting for long periods, and even reduce the number of sick days your employees use.
A stipend also removes some of the onboarding burden from your finance and human resources teams. Rather than investing time and money into purchasing and shipping items that go unused, offering a stipend allows your employees to choose the items that will bring them the most value.
How Can You Set Up a Home Office Stipend?
Setting up a home office stipend is quick and easy. In fact, you can do it in 3 easy steps.
1. Choose Which Costs Your Stipend Will Cover
While home office needs may vary by industry and role, here’s a list of some expenses that are commonly included in home office stipends:
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Desk and chair
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Computer and secondary monitor, keyboard, mouse, or other accessories
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Required software subscriptions such as LastPass
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Ergonomic devices such as wrist supports or laptop stands
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Organizational items like whiteboards or file cabinets
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Webcam or microphone for virtual meetings
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High-speed internet and cell phone plans
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Office lighting
Furniture expenses are often crucial to remote employee success since a comfortable desk and chair can ward off aches and pains so the focus stays on work. Larger pieces of furniture are also the most costly expenses, so it’s a good idea to cover these rather than place the financial burden on your new employees.
2. Determine Payment Schedules and Double-Check Legalities
You’ve already estimated the costs incurred by your remote team members, so you should have a good idea of how much the home office stipend should be.
The next step is to determine when you’ll pay out home office stipends. There are a few options:
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A one-time payment upon starting employment, often included alongside the first paycheck
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A one-time payment upon completion of the company-specified probationary period
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A recurring monthly, quarterly, or annual payment
And finally, partner with your finance or legal team to double-check that your home office stipend meets any federal and state regulations that may apply. You’ll also want to check in with your human resources team to ensure the home office stipend complies with any existing company policies.
3. Share the Good News With Your Team
That’s it—the legwork is done! Now it’s time to let your team know about the stipend so they can improve their workstations and, as a result, level up their performance.
Your Team Can Spend Their Stipends Here
Now that we’ve walked you through the ins and outs of home office stipends, we’d like to volunteer to help your team with their furniture.
National Business Furniture has everything that’s needed to set up the ideal home office, including standing desks, office chairs, filing cabinets, and much more. And we’ve got enough sizes and styles to accommodate a variety of home offices. Check out our buying guides and pass them on to your team.
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