Stipend Vs Salary: Difference Between Stipend And Salary

In the corporate world, the words ‘stipend’ and ‘salary’ are often heard, but what is the difference between them? These are two different forms of payment that an individual receives as compensation for their work. Having a solid understanding of the pros and cons of both of these forms of employment compensation will help you choose your profession with confidence based on your unique situation.

This blog on stipend vs salary will provide you with an in-depth look at the differences between stipend and salary and will help you decide which is best for you based on taxes, employee benefits, and other factors.

Overview of Salary

A salary is a fixed amount of money an employee receives every month in return for their work and services. It is based on an employee’s qualifications, experience, and job role. An employee has to pay an income tax based on their pay scale. Typically, a monthly salary includes benefits like paid time off, health insurance, and other employment benefits. 

Salary is often classified based on either the role of the individual in the project or the job position regardless of the projects they work on.

Overview of Stipend

A stipend is an amount of money an organization pays interns, trainees, and apprentices for a specific period. Its main function is to assist in paying for necessities like accommodation, travel, and food. Stipends typically have smaller values but serve as financial support while a person gains knowledge and experience in an internship or apprenticeship.  

There are several categories of stipends such as: career development stipends (for educational resources like books or courses), academic research stipends (to assist with research activities), living cost stipends (for covering costs such as rent and food), etc.

Also Read: Gross Salary vs Net Salary

Stipend Vs Salary: A Brief Comparison

In this section, we will briefly compare the differences between a salary and a stipend. By now, you must have understood that a stipend is a fixed amount of money given often to a student or trainee to help them cover living expenses or education costs. On the other hand, a salary is the fixed amount of money that employees get for the work they do for their employer. 

Here are some key distinctions between stipend vs salary.

1. Amount & Minimum Wage Law

Salaries must follow the minimum wage set by law, not lower. However, there are no such restrictions on stipends. Employers are free to choose how much to offer.

Usually, the stipend is lower than the minimum wage. However, it depends on the company or organization if they are willing to offer a higher stipend.

2. Function

Stipends can be short-term depending on the tenure of an internship. This is because of the temporary nature of the internship. The stipend amount is usually paid by the end of every month or upon satisfactory completion of the internship period.

However, salaries are long-term and are usually paid monthly to permanent employees. They offer a stable source of income. Getting a salary reflects a long-term commitment to work.

3. Variability

Stipends are fixed amounts and sometimes are subject to change based on your performance. Some companies implement performance-based variable criteria to encourage an intern to work harder and smarter. However, salaries are subject to increments.

For instance, you might get some commission for working extra hours or doing well at your job. Geographical location and qualification are common factors that affect both salary and stipend amounts. Working in a metropolitan city offers an opportunity to earn a higher salary and stipend.

4. Plan of Payment

Stipends are frequently given in one lump sum at the beginning or end of your internship tenure, as a monthly payment. In some cases, the stipend is given at the end of internship completion as a lump-sum amount. Meanwhile, payments for salaries are made regularly, which is every month.

An employee receives a net salary, which means that the employee gets the salary after payroll deductions on the actual amount, such as taxes, insurance premiums, and other benefits.

5. Subject to Taxes

Salary is certainly subject to taxes, depending on the pay scale and tax regulations. On the other hand, a stipend is not usually taxable. However, for some services, a company might deduct a professional fee from the stipend amount.

6. Work Intentions

An employee works full-time as permanent staff, earns money by way of a salary, and has an annual package. Their intention to earn is to have a great salary package, a comfortable lifestyle, and to be able to provide for their family.

On the other hand, an intern joins a company to gain experience and knowledge in a particular field. The intent behind getting a stipend is to cover basic living expenses.

Also Read: Difference Between CTC and In-Hand Salary

Stipend Vs Salary: Comparison Chart

The key differences between a stipend and a salary are displayed in the table below. It’s critical to remember that depending on where you work, what industry you’re in, and who your employer is, the details of your stipend and salary may vary. For instance, a business data analyst’s salary will differ from a doctor’s salary.

Aspect	Stipend	Salary
Duration	Offered for a specific duration (e.g., semester, academic year) with no guarantee of continued payment after this period.	Provides a stable source of income with frequent disbursements (mostly monthly payments).
Benefits	Usually lack employment benefits, such as retirement benefits, health insurance, and more.	Often accompanied by additional benefits, such as health insurance coverage and retirement benefits, depending on the employer’s policies.
Monetary Value	Commonly gives a lower monetary value when compared with a salary.	Typically offers increased financial remuneration in comparison to a stipend.
Basis of Award	Commonly awarded through an internship or other criteria rather than negotiated through salary negotiations.	Awarded based on job responsibilities, skills, experience, and industry norms.
Nature of Compensation	Typically found in training or education programs, such as internships, fellowships, or research positions.	Closely tied to regular employment in various industries, including corporate jobs and government roles.

Conclusion

When it comes to understanding stipend vs salary, a stipend is a set amount of money given for a specific purpose, while a salary is a recurring payment made by employers to employees in exchange for their work. Salaries can change depending on performance and work duties, and include taxes and perks. Stipends, on the other hand, are frequently tax-exempt and are not constrained by minimum wage requirements.

Have you ever been paid a stipend, and were the terms like what we’ve discussed here? Let us know in the comments section below. You can also learn more about the salary slip breakup to better understand your salary.

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