Stipend vs Salary: Key Differences Explained

In general, we understand that research analysts typically earn a stipend to support their learning and work. In contrast, government and corporate employees receive a fixed monthly salary, which is reflected in the payroll management system as formal compensation for their services. However, we often get confused about whether their purpose is similar or different. What exactly are the differences between a stipend and a salary? This blog will discuss what stipend and salary are meant for and their differences. Moreover, we will also focus on who generally receives the stipend and who is eligible for the compensation.

Difference between Salary and Stipend

A salary is paid to employees for regular work and includes benefits, while stipend is a fixed amount given to interns or trainees for learning purposes, usually without benefits. While both salary and stipend refer to money paid for work or services, they are not the same. Here’s how they differ:

What is a Stipend?

A stipend is a fixed amount paid to an individual for a specific work purpose. People receive it either based on the work scope or, often, after calculating the work duration.

A stipend is usually provided to help cover job-related expenses such as travel costs, housing, or office supplies. However, it can also offer extra compensation for job training, advanced degrees, or working in a high-cost area. Unlike salary, a stipend is not considered a permanent wage because it is generally lower and unrelated to work hours.

Some key features of Stipend

Some key characteristics of a stipend are,

• It is a predetermined amount that is considered a token of work. It is often paid in addition to regular wages.
• It usually covers the basic living or training expenses rather than serving as full compensation.
• The employers or the organization set the compensation amount. There is little chance of negotiation.
• Unlike the salary, the stipend is not tied to the employment contract.
• It is also not included in the government’s minimum wage act.
• Workers who receive the stipend don’t work fixed hours. Recipients may have more flexible schedules compared to salaried employees.

What is a Salary?

A salary is fixed compensation that workers receive on a fixed interval, mostly monthly, hourly, quarterly, or rarely yearly. Employees are paid for their work and services in corporate or government entities, subject to employment contracts, benefits, and labour laws, often including bonuses, increments, and allowances.

Some Key Features of Salary

Here are the key features that describe the salary entirely.

• Salary is a fixed amount paid to employees monthly or periodically. It can be increased for a specific duration based on performance and work tenure.
• However, it is pre-defined. The employees can negotiate it as per their requirements during the onboarding process.
• Salaried employees often receive additional perks like health insurance, provident funds, bonuses, and paid leave.
• Salaries are regulated by the government’s Minimum Wage Act and other government policies. Therefore, employers must maintain some policies while defining an employee’s salary.
• Unlike stipends or commissions, salaries remain stable and do not fluctuate based on performance (except for incentives or bonuses).
• Salary is fully taxable income and subject to income tax laws, with deductions for provident fund (PF) and professional tax.

How does Salary make a difference from Stipend?

While employers can understand the difference between salary and stipend, misconceptions and confusion have occurred among employees. Very importantly, both compensation packages are designed to meet the needs and merits of the workforce; one maintains all the government rules and regulations, and the other depends on the organization’s policies and the decisions of the higher authorities. Let’s explore the difference between the two.

1. Taxes

According to labour law in India, if one’s salary is 12.75 LPA, she is eligible for taxable income. Besides, every salaried employee has to pay professional tax for their part-salaried employment.

Receiving a stipend depends on the type of salary. Employees who get the stipend for academic or research purposes will not be responsible for paying taxes. However, the employee receives the stipend for completing any internship or training that might apply to their taxable income.

2. Purpose

Salaries are compensation for work that every employee receives at predefined intervals. They are incremented periodically, such as quarterly, yearly, etc.

On the other hand, employers designate the stipend based on specific activities. Often, it is reimbursed for particular works and activities, showing proof of performance attended by dedicated individuals.

3. Legal Wages

According to Indian labour law, an employee’s minimum wage should be between 9000 and 24000, per the Central and State Minimum Wages.  In metro cities, the minimum wage is higher than the defined amount.

However, the stipend is just a lump-sum amount provided to employees as a token of achievement for their efforts and hard work. It ranges from very small to too big. For a start-up, the stipend is about 5k to 10k, but for a big company like an MNC, the stipend range can be within 30k per month or even more.

4. Fixed payment

Salaries are the fixed payment option. It is predefined that employers and employees perform during onboarding, where employees can get a scope to participate in the negotiation process. Even employees can move out during their probation period if dissatisfied with their compensation.

Stipends are temporarily or periodically paid as a lump sum. Employees receive them monthly, quarterly, yearly, or over multiple periods. Employers generally fix stipends, and there is no scope for negotiation. Employees receive them after finishing their predetermined work scope.

5. Reimbursement model

Salary is a standard compensation; it can be increased after a fixed working tenure. On the other hand, stipends can be a reimbursement-based payment option, where employees submit their receipts or proof of expenses to receive the stipend amount.

6. Universality

As an employee, you can negotiate your salary with your employer, and employers usually manage raises individually. Salary ranges tend to connect to your performance and market value and can increase gradually over time.

Stipends, in contrast, are fixed sums that apply across the board. They don’t depend on performance or the number of hours you worked, though there may be minimum thresholds for eligibility, such as being a full-time employee. A high-performing employee and a struggling one will receive the same amount.

Stipend vs Salary: Which one should you offer?

An organization cannot offer a stipend to a regular employee; instead, they plan for it for their gig workers, trainees, or interns. Some companies provide incentives or bonuses in the form of stipends. The following categories can receive stipend: researchers, graduate students, interns, apprentices, fellowships, clergy, job trainees, etc. Here we have highlighted why companies don’t provide stipends instead of salaries, because salaries are legally required compensation for work performed. In contrast, stipends are typically supplementary and not a substitute for wages. Here’s why:

➔ Legal and Labour Law Requirements

Labour laws govern salary, whereas stipends aren’t. The law ensures that the employees get a genuine amount that follows the minimum wage act. The law also covers overtime charges and helps employees get social security and health insurance benefits. Replacing a salary with a stipend would violate these laws and could result in penalties.

➔ Stipends, considered as Non-Wage Payments

Stipends are fixed amounts paid to workers at one time, given for specific purposes, like internships, training, or to cover certain expenses (e.g., equipment, or commuting). They’re not meant to compensate someone for full-time, productive work like a salary does. They can be a lump-sum amount, not under the government labour laws; employers do not have to think about PF, ESI, Medical Insurance, etc. Employees getting a stipend sometimes come under the shift management software, where they get paid hourly for their shift-wise work output.

➔ Lack of Stability and Protections

Salary offers job protection, benefits, and consistency, whereas the stipend doesn’t. If a company pays a stipend, often employee become unsure or confused about their financial security as it is not included in the wages act. On the other hand, their multiple terms and conditions of accepting salaries, negotiate them. Even employees expect an assured increment during their tenure.

➔ What did we conclude?

The choice of employees under both sections is pretty prominent for management or employers. In contrast, employers must plan to deliver a salary when hiring a permanent employee. On the other hand, when recruiting gig workers, consultants, trainees, or interns, management can fix a lump-sum stipend for their entire working tenure.

End Note

Understanding stipend vs salary may be very confusing. Generally, we have a generic idea that researchers or academic experts have a stipend for their excellence in work. However, a salary ensures permanent employment in the work market, whereas a stipend is considered temporary earnings.

Accepting our society’s thought process and making a family a stipend priority is a bit less important than earning a salary. However, an employee’s salary could reduce financial stress and help them cultivate a healthy work-life balance.

FAQs on Stipend vs Salary

1. Which is better, Stipend or Salary?

A salary is generally better than a stipend because it offers stable income, legal protections, and employee benefits like health insurance and paid leave. Stipends are usually lower, meant for temporary roles like internships, and often lack benefits. While stipends help gain experience, a salary provides long-term financial security and recognition as a full-time employee.

2. Is a Stipend considered as Salary?

A stipend is not considered a salary. While both involve payments, a salary is regular compensation for employment with legal benefits and obligations. A stipend is typically a fixed, smaller amount given for support during internships, training, or research, often without full employment status or benefits. It’s meant to cover basic expenses, not to serve as full compensation.

3. Do interns get a Stipend or a Salary?

In general, interns receive a stipend. On the other hand, employees receive a salary. In companies, interns receive a salary as well. As it solely depends on the company’s self-policies.

4. What is a monthly Salary Stipend?

A monthly salary is not a stipend. A salary is regular compensation paid to employees for their work, typically with benefits and legal protections. On the other hand, a stipend is a fixed amount given for support, often in internships or training, and usually doesn’t come with full employee benefits or the same legal obligations as a salary.