What is a travel stipend?

Helping employees achieve a good work-life balance is important for maintaining your team’s morale and avoiding employee burnout. This is particularly important in today’s workforce, where more employees than ever are leaving their jobs due to stress and toxic company cultures¹.

One way to help your employees maintain a work-life balance is by encouraging them to take time off and recharge. You can incentivize them by offering a travel stipend. Traveling has many known benefits². Your employees can spend time with their loved ones, improve their health, explore new places, and return to work motivated and refreshed. By offering a stipend, you can remove some of the financial burdens that may make it harder for them to travel.

This blog walks you through everything you need to know about travel stipends, including what they cover, how they’re taxed, their advantages, and how you can offer one at your company.

What is a travel stipend?

A travel stipend, or vacation stipend, is a set amount of money given to employees to use on personal travel. In contrast to stipends provided for business-related trips, employees can use travel stipends to travel to any destination, making a them a perk that compliments a robust paid time off (PTO) policy.

While employers typically cover all the costs associated with a business trip, they can set up travel stipends to only cover part of an employee’s personal travel expenses. But there are no contribution limits with stipends, so employers can offer as much money as their budget allows.

There are a few ways you can set up your travel stipend. The first is as a one-time payment, like a bonus. You can also offer it regularly (i.e., every month, quarter, or year). Or you can reimburse your employees for their travel costs. This means you’ll only pay for your employees' actual costs instead of paying up front.

Whatever method you choose, offering the stipend to everyone is the best way to achieve an inclusive workplace.

What can travel stipends cover?

The great thing about travel stipends is that they’re flexible. Each organization can choose what expenses they want to cover based on their budget and their employees’ needs. The federal government doesn’t require businesses to provide travel stipends, so the possibilities are endless when deciding how to set up this type of benefit.

Below are a few examples of what a travel stipend can cover:

• Bus, train, ferry, or airline tickets
• Gas for a personal vehicle or rental car (such as for a road trip)
• Dining allowances
• Lodging expenses (i.e., hotels, hostels, Airbnb, etc).
• Toll and parking fees
• Baggage fees
• Travel application fees
• Passport fees
• Mileage reimbursement
• Vacation/leisure activities
• Bike or scooter rentals
• Rideshare expenses
• Prepaid cell phones and an international data plan (if traveling abroad).
• Incidental expenses

As you can see, there are many expenses that a travel stipend can cover. If you don’t have the budget to start with a long list, you can start with a few items and add more as your business grows. Or, you can survey your employees to get an idea of what they want to see. This shows your staff you’re designing the benefit with them in mind, and you value their input.

Are travel stipends taxable?

Whether a travel stipend is taxable depends on how you choose to offer it. If you offer your stipend through an accountable reimbursement plan, it’s tax-free for your employees³. However, accountable plans must meet specific IRS requirements. Employees must properly document their travel expenses and ensure any unused portion of their stipend money stays with your organization.

Offering a travel stipend under an accountable plan is for business-related travel, not personal vacations, making the cost a deductible business expense for the employer.

One type of travel stipend that you can offer under an accountable plan is a mileage reimbursement stipend. If an employer reimburses an employee by the standard mileage rate (65.5 cents per mile in 2023) and receives proper documentation, it’s an accountable expense and isn’t subject to taxes.

Non-accountable plans are more common for personal travel stipends. The IRS doesn’t require employees to submit expense reports or mileage under a non-accountable plan. Additionally, you can provide the stipend in advance, your employee can spend the money on whatever they want, and they don’t have to return any unused funds to you.

If you’re using an expense reimbursement method, you can ask your employees for receipts to reimburse them with their stipend allowance for the total amount they spent while traveling.

Ultimately, the IRS defines advances, allowances, and most reimbursement stipends as regular income. This means your employees must pay income and FICA taxes on their stipend money at the end of each year. If you need help understanding your tax obligations with a stipend, contact a tax professional for further information.

What are the advantages of travel stipends?

Offering your employees a travel stipend doesn’t just benefit them and their well-being. Employers experience many advantages from these perks too. If you’re unsure if the benefits outweigh the cost of adding a travel stipend to your compensation package, we’ve described some of their advantages below.

1. They increase job satisfaction

Traveling allows your employees to unplug and focus on other aspects of life outside of work. It also improves their work-life balance, reduces burnout, and helps them relax. When you offer a travel stipend, you show your employees that you support their overall well-being even when they’re not at work, leading to job satisfaction and higher morale when they return from vacation.

2. They boost productivity

It’s difficult for burnt-out employees to be efficient and productive workers. Your staff will be better engaged when they’ve had the chance to recharge. When an employee returns from a trip funded by your travel stipend, they’re rested, energized, and ready to get back to work with a positive mindset.

Productivity increases because employees are better equipped to tackle challenges and meet business goals with a clear head. Additionally, when employees prepare for a vacation, they tend to be more productive, so they’re not leaving incomplete tasks for their team to handle in their absence.

3. They attract and retain talent

Travel stipends are a relatively new benefit. Adding one to your benefits package will help your company be more innovative and progressive compared to your competitors—which can help attract top talent. Millennials travel an average of 35 days per year⁴, which is more than any other generation. If you’re looking to recruit younger generations, a vacation stipend is likely to appeal to them.

Current employees tend to stay longer at companies with unique perks, too. This is because they know other organizations likely don’t offer the same benefits. For example, a software company in Denver increased its retention rate to 85% after providing a $7,000 travel stipend to each employee⁵. The amount each employee receives depends on tenure, further encouraging them to stay with the company.

4. Employees take fewer sick days

Overworked people are prone to several health issues like anxiety, stress, and depression. This can lead to an increased use of health benefits and sick time. As an employer, absenteeism results in lower productivity, which impacts business outcomes.

When employees take a break to travel, they can focus on being active, relieving stress, and recovering mentally and physically. They’ll have a lower chance of developing chronic health issues, take fewer sick days, and you can reduce your overall healthcare costs.

Providing a travel stipend also helps your staff be more financially secure when on vacation, positively affecting mental and financial wellness.

How can you offer a travel stipend at your organization?

Managing a stipend can seem daunting, especially if it’s your first time. Luckily, benefits administration software solutions can make the entire process easier. You can offer employees a monthly, quarterly, or annual allowance to cover any type of stipend you choose (i.e., travel, remote work, health, wellness, meals, etc.). You can also choose to offer a stipend as a one-time spot bonus and can vary the allowance by employee class or location for extra flexibility.

Conclusion

Your employees deserve to live a rich and fulfilling life outside your workplace. By offering a travel stipend, you’re encouraging them to use their PTO to explore the world around them and learn new things—without blowing their budget. Adding unique employee perks to your benefits package highlights your company’s culture, making you an employer of choice to job seekers.

But stipends may not be enough. If you want to want to attract and retain employees, you need to offer a personalized health benefit. PeopleKeep can help you offer an affordable and flexible health reimbursement arrangement (HRA).

1. https://www.forbes.com/sites/bryanrobinson/2022/05/03/discover-the-top-5-reasons-workers-want-to-quit-their-jobs/?sh=6c17208d5d46
2. https://www.everydayhealth.com/emotional-health/ways-travel-is-good-for-your-mental-health/
3. https://www.irsvideos.gov/Governments/Employers/WhatyouneedtoknowaboutAccountablePlans
4. https://www.roller.software/blog/millennials-travel-trends-and-statistics
5. https://www.cnbc.com/2022/05/20/these-10-companies-help-pay-for-their-employees-vacations.html