An organization is composed of members, which includes the owners, employees, workers and trainees who work for compensation which can be in the form of profit, salary or stipend. There always remains a confusion regarding when we talk about the term salary and stipend. Salary is paid to the employees, in return for the work performed by them in the organization.
On the other hand, the stipend is provided to the interns or apprentices, who work in the organization for the short term, with an aim of learning and getting the experience of work life. In this article, we’ve provided you with the difference between salary and stipend in a detailed manner.
Content: Salary Vs Stipend
Comparison Chart
| Basis for Comparison | Salary | Stipend |
|---|---|---|
| Meaning | Salary is the compensation given to employees for the services provided by them to the company. | Stipend is the amount paid to the trainees, so as to the cover cost of living. |
| Paid to | Employees | Interns or Apprentices |
| Relationship between parties | Employer-employee relationship exists | Student-mentor relationship exists. |
| Taxability | Taxable | May or may not be taxable |
| Increment | It may increase on the basis of performance. | It remains fixed irrespective of the performance level. |
| Objective | Earning money | Increasing the knowledge base |
Definition of Salary
Salary alludes to the fixed payment or consideration made by an employer to his employee, i.e. white collar worker, for his contribution to the organization according to the employment agreement. It is a monthly rate of pay, regardless of the numbers of hours put in by the employee in the job. The salary of an individual depends on his/her designation and importance in the organization.
In other words, salary is the cost of hiring and retaining the manpower, to continuously carry out business operations.When an employee is appointed on pay scale basis, his/her salary is subject to annual increment. Further, variations in the salaries are based on the nature of the job, employer organization, type of work, industry, job location and so forth.
Salary occupies a substantial place in an employee’s work-life, as his/her standard of living, productivity, efficiency and status in the society depends on it. Moreover, the growth and success of an employee in his career are also indicated by the salary drawn by him from the organization.
Definition of Stipend
The term stipend is defined as the form of consideration paid to the interns, trainees or apprentices, for rendering services to the organization with an aim of learning. The stipend is given to offset living expenses and not to compensate for the work performed. It is provided to those, who are not eligible to get periodical pay, in return for the work performed or the role played by them in the organization, i.e. interns.
The amount of stipend is fixed and it is predetermined by the management which remains same for all the interns, who are getting on-the-job training in the organization. Nevertheless, the amount of stipend is based on various factors such as the population in the city, type of city, i.e. metropolitan or cosmopolitan, etc.
Key Differences Between Salary and Stipend
The difference between salary and stipend can be drawn clearly on the following grounds:
- Salary is the remuneration paid to the employee for performing the work or task assigned to him or the job for which he/she is accountable. The stipend can be described as the form of payment made to the interns and fellows, so as to provide financial support to them.
- The salary is the monthly pay of the employees, for the provision of services to the organization. As against, the stipend is the consideration paid to the trainees, i.e. interns, or apprentices to cover the living expenses.
- Salary is paid when there exists an employment contract between the parties, i.e. there must be an employer and employee relationship. Conversely, the stipend is paid when a person joins the organization as a trainee, the relationship between the supervisor and the trainee is of mentor and student.
- Salary is a taxable income, i.e. tax has to be paid on the salary if it crosses the specified limit which is not chargeable to tax. Conversely, usually, when stipend is given in the form of scholarship, i.e. to further the education of the recipient it is an exempt income, whereas when a person works as a full-time employee, and gets stipend, for the knowledge and experience that he gets from the work, then it is a fully taxable income.
- Salary is subject to annual increment, which can be based on the performance or merit of the employee. Conversely, stipend remains fixed, irrespective of the performance or merit of the trainee.
- When the person works as an employee, the objective is to earn money by way of salary. On the other hand, when someone joins an organization as trainee the primary aim is to increase the knowledge base and understand the practical application of the course pursued.
Conclusion
To sum up the discussion, both salary and stipend are different terms, as they are offered to different persons. When a person is getting employment, he/she is provided with salary for the work performed in the organization. As against, the stipend is provided to the persons imparting training in the organization, i.e. interns, to cover living expenses.
So, if we compare the two, the amount of stipend will always be lower than the amount of salary for similar work. However, the experience and knowledge a person gets from the job will be same, no matter if he is an employee or a trainee.
Daryl Freedman says
Is a stipend considered income by law ?