Difference between Salary and Stipend

Salary and Stipend both involve the payment of money to individuals. Salaries are typically associated with employment contracts and regular work performed within an organization, whereas Stipends are often provided for temporary or educational purposes, such as internships, research, or training programs.

What is Salary?

Salary refers to a fixed regular payment, typically on a monthly or bi-weekly basis, provided by an employer to an employee in exchange for the work performed within the organization. It forms the primary component of compensation for employees and is often specified in an employment contract. Salaries are commonly associated with permanent or temporary employment and are subject to deductions for taxes, social security contributions, and other statutory deductions.

Features of Salary:

• Employment-Based Compensation: Salary is typically provided in exchange for services rendered by an individual as an employee of an organization. It represents a fixed or variable amount paid regularly, usually on a monthly basis, for the work performed.
• Legal Obligations: Employers are legally bound to pay salaries to their employees as per the terms agreed upon in the employment contract or as per the statutory minimum wages set by the government. Failure to pay salaries can result in legal repercussions for the employer.
• Taxable Income: Salaries are subject to income tax. The employer deducts Tax at Source (TDS) from the salary payments based on the applicable tax slab and other factors such as deductions and exemptions.
• Benefits and Perquisites: Besides the basic salary, employees may receive various benefits and perquisites such as Provident Fund (PF), gratuity, medical insurance, and allowances for housing, transportation, or food, depending on the employer’s policies and the employment agreement.
• Performance-linked Compensation: Some organizations offer performance-based incentives or bonuses in addition to the base salary. These incentives may be tied to individual performance, team performance, or the company’s overall financial performance.

What is Stipend?

A stipend is a fixed sum of money paid periodically to support an individual’s living expenses, educational pursuits, or participation in a specific program or activity. Stipends are typically provided as financial assistance or compensation for temporary engagements such as internships, fellowships, apprenticeships, or research projects.

Features of Stipend:

• Education or Training Support: Stipends are typically provided to support individuals during periods of education, training, or research, such as internships, fellowships, or academic programs. They are commonly offered to students, researchers, or trainees.
• Non-Employment Income: Unlike salaries, stipends are not considered wages for work but rather financial aid or support given to individuals pursuing specific educational or developmental activities. Stipends may be offered by educational institutions, research organizations, government agencies, or private foundations.
• Fixed or Variable Amounts: Stipends can be fixed amounts or variable depending on the program or institution offering them. They may cover living expenses, tuition fees, research costs, or a combination of these, and are often disbursed at regular intervals.
• Tax Implications: While some stipends may be tax-free, others may be subject to taxation depending on the purpose and source of the stipend. For example, stipends granted for research purposes may be exempt from tax under certain conditions, while stipends for other activities may be taxable.
• Limited Duration: Stipends are usually provided for a limited duration corresponding to the duration of the educational or training program. Once the program or activity is completed, the stipend payments cease, and the recipient may transition to other forms of income such as salary or wages.

Difference between Salary and Stipend

Basis	Salary	Stipend
Meaning	A salary is a fixed, pre-determined amount of money paid to an employee by an employer in exchange for the work performed.	A stipend is a fixed sum of money paid periodically to support an individual’s living expenses or educational pursuits.
Nature	It is typically paid on a regular basis, such as monthly or bi-weekly.	It is often provided as financial assistance or compensation for participation in a specific program or activity, such as internships, fellowships, or research projects.
Employment Type	Salaries are associated with formal employment contracts between employers and employees. Employees receiving a salary are typically permanent or temporary staff members of an organization.	Stipends are commonly associated with temporary positions, internships, fellowships, or academic programs where individuals are engaged in learning, training, or research activities.
Duration	Salaries are paid regularly and frequently, often on a monthly or bi-weekly basis, throughout the duration of employment.	Stipends are paid periodically, but the frequency and duration can vary based on the specific program or activity for which they are provided.
Purpose	The primary purpose of a salary is to compensate employees for the work they perform as part of their job responsibilities within an organization.	The purpose of a stipend varies depending on the context in which it is provided. Stipends may be used to support individuals during periods of training, education, or research, or to offset living expenses while participating in temporary programs or projects.
Taxation	Salaries are typically subject to taxation and may be accompanied by employee benefits such as health insurance, retirement plans, and paid time off, as outlined in employment contracts.	Stipends may be exempt from certain taxes or deductions, depending on the jurisdiction and the purpose for which they are provided.
Example	Malti Mary receives a fixed amount of money from her employer every month for her work as a marketing manager at a local company.	John receives a stipend for his summer internship at a research institute, which helps cover his living expenses during the program.

Salary and Stipend – FAQs

Who receives a salary?

Salaries are typically received by individuals who hold formal employment positions within an organization, whether they are permanent or temporary employees. Salary recipients perform work as part of their job responsibilities and receive regular compensation for their services.

Who receives a stipend?

Stipends are received by individuals participating in temporary engagements, such as internships, fellowships, apprenticeships, or research projects. Stipend recipients may include students, trainees, researchers, or participants in specific programs or activities.

Are stipends taxable?

Stipends can be taxable depending on the nature of the stipend and the laws of the country. Typically, stipends associated with work, such as research or internships, are considered taxable income. However, stipends for certain types of educational expenses may be tax-exempt.

Can stipends be negotiated?

Stipends may be negotiable depending on the organization and the specific circumstances. However, since stipends are often associated with programs like internships or fellowships, there may be less flexibility in negotiating compared to traditional employment contracts.

How is salary determined?

Salary is determined based on various factors including the nature of the job, industry standards, the candidate’s qualifications and experience, and negotiations between the employer and employee. It can also be influenced by factors like location, company size, and economic conditions.