What Is a Remote Work Allowance & How to Structure It?

If your company is embracing remote work, you may find it necessary to provide your remote employees with a way to cover the expenses of working from home. A well-structured remote work allowance solves this problem.

1.0 What is a remote work allowance?

A remote work allowance, also known as a work from home stipend, is the money provided to a remote employee to help them pay for expenses related to their work from home. These expenses could be for the purchase of home office equipment or for paying for internet and phone services at home.

According to data compiled by the SHRM, 62% of companies in the United States have a work from home stipend for their employees. On average, they provide around $891 for these employees per year.

1.1 What are the benefits of a remote working allowance?

There are several benefits to providing a stipend to your remote employees.

• Recruitment and retention: Offering a work from home stipend increases your company's competitiveness in the job market.

• Increased productivity: By providing a stipend to remote workers, they are incentivized to improve their work environment and increase their productivity. Many can invest in better office equipment and software that improve their performance.

• Reduced overhead for the company: Employers can save by allowing them to work from home instead of the office. This is money they would have spent on rent, utilities, and other office-related expenses.

• Equity in providing allowances to employees: If your company allows some employees to work from home while others must show up to the office each day, you may discover an inequity if the work from home stipends are not the same for each category of employee.

1.2 One time stipend vs. recurring stipend vs. hybrid model

Companies that offer work from home stipends can structure their allowance in a few different ways.

Model	How It Works	Best For
One Time Stipend	A single lump sum ($500 to $3,000) at onboarding.	Home office setup: desk, monitor, ergonomic chair.
Recurring Stipend	Monthly flat allowance ($50 to $500/month).	Internet access, phone, office supplies.
Hybrid Model	Combines one time payment with monthly allowance.	Fully remote and hybrid employees.

Stipends can be provided as a flat allowance or by requiring the employee to provide receipts for the expenses that they cover.

Once you decide on a stipend model, CompXL® automates the execution. It handles recurring monthly allowances alongside merit raises, bonuses, commissions, and equity awards — eliminating manual tracking and ensuring every remote employee receives their stipend on schedule.

2.0 Tax and compliance rules for remote work allowances

One of the most important considerations when providing a work from home stipend is tax rules. The stipend is generally taxable income for the employee unless it falls under an IRS accountable plan.

2.1 IRS accountable plan vs. nonaccountable plan

The following table demonstrates the differences between offering a reimbursement under an IRS accountable plan versus a nonaccountable plan.

Feature	Accountable Plan	Nonaccountable Plan
Tax treatment	Reimbursements are tax free	Payments count as taxable income
Receipts required	Yes, employees substantiate expenses	No documentation needed
Excess return	Unused funds returned within 120 days	No return obligation
Payroll taxes	Not subject to income tax or payroll tax	Subject to full withholding

Reimbursements that fall under an IRS accountable plan are nontaxable as long as three criteria are met: the expenses are for business use, they are adequately documented, and any excess money is returned to the employer within 120 days of receipt. Additionally, with the signing of the One Big Beautiful Bill Act in July 2025, work from home allowances will no longer be tax deductible for U.S. W2 employees.

2.2 What should employers consider when offering remote working?

There are a few things that employers should consider before implementing a work from home allowance for their employees.

• First, they must decide who will be eligible for the work from home stipend and include this within the employee's contract.

• Second, they must decide whether the stipend will use the actual cost method to calculate each employee's requirement or if they will use a fixed rate model to determine the allowance.

• Third, they may encounter challenges with tracking expenses for various state lines.

• Finally, many countries have established work from home allowances for their citizens.

For example, Ireland allows citizens to receive €3.20 per day of work free of tax, while the United Kingdom permits £6 per week for a remote employee. Other nations that permit work from home allowances include Australia, Canada ($500), and the Netherlands (€2 per day).

With remote teams spanning multiple countries, understanding how companies globally are setting pay and structuring allowances right now is essential. SalaryIQ™ tracks millions of job postings across 35+ countries in real time to show you what competitors are actually offering remote workers today — so you can stay ahead of the market, not react to it.

3.0 What does a remote working allowance cover?

A remote working allowance will cover the employee for the cost of any expenses related to establishing and maintaining their home office. This can include the purchase of office hardware and furniture, software, and the payment of utility bills at the home office.

The specific expenses that will be covered by your company's work from home stipend will be detailed in their policy. These allowances could include funds for:

• Hardware and technology: Any technology that is necessary for the employee to complete their daily work. This could include monitors, laptops, computers, keyboards, mice, webcams, printers, and other technology necessary for the job and work from home environment.

• Ergonomic furniture: Any furniture that is purchased to ensure that the employee is able to maintain their health and comfort while working from home. This could be standing desks, chairs, and desks with built-in monitor arms.

• Utilities and connectivity: Any monthly bills related to the employee's work from home. This could include internet and mobile phone plans and the cost of heating or electricity to the home office.

• Software and subscriptions: Any software that is required for the employee to complete their job duties.

Any supplies that are necessary to maintain the home office and complete the employee's work. This could include notebooks, pens, markers, printer ink, and other office supplies.

3.1 Most common eligible expense categories

Most companies cover expenses that fall into the following categories.

Category	Examples
Technology	Laptops, monitors, phone for business phone calls
Furniture	Standing desk, ergonomic chair, office furniture
Connectivity	Home internet, mobile phone plans
Supplies	Office supplies, printer ink, notebooks
Utilities	Prorated electricity for business use

Reimbursements for these expenses will be requested from the employee in the form of receipts. In some companies, a flat allowance will be provided to each employee each month, regardless of expenses.

4.0 What is the average remote working allowance?

The average range for a work from home stipend is between $250 and $2,500. The median home office stipend is $720 per year. This increases to $1,000 for employees working for tech companies. The amount of money that is provided to each employee will depend on a few different factors.

• Industry: Tech and finance companies provide higher work from home allowances than retail and nonprofit organizations.

• Work model: Fully remote employees will receive a higher allowance than those working in a hybrid work model.

• Company size: The larger the company, the more specific expenses that will be reimbursed.

• Geography: Companies in high cost of living areas will provide more money for each remote employee.

4.1 Benchmarks by company size, industry, and work model

The following table demonstrates the average work from home stipend by company size and industry.

Segment	Average Annual Allowance
Small companies	$500 to $1,200
Midsize (100 to 1,000 employees)	$1,000 to $1,500
Large enterprises and tech	$1,500 to $3,000+
Monthly recurring stipend	$50 to $500/month (avg. $150)

These industry averages are a starting point — but what should YOUR organization offer? CompAnalyst® uses 800+ million HR-reported data points across 16,000+ job titles and 225 industries to benchmark your total compensation, including remote work allowances, against the market. Model different scenarios, build allowances into salary structures, and see exactly where you stand.

5.0 FAQs

Here are the frequent questions about remote work allowance:

5.1 Is a remote work allowance taxable for employees?

Stipends provided to employees for work from home are generally considered taxable income for the employee. The exception to this is if the stipend falls under an IRS accountable plan for reimbursing the employee for expenses. Additionally, allowances are exempt from income tax in a few countries.

5.2 Are employers legally required to offer a remote work allowance?

There is no federal law that mandates that a company must provide a work from home stipend to their employees. However, 11 states in the United States require that the employees are reimbursed for any work from home expenses if they are working remotely.

5.3 How do you track and manage remote work allowance spending?

Companies will use expense management software to track the expenses of the employees who receive a work from home allowance. The employees will be required to submit digital receipts as proof of their expenses to be reimbursed.