Stipend Payments Explanation

Understanding what is considered a stipend can be confusing. The information below is from the U.S. Department of Labor’s (DOL) guidelines for a Trainee. These guidelines state that if an internship/fellowship/stipend meets the six criteria listed below, the position can be categorized as a Trainee position and does not need to follow minimum wage regulations. If your internship/fellowship/stipend does not meet these criteria, an employment relationship exists and you must hire that person as an employee. 

The decision to pay a stipend is dependent upon the funding source, an individual’s relationship with the University and the activities performed.

Stipend/Fellowship Appointments and Compensation

Trainee criteria:
  1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
  2. The training is for the benefit of the trainees or students;
  3. The trainees of students do not displace regular employees, but work under close supervision;
  4. The employer that provides the training receives no immediate advantage from the activities of the trainees or students and, on occasion, his operations may even be impeded*;
  5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
  6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

* If the internship/fellowship/stipend is more of a training/learning experience, as opposed to a job, it is typically acceptable if the employer derives some advantage from the trainee/student’s service. The internship/fellowship/stipend must be predominantly for the benefit of the student and not the employer.

Tax Reporting

Stipend Payments are not considered wages and have no Federal Witholding Tax deducted from them (the only exception is for some Foreign Nationals). 

Stipend Payments are distributed with payroll wages, but are not reported as wages on a Form W-2. 

UW Student stipend payment information will be reported at year end on a 1098-T; review the Year End Tax Resources page for more details. 

Non-UW Student Trainee/Fellowship stipend recipients will receive a Stipend Letter at the end of the year.