Should You Really Pay for Your Employee to Sit on a Beach in the Caribbean?

What are vacation stipends?

A vacation stipend is a new type of perk a few businesses currently offer. This incentive is different from a company paying for an employee’s travel expenses while they are on a business trip. A vacation stipend is given to employees for personal use so they may travel at their leisure and to whatever destination they choose, not as a company obligation. 

With a vacation stipend, an employee can travel whenever they want, whether it’s to a national park across the country or an exciting new destination in a different part of the world. Wherever the employee chooses to venture, the company pays for their travel expenses, in part or in full, with the stipend. 

>> Learn More: Don’t Step Foot on a Plane for a Business Without Knowing This

What do vacation stipends cover? 

Some companies, such as Airbnb, BambooHR, Expedia and Evernote, choose to provide employees with an annual flat-rate vacation stipend — typically ranging from $1,000 to $2,000 — which can be put toward travel expenses such as airplane tickets, hotels, rental cars, passport fees, an international data plan, leisure activities, a dining allowance and more. Other companies offer a scaled stipend for employees after each year of employment, which provides motivation to those dedicated to the company long-term.

Companies have complete autonomy to establish the terms and conditions surrounding these stipends because there are no mandatory federal or state regulations on vacation stipends. Employers can choose how to award the perk, usually by reimbursing employees who submit receipts or by providing the stipend annually in employees’ salaries. However, certain tax implications come with a vacation stipend that companies should talk through with a tax professional or accountant prior to offering this perk.

During a time when employees are more aware of employer mistreatment and are looking to work in a place that aligns with their values and lifestyle, offering perks that directly impact an employee’s well-being and improving their personal life is a major selling point for companies trying to recruit new talent. An employee-offered vacation stipend demonstrates that an employer cares for its staff and can help improve employees’ mental and physical health, boost company morale, promote culture, and increase productivity, among many other benefits. 

What are the pros and cons of offering employees vacation stipends? 

If you’re thinking of offering vacation stipends to employees, below are some points your business should consider.

Pros of offering vacation stipends

• Performance-based vacation stipends boost productivity. Many companies that offer vacation stipends have stipulations requiring employees to have good work performance records to receive the bonus. By motivating employees with a major benefit driven by one’s performance, they are more likely to work harder to earn the reward.
• Unique employee perks boost company reputation. Offering employees a perk that other companies don’t demonstrates to employees that you prioritize and value them and their well-being. Employees will be more engaged with the company and become brand ambassadors. They might share their positive experiences with others and provide referrals — improving your company’s reputation and making it easier to recruit high-quality candidates. 
• Employee travel benefits promote health and productivity. When employees get the chance to travel, it encourages them to be active and healthy, relieves stress, and helps them feel better both mentally and physically. This can reduce the amount of healthcare benefits employees use and can result in fewer sick days taken. 
• It’s a key recruitment tool. Not only is a vacation stipend a great way to stand out from the competition, but it can also be a big draw for attracting top-quality talent and can help to retain employees. This is especially true at a time when companies are dealing with staffing shortages and other operational issues. 
• Travel boosts morale and job satisfaction. Traveling increases job satisfaction and morale by giving employees the chance to disconnect from their jobs and avoid burnout from too much work. 
• Travel stipends encourage PTO usage. Without vacation stipends, many employees choose not to use their vacation days and instead bank those hours with the hope of being paid out upon departure from their company. However, a travel stipend encourages employees to use their PTO to travel.
• Vacation stipends showcase innovative company culture. One way to change people’s perception of your company and demonstrate you care about employee well-being is to offer a vacation stipend. Because this is a newer benefit companies are beginning to roll out, offering such an incentive can help your business appear innovative and ahead of the curve. 

Cons of offering vacation stipends

• Managing travel stipends requires resources and planning. While a travel stipend can be costly in itself to a business, it can also be expensive due to the amount of resources it takes. No matter how the company implements the vacation stipend, at least one person on the team — though most likely an HR department — will need to be in charge of managing the perk and any issues that arise because of it, which means they’ll have less time to dedicate to other matters. [Read related: The Best HR Outsourcing Services of 2023]
• Travel perks can attract the wrong candidates. Travel reimbursement benefits are a selling point for an employer. However, look out for potential candidates who are less interested in the position and more interested in the perks being offered. If a business isn’t careful, offering a vacation stipend can lead to misaligned priorities among employees and upper management, which can negatively impact employees and the company culture. 
• Companies must balance benefits and coverage. With a vacation stipend, companies encourage their employees to take time off as they desire — within their PTO limits. While there are many known benefits to employees taking a break from work, encouraging vacations also means key employees may be out of the office at crucial times. Depending on the structure of the stipend, offering an allowance for each employee to use at their leisure could result in your business being short-staffed on occasion, especially if parameters and limits for how and when the stipend can be used aren’t set beforehand.