Stipend Payments

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

Stipend Criteria

Trainee/Learner criteria:
1. The training, even though it includes actual operation of the employer’s facilities, is similar to training that would be given in a vocational school.
2. The training is for the benefit of the student.
3. The student does not displace regular employees, but works under the close observation of a regular employee.
4. The employer provides the training and derives no immediate advantage from the activities of the student.* Occasionally, the operations may actually be impeded by the training.
5. The student is not necessarily entitled to a job at the conclusion of the training period.
6. The employer and the student understand that the student is not entitled to wages for the time spent training.

* If the internship is more of a training/learning experience, as opposed to a job, it is typically acceptable if the employer derives some advantage from the student’s service. The internship 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 W2.
  • UW Student stipend payment information will be reported at year end on a 1098-T.
  • Non-UW Student Trainee/Learner stipend recipients will receive a Stipend Letter at the end of the year.
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