When it comes to stipends and extra-duty compensation, adhering to some common best practices can reduce equity issues, streamline processes, save money, and avoid potential Fair Labor Standards Act (FLSA) violations.
Stipends are used to compensate for duties performed that aren’t related to an employee’s primary job, such as time spent before and after school and for days worked outside of their normal duty schedule. Extracurricular stipends are paid for coaching athletics, such as football, baseball, and basketball, and for directing performing arts, (e.g., band, orchestra, drama). Other common extracurricular stipends include cheerleading, drill team, club sponsors, and UIL coaches.
Stipend pay practices vary among school districts. While all pay at least some of their stipends in fixed amounts that don’t vary among employees performing the same duty, some pay additional days plus the stipend. The value of the days typically is set either at the employee’s daily rate or a standard daily rate. These additional days primarily are used to compensate for sports or extracurricular assignments that begin before the school year officially starts.
The practice of paying extra days can be problematic for several reasons:
- The number of extra days paid rarely reflects actual time performing the duty.
- Inequitable pay among staff performing the same duty often occurs, especially when the daily rate is based on years of teaching experience.
- The district’s pay becomes disconnected from the market.
The percentage of districts that pay extra days has steadily decreased over time due to these equity issues. Currently, most districts do not pay extra days and instead pay a single rate that accounts for the value of the duty and the time required for anyone doing the same assignment. Additional benefits of moving away from paying extra days include:
- More equitable approach based on work performed
- Easier to budget (fixed rates)
- Easier to compare to market
- More control over costs
A high percentage of districts pay teachers a stipend for having a master’s degree, regardless of the content area of the degree. While this practice is well-embedded in the fabric of public school compensation, the number of districts paying exclusively for teachers who have a master’s degree in the subject or content area in which they teach is increasing.
This shift is primarily the result of research that shows teachers who have completed graduate degrees are not significantly more effective than those with bachelor’s degrees. However, some studies have found that teachers with advanced degrees in their subject or content area have a greater impact on student growth, particularly in the areas of math and science.
Moving away from paying a stipend for a master’s degree in any area to paying one to just those who are teaching a subject that aligns with their master’s degree isn’t just more strategic, it could yield substantial cost savings over time through attrition.
Paying Stipends for Required Credentials or Job Duties
Some districts pay stipends for job-related functions or required credentials such as master’s degree for non-educator roles like counselors, diagnosticians, and principals. This practice is highly discouraged, particularly because these credentials or licenses are required to perform the job. If a district currently pays stipends for job-related functions, it is recommended they be incorporated into the employee’s base pay and the practice discontinued. Benefits of making the switch include:
- Improved pay communication for employee recruitment and retention
- More accurate pay to market comparison for district jobs
- Pay for district jobs better reflects market value
Paying Stipends to Nonexempt Employees
While paying stipends to nonexempt staff such as clerical, paraprofessional, and auxiliary employees may be unavoidable depending on the size of a particular district, it can be problematic as it increases the probability of FLSA violations.
Nonexempt employees are entitled to premium pay (overtime) or compensatory time paid at time-and-a-half for every hour worked beyond 40 in a seven-consecutive-day workweek. This includes all hours worked performing extracurricular activities. Under U.S. Department of Labor (DOL) regulations, districts are not allowed to pay a stipend instead of overtime. Guidance on how to correctly calculate overtime pay for nonexempt employees assigned extracurricular activities is available in The Administrators Guide to the Fair Labor Standards Act, published by TASB HR Services.
Additionally, any stipends paid to nonexempt staff for certifications, additional assignments, serving as “lead worker,” or other duties must be included in the regular rate of pay. It is much easier to comply with federal law if stipends are not paid to nonexempt employees, but if unavoidable, they should be paid on an hourly rate basis with all hours worked appropriately recorded on timesheets.
Additional information can be found in the HRX articles Dos and Don’ts: Stipends and Stipend Administration Guidance, as well as in our recorded webinars (Pricing it Right—Stipends and Extra Duty Pay and Calculating Overtime for Nonexempt Employees).
Luz Cadena has worked as a compensation consultant with HR Services since 2006. Prior to TASB, she worked for a Central Texas ISD for eight years in the positions of compensation analyst, compensation coordinator, and director of compensation.
Cadena earned an associate degree in business administration from New Mexico State University, holds a bachelor’s degree in business management from Concordia University in Austin, and is a certified compensation professional (CCP).
Keith McLemore joined HR Services in 2015 and assists districts with compensation planning and development. He has 17 years of experience traveling the state supporting public education employees.
McLemore received a bachelor’s degree from Southwestern University and a master’s degree from Texas Tech University, both with a focus on research analysis and design. He is a SHRM-CP.
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