Better alternatives to a gym stipend for employee wellness

Why gym stipends tend to reach people who already exercise

In the Illinois Workplace Wellness Study, employees who signed up for the wellness program had visited the campus gym more often before it began, and were more likely to have entered local running events, than those who did not. In its first year the program then had no effect on gym visits. Wellness offers tend to be taken up by the people who are already active.

A field experiment with 1,000 employees of a Fortune 500 company shows what that costs. Employees were paid $10 per visit, for up to three visits a week over four weeks, to use the company gym. Before the study, only about 60% of existing gym members used it at least once in an average week. The researchers estimated that about 35% of the incentive money paid for new exercise, while 65% paid employees for exercise they would have done anyway.

Paying for a membership is not the same as paying for exercise. A study of 7,752 members of three US health clubs found that people on monthly contracts costing over $70 went an average of 4.3 times a month. That is more than $17 a visit, when a 10-visit pass cost $10 a visit. On average they gave up about $600 in savings over their membership.

How a gym stipend is taxed

IRS Publication 15-B (2026) sets out the rules for fringe benefits. Any fringe benefit an employer provides is taxable and must be included in the recipient's pay unless the law specifically excludes it. A taxable benefit given to an employee is generally subject to employment taxes and reported on Form W-2.

The exclusion for gyms is narrow. An employer can exclude the value of an employee's use of an on-premises gym or other athletic facility that it operates, on premises it owns or leases, if substantially all use during the year is by employees, their spouses and their dependent children. It does not apply if the facility is open to the general public through the sale of memberships. A cash stipend, or a membership at a public gym, does not fit that exclusion.

Cash cannot be treated as a small, tax-free extra either. Publication 15-B says cash and cash equivalents, such as gift cards, are never excludable as a de minimis benefit, however small. That applies to wellness prizes too: a gift card for winning a challenge is taxable. This is general information, not tax advice, so check your own plans with your tax adviser.

Alternative 1: pay for visits, then offer a commitment option

If you want to keep a gym benefit, pay for use rather than membership. In the Fortune 500 experiment, the $10 per-visit incentive raised gym use strongly while it ran, but long-run effects were modest at best. Half the incentive group was then offered a self-funded commitment contract: employees put their own money on a pledge to keep using the gym for the next two months, and it went to charity if they did not. That group showed lasting change, with the share using the gym still around 20% to 25% above the control group a full year after the program began.

The trade-offs: you need a way to verify visits, which is easiest with an on-site gym. Only 12% of those offered a commitment contract took one up. And most of the incentive money still goes to people who would have exercised anyway.

Alternative 2: team challenges built on competition

The STEP UP trial, published in JAMA Internal Medicine in 2019, enrolled 602 adults with overweight or obesity, recruited from Deloitte employees. Three groups entered a 24-week game with points and levels for hitting step goals. Compared with a control group that only had a wearable, daily steps rose by 920 in the competition arm, 689 in the support arm and 637 in the collaboration arm. Only the competition arm stayed significantly ahead in the 12 weeks after the game ended, by 569 steps a day.

The trade-offs: everyone needs a way to track activity, competition beat the support and collaboration designs, and activity fell in every arm once the game stopped. Plan challenges as a continuing part of the year, not a one-off. Cash or gift card prizes are taxable pay.

Alternative 3: screening with structured follow-up for people at risk

A stipend cannot tell you who is at risk. A blood panel can, and it opens the way to targeted follow-up, which is where the strongest evidence sits. In the Diabetes Prevention Program, adults with raised blood glucose who followed a structured lifestyle program, aiming for at least 7% weight loss and 150 minutes of activity a week, cut their rate of new diabetes by 58% compared with placebo. RAND found that disease management for employees with chronic conditions returned $3.80 per dollar in one large employer's program, against $0.50 for lifestyle management.

The trade-offs: screening on its own is not enough. In the BJ's Wholesale Club trial, screenings plus 8 modules delivered by registered dietitians did not change 10 clinical markers, including cholesterol and blood pressure, after 18 months, and employees completed an average of 1.3 modules. The follow-up has to be personal and sustained, which costs more per participant than a stipend. Health information also brings privacy duties that a gym benefit does not.

Alternative 4: an on-site gym or low-cost changes

Employers with space can run an on-site gym, the one gym benefit with its own tax exclusion. It still relies on people choosing to use it, so track use from the start. For smaller budgets, RAND notes that measures such as healthier food choices and campaigns to use the stairs cost little compared with screening every employee and offering one-to-one coaching.

Choosing between them

• To reach people at health risk: screening with structured, personal follow-up.
• To get more of the team moving: a competitive team challenge that keeps running through the year.
• To keep a gym benefit: pay per verified visit, add a commitment option, and consider an on-site facility for its tax treatment.
• On a tight budget: low-cost changes such as healthier food choices and stair campaigns. They are cheap, but the studies above do not measure their effect.
• Whatever you choose, decide what you will measure before you start, and check the tax treatment with your adviser.