The Small Benefit Exemption Scheme was increased in last year’s budget from €250 to €500. This means that employers can reward each employee in 2016 up to €500 completely tax-free.
Here are three key things to bear in mind:
1. The Bonus Must Be Paid in Non-Cash Form
To avail of the tax benefit of the Small Benefit Scheme, the benefit must be given in non-cash form. Employers can elect to give shopping vouchers or multi-retailer gift cards like One4All. Open-loop gift cards such as the Allgo Rewards MasterCard, which can be used anywhere, are becoming increasingly popular. You can also give physical gifts (if you really want the hassle!)
2. Only One Reward per Year is Tax-Free
Only one such benefit can be given to an employee in any one tax year, even if you do not utilize the full €500 allowance. For example, you cannot award €300 earlier in the year and then a further €200 later in the year. However, you can use the Small Benefits Scheme for year round points programmes with the restriction that employees can only spend the points at year end.
3. It Benefits Both The Employer and The Employee
The Small Benefit Scheme allows both the employer and the employee to save tax. The employer saves Employer PRSI at 10.75% of the reward (compared to paying it through payroll), and the employee saves 100% of the PAYE and USC that would normally be deducted at source. The combined tax saving is potentially as high as €653.65!
For more information on Allgo’s tax-free products, please click here