The Best Employer Tax-Break in Ireland!

The Small Benefit Scheme (SBS) is a statutory tax relief scheme offered by Irish Revenue that allows employers to provide a tax exempt benefit to Irish employees of up to €500 per year.

The Scheme allows you to give certain rewards to your employees that are NOT subject to Benefit-In-Kind (BIK) tax for the employee, or employer tax (Employer PRSI) for the company.

Small Benefit Scheme – 4 Key Rules

To provide tax-free rewards to employees under the Scheme, you must adhere to 4 basic rules:

1. Once per Year
The benefit can only be given once per year in a single award. As the tax year in Ireland is January 1st – December 31st, this means that if an employer makes an award to an employee in January, then the full year’s €500 BIK-relief is used up for that employee, even if the reward is less than the €500 threshold.

2. Non-Cash
The benefit must be in non-cash form that cannot be converted into cash. This means that it cannot be paid through payroll, or for example on any company expense credit card that could be used at an ATM to withdraw cash.

3. Below the €500 Threshold
The benefit cannot exceed the threshold, which is currently €500 per employee per year. The employer can award a lower amount than €500, or different amounts to different employees, but no employee can receive more than €500 in value.

4. No Salary Sacrifice
The benefit cannot be funded from a deduction in salary from the employee, so the company needs to be invoiced for the total benefit amount, and needs to pay for the total value of the rewards from the company’s own funds.

Tax Savings – Calculations

As long as the 4 Rules are met, then the employee is not liable for PAYE, PRSI and USC on value of award AND the employer is not liable for employer PRSI (currently 10.85%) on value of award.

The exact savings depends on both the amount awarded (remember, it can be UP TO €500 not necessarily €500!), and the marginal tax rate that the particular employee is on.

To give some concrete examples of the savings available, below are some calculations based on four different salary levels, comparing a €500 reward through the Small Benefit Scheme with €500 net payment through payroll.Small Benefit Scheme Tax Savings

Tax-Savings – By Company Size

The total tax savings that your company can benefit from depends on the total number of employees and how much of a tax-free reward you allocate to each employee. This table below gives potential total tax savings for different size companies-Small Benefit Scheme Tax Savings

Calculations based on –

  •  2019 Budget figures
  • Awarding full €500 per employee under the Small Benefit Scheme
  • Tax rate for single employee with normal allowances and tax credits

 

Small Benefit Scheme – Video FAQs

FAQsFrom working with hundreds of Irish companies over the past 10 years to provide tax-free rewards under the Small Benefit Scheme, here are the most common questions we get asked by the finance department-View FAQs Button

Extending the Scheme Year Round

It is possible for companies to extend the Scheme throughout the year in conjunction with a qualifying points system. This means that you can award points to your employees throughout the year, and allow them to cash-in their points at the end of the year up to maximum of €500 in non-cash rewards.

The advantage of course is that instead of a giving a one-off reward for retrospective performance, you can instead run an ongoing proactive incentive & reward programme throughout the year. This could be a Sales Incentive, Performance Improvement Programme, KPI Rewards, Safety-at-Work Programme, Wellness Programme, Referral Programme, Recognition Programme, Peer-2-Peer Programme – to name but a few.

As well as enjoying the same tax-free status, ongoing Small Benefit programmes can have the advantage of being more engaging and impactful than a single reward.

Allgo’s Reward Hub platform allows companies to run ongoing employee reward programmes, and is fully approved by Revenue for the Small Benefit Scheme. The typical ongoing programme works like this-

  1. Companies award points every month to their Irish staff using Allgo’s Reward Hub (normally for a defined set of criteria)
  2. Employees build up their points all year, but cannot spend their points until with 1st December or 1st January (depending on what suits the company best)
  3. Once the date for spending is reached, employees can log on the incentive website and redeem their points for retail gift cards or vouchers
  4. The programme either caps the value of the points earned by each employee at €500, or restricts their spending to €500, with the balance being paid through payroll, subject to the normal tax rate

Download Small Benefit Guide

Guide to the Small Benefit Scheme

Download the definitive guide to the €500 Small Benefit and we will also email you a copy.

 

 

 

 

 

 

 

 

This is the definitive guide to Irish Revenue’s €500 Small Benefit tax-free reward scheme for Irish employers and employees. The guide includes-

  • Small Benefit Scheme Rules
  • Tax Savings Calculations
  • Tax Records & Returns
  • Most Popular Rewards
  • Extending the Scheme Year Round
  • FAQs
  • Case Studies

More Questions? Contact Us!

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