Are Gift Cards Taxable Employee Benefits?

Every year, employers in Ireland overspend while rewarding employees with cash bonuses. Not because they feel generous, but because they have to pay additional taxes on it. A €1,000 cash bonus can cost the employer €2,313.54 (After including taxes like PAYE, USC, and employer PRSI).

This inefficient system needed a better solution. That's where tax-free gift cards come in. Under Ireland's Small Benefit Exemption Scheme, employers can reward up to 5 non-cash benefits of €1,500 to each employee every year. This means, employers can reward employees €1,500 without incurring any tax liabilities.

This solution was needed now more than ever. Employee recognition is one of the major factors driving productivity and keeping employees for longer in an organisation. A recent survey discovered that over 71% of employees would be less likely to leave their organisation if they were recognised more frequently.

What Are Tax-Free Gift Cards?

As per the Small Benefit Exemption Scheme, any non-cash benefit that cannot be redeemed in cash in part or full is considered tax-free as long as certain conditions are met. To qualify as tax-free, the benefit must:

• Be a non-cash reward, such as cards and vouchers
• Not be part of a salary adjustment agreement
• Not exceeding €1,500 in cumulative value
• Be limited to a maximum of 5 benefits per year
• It is purchased by the employer, not the employee

While gift cards qualify as tax-free, not all cards qualify. If a gift card can be used to withdraw cash from an ATM or be converted fully or partially into cash, it is considered a tax-equivalent benefit and becomes fully taxable.

Digital Gift Cards Vs Physical Gift Cards: What's Better For Today's Workplace?

While both digital and physical gift cards qualify as tax-free rewards, they differ in how employers and employees experience them. Before you zero in on which form of reward is the best for your organisation, let us first weigh down the pros and cons between the two:

1. Distribution: Physical gift cards often take weeks to deliver. Moreover, distributing them across teams and departments places a huge burden on HR and Admin. In contrast, digital gift cards can be procured and sent to employees instantly over email. Allowing for:

• Custom messaging for each employee
• Usage instructions to be embedded in the email
• Instant delivery regardless of location

This immediacy ensures that rewards are received on time, and the recognition feels more personalized and rewarding.

2. Accessibility: As Ireland embraces remote work, the need for structures that do not rely on employees' physical presence has become increasingly important. A recent study stated that over 45% of workers are hybrid, while 15% are fully remote.

Physical cards often place limitations on being used in brick-and-mortar stores at selected locations. Digital cards, on the other hand, can be linked to your Google Pay or Apple Pay and can be used to pay anywhere online or in-store.

3. Scalability: What works for a team of 5 may become increasingly complex for a team of 50. Manual processes such as distributing gift cards, recording employee details, and following up on the usage create inefficiency within the organisation.

Digital cards streamline the process of managing rewards for a larger organisation. With virtual cards, employers can bulk distribute cards online, manage employee details, and track usage from a centralised dashboard or app.

4. Environmental Impact: Using digital cards not only has a positive impact on the organisation but also on the environment. Plastic cards contribute to unnecessary waste, especially when distributed across enterprises. Digital cards, on the other hand, eliminate the need for physical materials, eliminating the carbon footprint.

Digital cards are a solution that is future-ready and goes hand-in-hand with the ambition of over 47% of Irish businesses that plan on going fully cashless. It is a simple solution that is not only tax-free but will reduce overhead and enhance employee experience.

How To Sign Up For Tax-free Gift Cards For Your Business?

Finding a tax-free gift card is simple. CleverCards offer Digital Employee Benefit Mastercards that can be issued to employees instantly online via email.

CleverCards can be added to Google Pay or Apple Pay to pay online or in-store using contactless, to pay over 50 million merchants worldwide. Employees will always know their available balance as they can track their card balance through the CleverCards app. While employers can track issuance and activation through their own CleverCards business portal.

Gift Cards: A Clever Way To Recognise & Retain Employees

Employee recognition and retention have a direct correlation. In today's competitive job market, the smarter move isn't replacing employees but retaining them.

Digital gift cards offer a modern, tax-compliant method to recognise employees that feels meaningful. It helps foster a culture where people feel appreciated and want to stay longer.

Ready to switch to tax-free gift cards for your business? Fill out the form below, and our team will reach out to you.