How To Give Tax-Free Employee Bonuses in Ireland This Festive Season?

Businesses in Ireland can give staff a tax-free bonus of up to €1,500 under the Small Benefit Exemption Scheme. Digital Mastercards stand out as a non-cash gift this festive season.

Christmas is a time of giving and celebrations, and the last thing employees want to discover is that half of their much-awaited Christmas bonus was eaten up by taxes. A €1,000 cash bonus can easily shrink to just €500 after deducting taxes like PAYE, USC, PRSI, etc.

This is why more businesses in Ireland are embracing tax-free bonuses for employees. Under the Small Benefit Exemption Scheme, companies can reward staff with tax-free gifts, such as gift cards.

Moreover, the impact goes far beyond Christmas cheer. Research shows that 84% of employees say receiving a Christmas gift card from their employer increases their loyalty. Let's look at the best tax-free reward for employees in Ireland.

Understanding The Tax Treatment Of Employee Bonuses

Cash bonus in Ireland is treated as ordinary income, so it is added to the recipient's payroll and subject to standard PAYE calculations. This means the following taxes are levied:

1. Income Tax: The cash bonus can be taxed anywhere between 20% - 40% depending on the income band.

2. PRSI (Pay Related Social Insurance): For employees, PRSI can be around 4% and for employers, the PRSI is 11.05%.

3. USC (Universal Social Charge): USC applies to all income with a rate varying from 0.5% to 8% depending on different thresholds.

In summary, cash bonuses in Ireland are costly and ineffective for both employers and employees.

Give A Tax-Free Employee Bonus In Ireland This Christmas

Employers in Ireland can give each employee a tax-free bonus of up to €1,500 under the Small Benefit Exemption Scheme. To qualify for this exemption, employers need to comply with certain rules by Revenue, which include:

1. The benefit provided must be non-cash and not redeemable in part or in full in cash.

2. Employers can give employees up to five small non-cash benefits provided the cumulative value of those five benefits does not exceed €1,500. If the amount exceeds the exempted limit, only the first five benefits are considered tax-free.

3. The gift can be used to purchase goods or services only.

4. The tax-free bonus should not be part of a salary sacrifice agreement where the employee has agreed to forgo a part of their salary for the bonus.

Who Qualifies For The Small Benefit Exemption Scheme

All salaried individuals, including full-time employees, directors, or part-time contractors, are eligible to receive a non-cash benefit under this scheme.

What Gifts Count As A Small Benefit?

Under Revenue's Small Benefit Exemption Scheme, employers can provide a wide range of non-cash benefits to staff, provided they comply with the key condition, which is that the benefit cannot be converted into cash and must be used for goods or services.

Some popular non-cash benefits include:

1. Gift Cards & Vouchers

Two types of gift cards qualify as a non-cash benefit:

1. First is retailer-specific or closed-loop gift cards. These cards belong to a particular retailer or brand and can only be spent with them.

2. Second is a network-powered or open-loop card. These cards are powered by payment networks like Mastercard or Visa, meaning they can be spent anywhere these payment networks are accepted.

2. Experience-Based Vouchers

Experience-based vouchers include more specific niche gifts like:

• Spa vouchers
• Adventure vouchers
• Dining vouchers
• Theatre tickets
• Concert Tickets

3. Tangible Gifts

Tangible gifts are physical gifts like electronic items, mobile phones, device accessories, bags, t-shirts, watches, etc.

Creative Non-Cash Gift For Employees This Christmas

This festive season, businesses are thinking beyond traditional gift hampers. The goal is to embrace smarter, digital-first rewards. One of the most popular options is digital Mastercard gift cards.

Mastercard-powered gift cards are open-loop gift cards that can be spent anywhere Mastercard is accepted, whether in-store or online. CleverCards offer Irish businesses gift cards that are prepaid, powered by Mastercard, and can be instantly delivered online.

CleverCards further makes it easy for businesses to order Christmas gifts in bulk for their employees by simply uploading a CSV of their details. On top of that, employees can instantly activate and use their gift card by adding it to Google Pay or Apple Pay.

Why Choose Gift Cards Over Traditional Gifts This Festive Season

Traditional rewards like gift baskets on Christmas have long been the norm, but it's time employers look for gifts that feel more personal and are easily manageable, especially with distributed remote teams.

Here are some reasons why Irish employers are switching to digital gift cards:

1. Freedom: Employees can choose to spend their gift card anywhere they want. Whether it is at a movie date or on Christmas gifts for their family.

2. Tax-efficient: Digital gift cards are fully compliant with the Small Benefit Exemption Scheme and are tax-free up to €1,500 per employee per year.

3. No shipping expense: Since no physical gift delivery is involved, there are zero shipping hassles, including packaging and shipping costs.

4. Employee satisfaction: Employees value choice. 89% of employees agree a gift card allows them to shop for their perfect gift.

The Right Time To Order Tax-Free Christmas Bonuses

Employees eagerly wait for their Christmas gift. To make sure employees receive their rewards on time, businesses should plan gift cards ahead of December and also report to Revenue in real-time.

Make This Festive Season More Rewarding With CleverCards

Rewarding employees on Christmas should never feel like just another admin task. It should feel personal and meaningful to both the employer and employee. That's why CleverCards ensures every digital gift is delivered instantly by email and stands out with a personalised message.

After all, the goal isn’t just to hand out a Christmas bonus; it's to give employees the freedom, excitement, and joy of choice. By choosing a tax-free digital gift card this year, you’re not only maximising the value of your employee bonus but also creating a reward that truly resonates.

Make employee bonuses count this Christmas with CleverCards. Fill out the form below to learn more!