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Everything You Need to Know About the Small Benefit Exemption Scheme in Ireland (2025 Update)

~6min reading time –
Small Benefit Exemption Scheme

The Small Benefit Exemption Scheme is an initiative by the Government that lets businesses in Ireland reward their employees without triggering tax liabilities. Rewarding employees is important, but also expensive. With taxes like PAYE, PRSI, and USC, the actual value gets reduced heavily for both employers and employees.

That being said, studies after study show that rewarding employees boosts morale and increases productivity in an organisation. This means having a proper reward structure is not just a 'nice to have' anymore. It's essential for business.

Let's understand how the Small Benefit Exemption Scheme works in 2025, what counts as a small benefit, why it is important for employers and employees, and how companies can reward employees without being burdened by tax.

What Is The Small Benefit Exemption Scheme In Ireland?

Small Benefit Exemption Scheme is a revenue-approved scheme under which employers can provide their employees with up to 5 qualifying non-cash benefits whose cumulative value does not exceed €1,500.

Employers can also choose to provide a single benefit of €1,500 instead of 5 benefits. However, in both cases, the total value of this benefit cannot exceed €1,500. If they do, the entire amount is subject to tax.

What Qualifies As A Small Benefit?

To qualify as a small benefit, employers must meet the following criteria:

  • The benefit must be other than cash. This can include digital cards or vouchers.
  • It should not be part of a salary adjustment agreement. This means employees should not agree to forgo a part of their remuneration to receive the incentive.
  • The benefit must not be redeemable in part or in full in cash.
  • The benefit must be bought by an employer and not the employee

Why Is It Important For Employers And Employees In 2025?

When an employer gives an employee a gift or cash bonus that does not fall under the small benefit scheme, both the employer and employee have to pay taxes on it. For employees, these gifts are considered a part of their income and are subject to taxes like:

  • Pay as you earn (PAYE) income tax, which ranges from 20% - 40%
  • Universal Social Charge (USC,) which can be up to 8%
  • Employee PRSI (Pay Related Social Insurance), which comes to 4%

On the other hand, employers are required to pay PRSI on the bonus, which can go up to 11.05%. So when an employer gives a cash bonus, the employee would only receive a small percentage of it after tax, and it would cost the employer a lot more.

For instance, if an employer gives out a cash bonus of €1,500, it would cost them €3.453.12 after taxes. While under the small benefit exemption scheme, the employer will only have to pay €1,500 for the benefit provided and not additional taxes. 

What Can Employers Offer Under The Small Benefit Scheme In Ireland?

The small benefit scheme presents an opportunity to reward employees without it feeling like a burden to the employer and employee. Here are the following non-cash benefits through which employers in Ireland can say 'thank you' to their employees:

1. Digital Cards: Digital Cards are prepaid payment cards that can be used both online and in-store via mobile wallets like Google Pay and Apple Pay. CleverCards is one such provider, offering prepaid Mastercards that can be issued digitally and spent wherever Mastercard is accepted. These cards offer employees the flexibility to spend their reward as they wish, while remaining fully compliant with the scheme.

2. Gift Vouchers: Employers can issue gift vouchers that can be used at stores or online, like Amazon, IKEA. They can also issue specific vouchers like spa vouchers, dining vouchers, gym membership vouchers, etc. Unlike digital cards, gift vouchers are often valid only at store-specific merchants or specific types of purchases.

3. Tangible Gifts: Gifts like Jewellery, Watches, Bags, T-shirts, etc, can also be offered to appreciative employees, provided they fall within the exemption limit and cannot be redeemed for cash.

Revenue Reporting Requirements In 2025

The Small Benefit Scheme falls under Revenue's Enhanced Reporting Requirements. This means businesses have to report any non-taxable benefits issued to employees in real-time. They must report the following details:

  • Employee PPS Number
  • Date of the benefit
  • Type of the benefit
  • Monetary value

Budget Announcements: How Has This Scheme Evolved?

The small benefit exemption scheme was first introduced by the Irish Government in Budget 2004. The initial limit for this exemption was €100 and was introduced to waive off PRSI tax for employers who gave their employees luncheon vouchers.

This limit was subsequently increased to €1,000 in 2022 and then finally to €1,500 from 1st January 2025. This change and initiative are part of a broader effort to support rising inflation, increased cost of living, and increased focus on talent retention.

Final Thoughts

Use the small benefit scheme strategically, not just for tax-saving but also to appreciate your employees and build a culture of high performers. There's never a perfect time to say 'thank you' to your employees for the efforts they put in, and with a benefit like this, there is no excuse not to.

Want to learn how your business can give employees tax-free rewards? Fill out the form below, and our team will reach out to you.