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The Irish Biz Guide to the Small Benefit Exemption Scheme

~5min reading time
Board with the following text written: An Irish Employers Guide to the Small Benefit Exemption Scheme

The Small Benefit Exemption scheme now makes it easier than ever for Irish employers and HR managers to reward employees tax-free. But what exactly is it and how does it affect businesses?

Following the September 2022 budget updates, Irish businesses can now distribute two tax-free benefits (vouchers or gift cards) to employees each year. To qualify for the tax-free allowance, the benefits should not be in the form of cash, and the combined worth can’t exceed €1,000. Prior to the update, businesses were restricted to distributing only one non-cash bonus worth €500.

It’s important to remember that if more than two benefits are given in a year, only the first two may qualify for tax-free status and any unused allowance can’t be carried over to the next year. The vouchers or benefits can only be used for the purchase of goods or services and not exchanged for cash, and they can’t be part of a salary sacrifice arrangement.

As the payment must be in a non-cash form, the most common way businesses avail of the scheme is by purchasing tax-free digital prepaid gift cards to reward and incentivise employees.

Why is the Small Benefit Exemption Scheme Important for Irish Businesses?

Employee engagement is a key driver of motivation, commitment and productivity in the workplace. However, an alarming 63% of employees feel disengaged from their workplace, according to findings from a new Robert Walters poll.

Furthermore, Gallup research shows disengaged workers are costing the global economy $7.8 trillion and the global average of worker engagement currently stands at 20%.

One of the best ways for leaders and HR managers to tackle this issue is to implement initiatives such as tax-free employee gifting and rewards. And with Christmas on the horizon and the recent updates to the Small Benefit Exemption regulations, there is no better time to start than now.

How Much Can Employers and Employees Save?

Who would have thought that both employers and employees could benefit from the Small Benefit Exemption scheme!

As well as being tax-free for employees, employers are not charged the 10.75% PRSI that is normally liable on bonuses. Here is an example of how much savings a business can expect:

If you were to put a bonus of €1,000 through payroll for an employee who’s on the higher tax band and pays PRSI and tax, it would cost €2,313.54. By using the exemption, you can make potential savings of up to €1,313.54 per employee compared to putting it through payroll and employees will receive the full value of the bonus as long as it ticks all the boxes.

What Kind of Employee Benefits Are Eligible?

All cashless vouchers, rewards or gift cards that don't exceed €1,000 are eligible for the Small Benefit Exemption in Ireland.

A perfect example is CleverCards digital gift cards which are perfect for special occasions such as Christmas, birthdays, and work anniversaries. Additionally, they can be used as incentives to motivate employees to achieve specific goals, promote team building, and show your employees that you appreciate their hard work.

How Does CleverCards Tax-Free Employee Gifting Work?

CleverCards are digital prepaid Mastercards that enable businesses to distribute employee tax-free rewards and gifts in a hassle-free, efficient way. The digital cards can be ordered online in bulk and distributed to any number of employees instantly via email or Whatsapp.

Employees can then add their CleverCard to Apple or Google Pay and use their phone to make purchases. Most importantly, CleverCards allows employees to spend rewards and gifts wherever they want with no restrictions. So, say goodbye to frustrated staff who are tired of being told where to spend their rewards!

Just some ideas of where your employees can spend their tax-free CleverCards:

  • Online or in-store shopping (zero restrictions)
  • Holidays and weekend breaks away
  • Gyms, spas and health centres
  • Entertainment venues, concert tickets and sports events
  • Last-minute Christmas shopping for family and friends!

Why You Should Switch to CleverCards

According to Deloitte, companies with employee reward/gifting initiatives perform 14% better than those without, and recommends it should be 4th in a CEO’s list of priorities.

The Small Benefit Exemption scheme presents a unique opportunity for Irish businesses to boost productivity and employee engagement and best of all, it allows for tax-free savings for both employers and employees.

By thanking and rewarding your staff with initiatives like CleverCards, businesses will quickly be able to develop a workplace culture of appreciation and recognition, as well as enhance employee motivation and satisfaction.

Download our FREE guide for more on the Small Benefit Exemption

Give the gift of tax-free CleverCards to your team this Christmas. For more information, get in touch with our team filling out this enquiry form: