Why are cash bonuses taxed in Ireland?

Cash bonuses are considered income under Irish tax law and are subject to Income Tax (PAYE), Universal Social Charge (USC), and Pay Related Social Insurance (PRSI) contributions, significantly reducing the net benefit employees receive

How do taxes affect the value of a €1,500 cash bonus?

A €1,500 cash bonus could cost an employer approximately €3,470.31 once taxes and contributions are applied, making it far less efficient than a tax-free, non-cash alternative

What is the Small Benefit Exemption Scheme?

The Small Benefit Exemption Scheme is a Revenue-approved tax relief that allows employers in Ireland to give employees non-cash benefits worth up to €1,500 per year completely tax-free. To qualify, the benefit must be strictly non-cash (e.g., a gift card or voucher) and must not exceed the set annual limit.

What types of rewards qualify under the Small Benefit Exemption

Non-cash rewards such as digital gift cards or prepaid cards qualify, provided they cannot be redeemed for cash and are given as genuine employee rewards or gifts

How many non-cash benefits can an employee receive annually?

Employees can receive up to five separate non-cash benefits per year, as long as the combined total does not exceed €1,500 under the Small Benefit Exemption.

What happens if the €1,500 limit is exceeded?

If the total value of non-cash rewards surpasses €1,500, the entire amount becomes taxable, not just the excess, and will be subject to PAYE, USC, and PRSI

Are digital gift cards eligible for the exemption?

Yes. Digital gift cards are fully eligible under the scheme as long as they are non-cash and cannot be converted into cash equivalents.

How do digital gift cards benefit employers?

Digital gift cards are cost-effective, compliant, and easy to distribute. They allow employers to reward teams instantly while saving on tax costs and administrative time

Can digital gift cards be used internationally?

Yes. Digital gift cards powered by Mastercard, such as those from CleverCards, can be used worldwide, both online and in-store wherever Mastercard is accepted

How can businesses implement digital gift cards for employee rewards?

Businesses can partner with providers like CleverCards to issue digital gift cards that comply with the Small Benefit Exemption Scheme. The setup is quick, fully digital, and allows instant distribution to employees

Why Tax-Free Employee Rewards Beat Cash Bonuses in Ireland?

~7min reading time – 22 September 2025

Cash bonuses are treated and taxed as income. Tax-free employee rewards offer a smarter alternative to employee rewards.

Handing out cash as a bonus will never go out of style. It is simple, familiar, and has been the go-to reward choice for decades, but times have changed. Teams today are hybrid and distributed. Businesses are under pressure to keep costs low, and every time a business hands out a cash bonus, Revenue takes a cut.

Cash bonuses are treated as income, which means both employers and employees end up paying taxes on what was meant to be a reward. This is why the need for tax-free employee rewards came into the picture.

Under the Small Benefit Exemption, employee benefit cards are completely tax-free up to €1,500, no PRSI, no USC, no income tax. Every euro spent goes directly to the employee, which makes them a far more rewarding and cost-efficient option for businesses.

How Are Cash Bonuses Taxed?

Before looking at tax-free employee reward options, let's first understand how cash bonuses are taxed in Ireland and what impact a tax-free reward makes. When you give employees cash bonuses, they are treated as regular income and are subject to:

Income Tax (PAYE) 20% or 40% depending on the income band
USC (Universal Social Charge) of up to 8%
PRSI (Pay Related Social Insurance) contributions of 4% by employee and 11.05% by employer

What this means is that a reward of €1,500 could easily cost an employer €3,470.31.

How To Reward Employees Tax-Free In Ireland?

Revenue wanted to offer a smarter alternative for businesses to encourage employee recognition, which led to Ireland's Small Benefit Exemption Scheme.

Under this scheme, employers can give each employee a 'non-cash' gift of up to €1,500 per year tax-free. The key requirements for businesses to qualify for this exemption are:

1. The benefit must be non-cash, which means it should not be redeemable in part or in full in cash. (e.g. a gift card)

2. The employer can offer employees up to five non-cash benefits in a year, the cumulative value of which must not exceed €1,500.

3. Employees can also offer a single benefit of €1,500 to employees. The limit must not be exceeded in one gift, or else the entire amount will be taxable.

Digital Gift Cards: The Perfect Non-Cash Reward Solution

If you are thinking of a non-cash benefit that qualifies under the Small Benefit Exemption Scheme and is cost-efficient, digital gift cards are the way to go.

Digital gift cards allow employees to enjoy the full value of their reward. These are preloaded cards that provide staff with the flexibility and open-loop cards, such as CleverCards Mastercards, allow them to spend them on things they actually like.

Moreover, Irish consumers are rapidly moving towards digital payments, a survey shows 63% of Irish consumers prefer cashless methods for offline shopping. For employers, this makes virtual gift cards a practical way to distribute rewards instantly and tax-free, since cards such as CleverCards can be instantly added to Apple and Google wallets on a smartphone for use anywhere.

Why Tax-Free Employee Rewards Beat Cash Bonuses In Ireland?

Non-cash rewards like digital gift cards can be as flexible as cash, and align much more closely with broader workplace trends. Here are some of the biggest reasons why non-cash rewards are a smarter choice than cash bonuses in Ireland:

1. Zero Admin Hassle: Unlike cash bonuses that require payroll processing and tax calculation, digital rewards are instant and easy to manage. This means almost no time is spent on admin effort, increasing overall efficiency in the organisation.

2. Feels More Personal: Cash is generic and does not feel personal. Non-cash rewards, especially something like a digital gift card, let employees pick their reward, making it feel more thoughtful.

3. More Memorable: Cash bonuses disappear into monthly expenses and are often forgotten. Non-cash rewards create a memorable experience, employees remember being recognised and feel valued.

4. Cost-Effective: Cash bonuses are taxed heavily, costing employers a lot more than what employees get. In case of a non-cash reward, if the employee spends €1,50, the employee can utilise the full value of €1,500.

CleverCards: The Smart Solution For Tax-Free Employee Rewards

CleverCards offer the perfect solution for businesses looking for non-cash rewards that are tax-compliant. With CleverCards' digital gift cards, employers can gift employees up to €1,500 tax-free annually.

Here are some features that make CleverCards stand out as a non-cash reward:

1. Instant Delivery: CleverCards can be issued and sent to employees instantly via email.

2. No Postal Costs: Unlike physical gift cards, there are no shipping fees, no delays, and no risk of lost or misplaced cards.

3. Wide Acceptance: These cards are powered by the Mastercard network and are accepted at over 50 million merchants worldwide.

4. Wallet Integration: Employees can add their CleverCards gift card to Google Pay or Apple Pay and pay online or in-store.

5. Easy Tracking: Employees can easily check their gift card balance on the CleverCards app.

Start Rewarding Smarter: Switch To Tax-Free Employee Rewards Today

Cash bonuses may feel familiar, but they are no longer the most effective way to reward employees in Ireland. With businesses adopting the hybrid model and Revenue providing tax-free reward choices, simpler rewards now exist.

By switching from taxable cash bonuses to tax-free employee rewards, businesses can stretch their budgets further while giving staff something they’ll genuinely appreciate.

This ensures employees receive the full value of their reward, making them feel more valued while saving the business money at the same time. It’s a small change that makes a big impact on engagement, retention, and overall workplace satisfaction.

Want to learn how CleverCards can help with tax-free rewards?

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