Employers may wish to show appreciation to their employees by awarding gifts or other tokens of appreciation in addition to salary increases or bonuses. However, care must be taken as to the nature and form of any gifts as they may result in a benefit-in-kind (BIK) resulting in the value of such gift been deemed part of the employee’s salary on which paye/prsi/usc must be deducted.One of the most common and tax-efficient gifts for employees are gift vouchers. Vouchers up to a maximum face value of €500 may be given to an employee without any tax or BIK implications. The voucher can only be for use in the acquiring of goods or services and cannot be redeemed for cash in full or part (if so, the voucher will be treated as a BIK). The voucher must not also be part of a salary sacrifice agreement.If the voucher has a value of greater than €500 then the full amount is deemed a BIK and liable to paye/prsi/usc.Only one such voucher may be given in any year. If any further vouchers are given, they will be subject to paye/prsi/usc as a BIK.Another common example of employers showing their appreciation for employees is by way of an award for long-service. Such awards may be made without BIK consequences if the following conditions are met.
The employee must have at least 20 service with the employer
The cost of the award to the employer must not exceed €50 per each year of service of the employee.
No similar award was made to the employee in the previous 5 years.
The gift must be of a tangible item and not made in the form of cash or vouchers.If any of the above conditions are not met, then the cost of the gift to the employer will be a BIK for the employee with the relevant paye/prsi/usc been applied.Written by: Brendan Halloran