In order to make tax-free rewards to employees, the reward must adhere to these 4 basic rules:
1. Once per Year
The benefit can only be given once per year in a single award. As the tax year in ireland is January 1st - December 31st, this means that if an employer makes an award to an employee in January, then the full year’s €500 BIK-relief is used up for that employee even if the award is less than the €500 threshold of the scheme.
The benefit must be in non-cash form that cannot be converted into cash. Normally, this means that it is awarded in the form of gift cards or vouchers. However, it could also be awarded in the form of products, employer-provided goods or services, memberships of gyms or other lifestyle benefits.
3. Below the Threshold (€500)
The benefit cannot exceed the threshold, which is currently €500 per employee per year. The employer can award a lower amount than €500, or different amounts to different employees, but no employee can receive more than €500 in value.
4. No Salary Sacrifice
The benefit cannot be funded from salary sacrifice on behalf of the employee, so the employer needs to be invoiced for the total benefit amount, and needs to pay for the total value of the rewards from the company's own funds.
For more about the Small Benefit Scheme, download our definitive guide -