From working with hundreds of Irish companies over the past 10 years to provide tax-free rewards under the Small Benefit Scheme, here are the most common questions we get asked by the finance department-
Q1: Can we use the Small Benefit Scheme to pay Bonuses?
A: Yes up to the €500 threshold as long as the bonus is not guaranteed and seen as part of the employee’s normal salary. Many employers use the scheme to pay the first €500 of any yearly bonus tax-free.
Q2: How much do Irish companies award on average through the Scheme?
A: While many companies do award the maximum of €500 per employee under the Scheme, the average spend per employee is actually just over €300 (€308 to be precise!).
Q3: What are the best reward options for Small Benefit Scheme?
A: The most popular rewards on the Scheme are multi-retailer gift cards (like One4All, Me2You and AllGifts Vouchers), Supermarket gift cards (like Dunnes or Tesco), or open-loop Mastercard gift cards (like the Allgo Rewards Mastercard that can be spent in any shop or business that accepts Mastercard – even online and abroad). Employees naturally favour the open-loop cards, which offer the maximum redemption choice, though some companies opt for supermarket cards because of the volume discounts they offer.
Q4: Do part-time employees qualify for the full €500 relief on the Small Benefit Scheme??
A: Yes they do. No distinction is made by Revenue between full and part-time employees. As long as the person is an employee of the company, they can avail of the full €500 threshold regardless of the number of hours they work..
"You can extend the scheme throughout the year with a qualifying points system, such as Allgo Points."
Q5: Can self-employed workers and contractors avail of the Small Benefit Scheme?
A: Yes, as long as they are paying income tax, PRSI and USC. As there is no employer PRSI for self-employed workers, the overall tax-saving may be 10.85% less than for employed workers.
Q6: What happens if I want to give employee rewards twice a year?
A: Only the 1st reward will qualify for the Small Benefit Scheme. For example, you award a voucher of €250 in January to an employee, and then another €250 to the same employee in July. The 1st €250 voucher is tax-free, however full BIK and employer PRSI must be paid on the 2nd voucher. Normally, the employer would pay the BIK on this by grossing up the €250 benefit in the employee’s payslip in July, and thereby paying the relevant withholding taxes for the employee’s €250 voucher.
Q7: Is there any way to get the benefit of the Scheme year round?
A: Yes! You can extend the scheme throughout the year in conjunction with a qualifying points system, such as the Allgo Reward Hub. With this Revenue-approved tool, you can award points to your employees throughout the year, and allow them to cash-in their points at the end of the year up to maximum of €500 in non-cash rewards.
Q8: If not fully used up, can the €500 tax-free amount be carried over to next year?
A: No. On January 1st each year, the €500 is reset for every employee, regardless of how much or how little they were awarded through the scheme in the previous year.
Q9: Can the Small Benefit Scheme be used for Industrial Relations?
A: Not only can it, but more and more we are seeing labour agreements incorporating a mandatory tax-free payment to workers through the Scheme.
Q10: As an employer, do I need to make a return to Revenue for the Small Benefit Scheme?
A: No. If audited, it is sufficient to show than the total cost of the Small Benefit Scheme is the same or less than the no. of employees at the time divided by €500. More detailed records can obviously be kept if desired.
For more information and frequently asked questions, click here
If you would like to talk to Allgo about tax-free gift cards, vouchers and rewards for your staff, don't hesitate to contact us today.
Download the Small Benefit Guide 2018
In the latest publication from Allgo, we provide the definitive guide to the Irish Revenue's tax-free reward scheme for Irish employers and employees. Download it for free today by clicking the Download Now button below.