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
Download the Small Benefit Guide 2018
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