A great way for small businesses to pay a bonus at Christmas is through the Small Benefit Exemption Scheme.
To pay an employee a bonus of €500 through payroll, it would cost an employer €1,078.15 (For an employee who is earning €37,500 to receive a final net bonus of €500, an employer would need to pay €970.87 gross, plus incur an additional cost of €107.28 based on 11.05% Employers PRSI.)
However, under the Small Benefit Exemption Scheme businesses can give employees, including directors, up to €500 once a year completely tax-free.
This bonus must be in the form of a voucher which can only be redeemed in exchange for goods and services i.e. it cannot be exchanged for cash.
It should be noted that for 2020 Revenue have relaxed the rules due to the COVID-19 pandemic meaning employees can receive more than 1 voucher under the scheme. The combined value of all vouchers must be €500 or less.
The most widely known method of availing of this scheme is through the One 4 All gift vouchers.
Date published 18 Dec 2019 | Last updated 10 Dec 2020This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.