15 tax-free ways to reward your employees
There are plenty of perks you can provide staff without the taxman getting involved.
EMPLOYERS ARE ALWAYS looking for different and tax-efficient ways to reward employees and provide incentives.
After all, simple salary increases and bonuses attract income tax, PRSI and USC for the employee and employer’s PRSI.
However, there are many ways to reward staff without attracting extra taxes for either workers or your business.
Here are 15 tax-free ways to offer incentives:
- Once-off non-cash gifts or prizes, such as vouchers, up to the value of €500 per year
- Certain monthly or annual travel passes for bus, railway or ferry transport
- One medical check-up per year
- Professional subscriptions or membership fees, where clearly required to carry on the person’s work duties
- Course or exam fees where the study is relevant to the employer’s business
- Examination awards in certain circumstances
- Mobile phones provided for business use; incidental private use is also permitted
- Use of a company vehicle where any private use is secondary to the business use, or where the vehicle is not capable of being used privately
- Reasonable employer contributions to an employee social club, where membership is available to all employees
- Free periodicals and newspapers that are relevant to the employer’s business
- Certain long-service awards for employees with more than 20 years’ service
- Sports and recreational facilities provided to all staff on the employer’s premises
The remaining three we will explore in more detail.
Payments to e-Workers
These benefits are available when employees work for substantial periods outside the employer’s premises. Employees can either be working from home or on the road and will have to spend time making calls and/or logging on remotely to perform work duties.
The following costs associated with this type of work can be paid tax-free by an employer:
- Equipment provided to allow the employee to work from home and where any personal use is incidental to the business use. This equipment could include computers, printers, software, telephone or internet access, and office furniture
- A sum of up to €3.20 per day towards the employee’s light and heat expenses. This daily rate does not prevent the employee claiming additional vouched expenses for light and heat where the actual cost of the services exceeds €3.20 per day
- Costs of business calls on home or own mobile phones
This scheme does not have any impact on the employee claiming mortgage interest relief on their family home.
Cycle-to-work scheme
An employer can purchase a new bicycle and safety equipment on behalf of an employee up to the value of €1,000 tax free.
The bicycle and equipment must be mainly used for travel to and from work, or for other work-related journeys. Employer’s PRSI is also not payable for the cost of the bicycle or equipment.
Pensions
Employers are required to provide employees with access to, or time off to access, a pension scheme. Where an employee is a member of an occupational pension scheme, an employer can make contributions in respect of an employee without attracting a benefit in kind.
Therefore, the company can claim a deduction for the amount paid in respect of the contribution and there are no tax consequences for the employee and no employer PRSI is payable.
If an employee is not a member of an occupational pension scheme, employer contributions to an employee’s PRSA pension fund are not subject to income tax or PRSI if the amount paid is under permitted limits; however, USC will remain chargeable.
Paul Mee is a tax partner with Mazars Galway.
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