If you give gifts or perks with a monetary value to your employees, they must be treated as taxable income. That’s because Revenue treats them as a benefit-in-kind, or BIK. However, there is a way to give each employee up to €1,500 per year without incurring any additional taxes. No income tax, no PRSI (employer or employee), and no USC!
The Small Benefit Exemption Scheme in Ireland
This scheme for rewarding employees is called the Small Benefit Exemption. Not long ago the limit was just €500, but after a few changes it is now (from 1st January 2025) an impressive €1,500 per year per employee (whether full-time OR part-time). In Budget 2025, the government announced changes that raised the limit and also allow for the possibility of splitting the amount into up to five gifts in any year.
What makes this scheme so interesting? Well, imagine you wanted to give a bonus to an employee at the end of the year. If you added €1,500 to their December salary, you may, depending on their tax bracket, have to match that amount with hundreds of euros in payroll taxes. Suddenly, your generous gesture is costing you considerably more than you thought! With the small benefit exemption, a gift of €1,500 costs you €1,500 and no more.
Here’s everything you need to know to stay within the conditions.
Vouchers, gifts, and cards are tax-free, but not cash
You cannot give cash to your employees! To count as a Small Benefit Exemption, the gift must be in a non-cash form. If you give your employees cash, this will have to be taxed. Store gift cards and the multi-retailer vouchers One4All, Allgifts, and Me2You are popular ways to give this small benefit. The downside with these vouchers is that they can only be spent in the shops or outlets that accept them, which is why I explore other options below.
Any employee is eligible for a small benefit
You can give this benefit to any employee of the company, including directors and shareholders, as long as they are on the payroll. Part-time employees qualify too. It’s very important not to use the benefit as part of a salary sacrifice arrangement. And, of course, there is no obligation to give a benefit to all employees. You can choose to reward only to a select group, and you can give different amounts to different employees. It’s an entirely voluntary scheme and how you do this is up to you.
You can give five benefits in any year
How much you decide to give is your choice, but the absolute maximum is €1,500 for any employee. If you give more than €1,500, the entire amount will be subject to PAYE, USC, and PRSI. You can give a benefit up to five times in the year (previously, it could only be given twice). So you could give this sum in one go or split it into phased payments across the year. You can also give a different amount each time. Just be mindful of the total annual value.
You can give this benefit at any time
The end of the year is when we think of giving our employees bonuses, and with Christmas falling in December it is quite common for employers to make this the moment to give small gifts as well. But you can give this benefit to employees at any point in the year should you wish, there is no specific date you have to stick to. In fact, it could be better for your cash flow to spread the cost across the year, or you might consider when this boost would be most appreciated by an employee (like before a big life event or the school holidays).
It’s straightforward and a win-win for both sides
What I like about this exemption is its simplicity. It’s open to any employer and completely voluntary. You could offer the benefit one year and not the next if that’s what you wanted to do. The only bit of ‘paperwork’ involved is that you must notify the payments to Revenue as part of the new Enhanced Reporting Requirements (ERR) brought in last year. Hopefully, your payroll software has a fast and easy way to log such payments and will automatically submit them when you file.
This is a nice way to incentivise and personally reward an employee. They get a little something extra, and you haven’t had to pay any payroll taxes on the amount given. Just be aware that if you ever get audited, your accounts will need to show that the total amount invoiced using the exemption does not exceed the number of employees multiplied by €1,500.
Vouchers and gift cards for employees in Ireland
I mentioned above that store cards and the vouchers like One4All are popular options. But you could opt to buy a gym membership, spa treatments, or concert tickets instead. And, thanks to the fintech revolution, there are now various alternatives to store gift cards in the form of prepaid cards that can be spent in any shop or business that accepts Mastercard (a few options are listed below). Just make sure, if you opt for a prepaid payment card, that it’s not a type that allows for ATM withdrawals, as this means the benefit could be converted into cash and therefore wouldn’t qualify for the exemption.
Swirl card
Swirl’s gift card can also be accepted worldwide at any outlet that accepts Mastercard – online or offline – and is fully compliant with the small benefit exemption.
Perx card
The Perx Reward prepaid card will allow people to spend online or offline wherever Mastercard is accepted – so it can be used worldwide. Like other similar cards, users can create an online account to check their balance.
Allgo card
This option allows you to award points to your employees throughout the year, and then you can reward those points with the appropriate benefit amount at the end of the year. This is a nice option if you are linking the benefit to their day-to-day performance.
