Incentivising your staff is key when you want to retain your top talent. But how can you achieve that without incurring tax?
HMRC is not overly generous when it comes to enabling you to reward your staff. Anything involving hard cash or vouchers will attract income tax and so deplete the value to the employee.
However, there are a few concessions which HMRC makes to enable you to show your generosity and say thank you for outstanding service, reward long service or just wish them a happy Christmas!
Long service: if an employee has been with you for at least 20 years you can present them with a gift but the value of that gift mustn’t exceed £50 for each year of service. So, if you’re celebrating a 20th anniversary you can present a gift to the value of £1,000.
Suggestion scheme: as long as the scheme is ‘organised’ rather than simply a case of bouncing a few ideas around in the pub after work it can net staff tax free rewards up to a maximum of £5,000. The actual figure should be based on a set percentage of the expected financial benefit of the suggestion to your business.
Encouragement awards: merit based rewards are included in the concessions. A cash payment is allowed but only up to £25.
Annual staff party: staff can party tax free – whether it be at a Christmas celebration, summer barbecue or awards night. Be aware though that the total cost of such get togethers can’t exceed £150 a year per person.
Promotional gifts: each member of staff is entitled to receive promotional gifts which your business might usually use to advertise a corporate message up to the value of £50 a year.
Celebratory presents: in the strictest sense, all extras which employees receive, over and above their salaries and expenses, are subject to tax. However, HMRC does differentiate between gifts and benefits. Gifts might include flowers on the birth of a child, a bottle of wine to mark a birthday or a Christmas gift.
Not surprisingly none of these are going to make your staff rich, but they may just help give you the edge over your competitors and demonstrate your commitment and appreciation of your staff. Those little extras throughout the year can help with the ‘feel good factor’ in a workplace and are the kind of things staff mention to others who may be prospective employees of yours.
And the good thing is – HMRC can’t tax any of that!