Many business owners will be surprised to find that even in the middle of a once-in-a-century pandemic, it’s possible to find ways to reduce costs and cheer up your workforce at the same time. And there’s never a better time to think about improving business morale than coming to the end of a difficult year. Employers and employees have undergone a revolution in working life in 2020, from dealing with a pandemic and the resulting migration from working in an office to working from home. For many companies, this has been a demanding learning experience that depended on the team effort of the company and its employees.
For employers looking to boost employee morale and improve productivity there are several small ways to offer employees a tax-free benefit without you or your employees suffering a tax liability.
The Small Benefit Exemption
You can give employees a small benefit of up to €500 in value, tax free, each year. This benefit must not be in cash. The most common form of benefit is a voucher, although benefits such as gym fees may also be included, provided they cannot be redeemed for cash.
Previously employers could only give employees one tax-free voucher per year. As a concession in 2020, employers of frontline and essential workers (who would include employees in the financial, legal, scientific and technical sectors) where the employees continued to work during the pandemic, could give employees multiple tax-free vouchers during 2020, provided the cumulative value of the vouchers given does not exceed €500.
Be aware however, the small benefit exemption cannot be used as a substitute for an employee’s pay i.e. a salary sacrifice. If you need more details on what constitutes a salary sacrifice, feel free to contact any member of our tax team.
Working from Home Benefit
Where employees are asked by their employer to work from home, the employer can make a tax-free payment of €3.20 per day to the employee to offset the costs of working from home.
Alternatively, the employee can make a claim to Revenue for tax relief on a portion of the costs incurred by them during the period that they worked from home. Current Revenue guidelines specify that the average proportion of expenses attributable to a home office is 10% of the allowable utility bills.
Bike to Work
Eco-conscious employers and employees can participate in the tax-free Bike-To-Work scheme. The purchase of a bike and the accompanying safety equipment by the employer for the employee is not a taxable benefit.
There are limits on the costs of the bicycle purchased. For e-bike or pedelecs, the limit is €1,500. For other bikes and related equipment, the limit is €1,250. This was increased from the previous limit of €1,000 in August 2020.
The purchase of the bicycle can be arranged as a tax-free benefit or as part of a salary sacrifice scheme over an agreed time, which cannot be more than 12 months.
For more information on these and other tax-breaks for SMEs and their employees, contact any member of the tax team at McAvoy & Associates.