With the Christmas holiday being almost upon us, we here at Simon Shirley Advisors thought that it would be a good time to discuss a serious topic: corporate gift giving. Many offices in the UK and other countries around the world take time to organize events such as Secret Santa gifting, office parties, and corporate bonuses near the end of the year.
What many employees might not realise is that many non-monetary gifts that they may receive from their employers are taxable as “benefits in kind,” where they are expected to pay tax for the monetary value of the gift, or “benefit,” that they received. In a way, this is similar to the manner in which employees are expected to pay PRSI and PAYE for benefits in kind when they receive health insurance cover from their employer (albeit on what is typically a much smaller scale).
HR managers can prevent misunderstandings by ensuring that employees know that any corporate gifts they may receive this holiday season may end up being added employee benefits to their taxes. With this in mind, here are a few ideas for making sure that your employees know about the Benefits in Kind rules regarding their corporate gifts.
Method for Raising Awareness #1: Email
In today’s connected world, the simplest, and often fastest, way to communicate with a large group of people is to send a mass email. Here, you can send out a notice explaining the rules for benefits in kind briefly so that all employees can be brought up to speed regarding these rules.
However, while this method will be highly effective for most employees, there are always a few who may slip through the cracks. In any organisation of a significant scale, there will be that small number of employees who don’t get the email because of technical issues or who regularly ignore corporate communications.
For these individuals, you may need to use an alternative method of communicating their BIK liabilities.
Method for Raising Awareness #2: Departmental/Team Meetings
Instead of using an automated communication, you can have team managers arrange a quick meeting to discuss the issue of BIK corporate gift tax liabilities with employees in person. This gives employees the chance to hear about how corporate gifts will influence their PRSI and PAYE costs from their direct reports.
Here, employees will have an opportunity to ask questions that they may have about PRSI and PAYE. When preparing management staff for these meetings, try to provide them with as much information and resources as are reasonable so that they are ready to answer basic questions.
At the very least, this should give your front-line employees the basic idea of how benefits in kind “earnings” will affect their tax liabilities.
Method for Raising Awareness #3: Regular Mail/Brochures
For those employees who work offsite much of the time, organising a meeting with their whole department or even their core team might not be practical. When this is the case, using standard post to send employees a physical brochure to inform them of the rules regarding benefits in kind and how a non-monetary corporate gift will show up as a tax liability for their PRSI and PAYE dues.
This method gives your employees a physical item that they can reference on a moment’s notice, which can be handy for ensuring retention of information.
This particular method of raising awareness has two major flaws:
It can be expensive. The larger your organisation is, the more brochures you will have to print and pay postage for. While the cost of printing a single brochure and prepping it to be sent to a single employee may be small, when that cost is multiplied by thousands of employees, the expenses can quickly become quite large.
The post. Once your brochures have been made, they still have to be shipped to your employees. While the post is normally quite reliable, there is always that chance of a mishap where mail gets misfiled, delayed, or lost so that the brochure doesn’t arrive at the employee’s address in time.
Using Multiple Avenues of Communication
Rather than simply use any one of the communication methods listed above, you can use multiple methods of contacting employees to make them aware of the benefits in kind rules regarding corporate gifts.
By combining the use of communication channels, you reduce the chances of employees missing the message to almost nothing.
Try to Include Good News in Your Communications
In any form of communication regarding the rules for applying BIK to PRSI and PAYE dues, it may help to reference the exceptions to the BIK rules, such as:
One-time benefits under €250 in value. As reported by welfare.ie, “employers do not need to apply PRSI and PAYE to small benefits worth €250 or less as long as an employee receives only one such benefit a year.
Aggregation of minor benefits. When employees receive minor benefits all throughout the year, employers can make arrangements with the revenue agency to pay PRSI and PAYE on behalf of their employees. As stated on the welare.ie site, “to do this, employers must factor-in the ‘grossed up’ value of benefit – this is the notional amount which, if PRSI and PAYE were deducted from it, would leave the employee with the net value of the benefit received.”
Noting exceptions such as the above can take some of the sting out of the announcement, and help your company explain to employees why you use the benefits models that you do.
To learn more about how to communicate benefits in kind rules to your employees, or for advice about providing benefits to your employees, contact Simon Shirley Advisors today.