As we approach Christmas, many employers will reward their staff in the form of a bonus or gift. Here we look at how employees can benefit financially from the expansion of the Small Benefit Exemption Scheme.
The tax-free voucher limit for employers who want to reward their staff has been increased again to €1,500, meaning workers could be in for a nice surprise if their employer chooses to avail of it.
The so-called Small Benefit Exemption Scheme, which was first introduced back in 2004, is a handy way for companies to provide a small bonus or ‘thank you’ to workers that is exempt from PAYE, PRSI and USC.
The benefit was originally only €250 a year. However it's been increased several times since inception and was raised again from €1,000 to €1,500 in Budget 2025, being seen as a way for employers to give back to workers who may be feeling the pinch during the recent inflationary spike.
However, as with most Government supports, there are a few caveats…
Only non-cash payments
The benefit or gift can't be given in cash as any cash payment would be fully taxed, so it must be given outside of payroll.
Popular benefits instead of cash include gift cards such as One4all vouchers, a supermarket voucher, a hotel voucher, a hamper, or a membership to a gym or swimming pool.
Prior to 2020, employers could only provide one benefit per employee per year, regardless of the amount. But the scheme has since been relaxed and in Budget 2025 was changed again to allow five separate payments in a single tax year.
Limits
The value of the gift cannot exceed the €1,500 limit. If so, then the full amount is liable for taxation – not just the difference. Unused allowance amounts cannot be carried over to another year.
Also, the gift must not form part of a salary sacrifice agreement, where a worker is forced to give up part of their salary, or where the voucher’s value is taken out of an employee’s pay.
And while most employees will generally pay some form of PAYE, PRSI and USC, this is actually not a specific requirement to qualify for the relief so it's open to all employees really, including part-time workers and contractors.
What do employers need to know?
If you’re an employer who’s looking to reward your staff, the vouchers or gift certificates must be purchased from your company credit card or bank account - meaning you can’t reimburse your staff for vouchers that they've purchased themselves.
Unused allowances also cannot be carried over to the next tax year.
As well as being tax-free for your employees, employers are not charged the 10.75% PRSI that is normally liable on bonuses.
