As we enter the final few weeks of 2016, a well-placed reward or gift could be just what the team needs to help them cross the finish line with aplomb. But it’s that straightforward. Rewarding your staff without them being taxed is a very tricky thing to do. Hard cash and vouchers are pretty much out. But whilst HMRC aren’t particularly generous here, there are a few exceptions where the taxman can’t help himself to some of the value of the gift:
1. Celebratory Presents
Whilst employees will incur tax on all benefits on top of their salary and bonus, modest ‘celebratory gifts’ to mark a special occasion such as a birthday or new baby should be fine. Also included here would be a modest Christmas present.
2. Suggestion Scheme
Employers can pay staff £25 tax free for responses to an ‘organised’ suggestion scheme which formally asks employees for ideas on how to improve the way their business is run. But it get’s better. If a suggestion yields financial rewards for the business, the firm can pay the owner of the original idea 50% of that financial yield accrued in the first year (or 10% of the yield accrued in the first 5 years) up to a maximum of £5k, without tax.
3. Encouragement Awards
Merit based rewards to motivate high achieving staff are included in the concessions. A cash payment is allowed but only up to £25, but it’s better than nothing!
4. Recreational Reward
Businesses can lay on parties/functions for their workers up to the value of £150 per person without incurring any tax liability. So it’s always worth ring-fencing the money for the annual Christmas do if you can….
Ok so you can’t give them money tax free, but you can lend them it. Companies can lend employees up to £10,000 without any tax implications. Ideal to help pay for season tickets for example.
But Sometimes The Best Rewards Are Free….
A ‘reward’ doesn’t have to be tangible and/or cause you to put your hand in your pocket: Praise your team wherever possible – it’s proven to be motivating. As well as making staff feel more appreciated, it improves their confidence and self esteem too. Remember to say ‘Thank You’ - the most important two words in the workplace. Better still, write handwritten thank you cards to staff, each with a personalised message expressing gratitude for their support on a particular project or issue over the past year. Such a simple gesture, but one that will go a long way to making them feel really valued.
For many hard-working employees, having time spent focused purely on them, discussing their performance, hopes and future in your business and ensuring their voice is heard would be the ultimate way to motivate and show they are valued. So as the traditional annual appraisal process enters the fray at this time of year, make sure you make the most out of this time by encouraging all managers to side-step the rankings (there is scant evidence these help to improve anyone's performance) and simply focus on, what I like to call, "having-a-conversation" with your employees. Better still, ditch the 'annual' and lead by example, making sure these conversations are taking place on a much more regular basis….
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