A great option for small business owners to pay a bonus at Christmas is through the Small Benefit Exemption Scheme.  The Small Benefit Exemption Scheme allows businesses to give employees, and directors, up to €1000 annually without incurring any tax.

Tax-Free Bonus:

Paying an employee a €1000 bonus through payroll would typically cost an employer €1,554.70. This entails a gross payment of €1,400, along with an additional €154.70 based on 11.05% Employers PRSI, for an employee earning €45,000 to receive a net bonus of €1000.

Changes to the Small Benefit Exemption Scheme:

Previously, the tax-free limit under this scheme was €500. Budget 2023 raised this limit to €1000, though there is no obligation to give the full amount.

How can I issue the bonus?

This bonus must be provided in the form of a voucher, which can only be redeemed for goods and services, not for cash. Previously, an employer could only issue one voucher per year. However, this has been updated, allowing for two vouchers to be given annually.

The most commonly used method to utilize this scheme is through One4all Gift Cards.  

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