What's the best way for me to pay a Christmas Bonus?

A great way for small businesses to pay a bonus at Christmas is through the Small Benefit Exemption Scheme.

Under the Small Benefit Exemption Scheme businesses can give employees, including directors, up to €1000 once a year completely tax-free.

 

How much can I give?

Previously the total amount an employer could give was €500. Budget 2023 increased this limit to €1000, although there is no obligation to give the full amount.

For an employee who is earning €42,500 to receive a final net bonus of €1,000 through payroll, an employer would need to pay €1,400 gross, plus incur an additional cost of €154.70 based on 11.05% Employers PRSI. However, through the Small Benefit Exemption Scheme you can give this €1000 tax free. 

 

How can I pay it?

This bonus must be in the form of a voucher which can only be redeemed in exchange for goods and services i.e. it cannot be exchanged for cash. 

The most widely known method of availing of this scheme is through the One4All gift vouchers.

Previously an employer could only give 1 voucher in a year, but this has now been changed that 2 vouchers can be given in a year. 

While traditionally companies used the Small Benefit Exemption Scheme to give a Christmas bonus you can actually give the voucher at any time of year. 

 

Date published 18 Dec 2019 | Last updated 1 Nov 2023

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.