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How to help your Staff and keep the Tax Man happy

Engagement | Wellness | 5-minute read

Posted on: Friday November 17, 2023

by Gareth Harris, Client Experience Operations Manager

In these tough times, employers are stepping up to find ways to help their employees cope with rising costs of living.

However, are you aware of the rules to ensure you don’t inadvertently trigger a tax and national insurance liability for your employee (and your payroll team)?

By using your benefits platform, it’s easy to help your staff over this festive season by adding funds to their accounts which they, in turn, can exchange for an eVoucher to spend where they like.

Simply top-up your float, and help your staff spread the costs of Christmas using their Hapi app. You choose the amount, and your employees choose when and where to spend it.

Points to consider

There are a few things to be aware of.  Rewarding your staff for a job well done, or using the system for financial incentives could well fall into the P11D/PSA reporting and trigger tax and National Insurance implications for you and your employees*.  Similarly, if any one gift is more than £50 in value this too will trigger tax and NI charges. That said, there are still massive benefits to thanking your staff and showing recognition regularly:

  1. 31% lower voluntary turnover (1)
  2. 85% see a positive impact on employee engagement (2)
  3. 12x more likely to have strong business outcomes (3)
  4. The #1 reason people leave their jobs is lack of recognition (4)
  5. Recognition for work is one of the top drivers to attract new staff (5)

However, here’s the good news – by keeping the value to £50 or under and sending it as a Christmas Gift, you can help your staff and potentially avoid additional reporting needs by using Trivial Benefits rules*. The wording here is quite key…

What is a trivial benefit? 

HMRC introduced the term trivial benefit in April 2016. This allows you to gift staff small amounts to acknowledge special events, Christmas, birthdays, etc. But what are the rules:

A trivial benefit…

  • Must be given as a gift and not exceed £50 in value
  • Cannot be cash – or a cash voucher (such as a prepaid credit card)
  • Cannot be as a reward for their work or performance
  • Cannot be a contractual entitlement

Your award must meet ALL the above criteria to avoid tax and NI liability. If you’re not sure, the Government website has a helpline to answer all your queries.

The award must be given as a “gift” and not as an incentive or directly linked to a “job well done” or to add value to an employee’s paycheck. 

Of course, you can use your Reward area in Hapi to thank staff when they go above and beyond but you will then need to consider the P11D/PSA implications for both the employee and your finance team.

So, what can I do?

Help your teams spread the cost of Christmas with a £50 gift into their employee benefits app. Your employees can then purchase an eVoucher of choice that is only exchangeable for specific goods or services (and therefore not cash) so it falls within the above criteria. The good news, a trivial benefit is not just for Christmas, there are many other occasions you can mark throughout the year to help your teams - as long as they meet the above criteria.  Why not celebrate: 

  • Birthdays
  • House moves
  • A new baby arrival
  • A new role
  • Welcoming new employees
  • Bank holidays
  • And many more…

Why use Hapi and not simply buy gift cards?

Simple. With Hapi, it saves valuable administration time and drives employee engagement on your platform. If an employee does not use the eVoucher or leaves the business after a year (or upon employee leaving) any value left in their recognition pot will be paid back into your Recognition Float too.  Many other employee benefit platforms simply take these funds, and you lose out!

Summary

Celebrating with your staff with a small gift is a powerful tool. Not feeling appreciated is the #1 reason people leave their jobs. Saving you time and money on recruitment and making you an employer of choice.  

If you want to learn how to create an environment that encourages people to do their best, get in touch with our experts. Also, don’t forget to subscribe to our blog for weekly thought leadership straight to your inbox. 

References:
(1)    Bersin by Deloitte
(2)    SHRM Globoforce Employee Recognition Survey (when spending 1% of payroll)
(3)    Bersin by Deloitte
(4)    Gallup
(5)    Willis Towers Watson

 

*Source: GOV.UK

 

NB: This blog provides our opinion only and does not account for some factors that may apply to individual employers.  You should ensure you take appropriate advice specific to yourselves before taking any action. 

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