Every year at this time, Employers are thinking of ways to give back to their employees, and to show their appreciation of a job well done. This can come with a lot of questions and concerns, especially as it relates to properly accounting for those gifts.
Unless a gift in considered “de minimis” by the IRS, it is considered taxable earnings for the employee.
De minimis gifts, or fringe benefits, are a gray area for most employers, but we generally advise clients that it should be something small, under $25, and NEVER cash or a gift card/certificate. So – how to be generous to your employees without getting into trouble? Here are a few ways to responsibly spread cheer:
Cash Bonuses: Cash is king! This time of year, with all the holiday gift buying, travel, and extra year end expenses piling up, we could all use a little extra cash to lighten the financial load. There are ways to give your employees a cash bonus and still have proper accounting for wages. You can give employees some crisp bills in their card, so long as you also account for it properly in your payroll records. Ask your payroll provider to “gross up” a bonus to cover the employee’s share of taxes, and that $250 bonus will remain $250. Generally, this costs an employer less than 10% more than paying it normally.
Uniforms and Tech: Do your employees wear uniforms at work? Have a cold office? Consider purchasing a nice, embroidered jacket or sweater for them. Because it is a uniform, it is not subject to tax, and you get free advertising when they wear it out on the town. Same can be said for tech or office products. Giving employees new devices and products to use at work is a great investment in their comfort and productivity, while providing items they need.
Food: Most grocery stores will allow you to place an order in advance and will drive their refrigerated truck to your location to deliver that order to your employees. You can order a turkey or ham for everyone on staff and help outfit their holiday feast.
PTO: Every employee appreciates a day out of the office, paid by their employer. As part of your holiday party, consider doing a drawing or raffle for an extra day of PTO. This is a small cost for you, and a huge benefit to your employees. The same can be done with certificates for a “double lunch hour” or an afternoon out. Allow employees to cash those in when needed, without having to dip into their regular allotment of PTO.
Charitable Donations: Many employees will be making charitable donations this time of year. Offer to match the donations that your employees make. This will show that you respect the things they care about, will be a tax advantage for you, and will, of course, help to support those organizations that do so much for their communities.