The Small Benefit Scheme (SBS) in Ireland has been a popular initiative allowing employers to reward their staff with non-cash benefits tax-efficiently. With the recent changes announced in Budget 2025, the scheme has become even more attractive for businesses looking to enhance their employee engagement and recognition programs.
Key Changes in 2025
Starting from January 1, 2025, the maximum value of tax-free benefits employers can provide to their employees under the SBS has increased from €1,000 to €1,500 per year[1]. Additionally, the number of tax-free benefits that can be given annually has been raised from two to five[1]. These benefits must not be in cash, and the combined value of the five benefits cannot exceed €1,500. If more than five benefits are given annually, only the first five benefits may qualify for the tax exemption[1].
Benefits for Employers and Employees
The increase in the SBS limit provides several advantages for both employers and employees:
- Increased Employee Satisfaction: Employees appreciate the value of gift card rewards, especially when minimal restrictions exist on where they can be spent. This boost in the scheme allows employers to offer more significant rewards, enhancing employee satisfaction and morale.
- Tax Efficiency: The scheme remains entirely tax-free for the employer and the employee. With the increased limit, businesses can provide more substantial rewards without incurring payroll taxes, USC, or PRSI, resulting in considerable savings for both parties.
- Boost to Employee Engagement: Regular rewards play a significant role in fostering loyalty and boosting morale. Companies offering consistent recognition see notable improvements in employee retention and overall performance.
Implementation and Compliance
To qualify for the tax-free treatment, the benefits provided must be in the form of vouchers or gift cards that can only be used to purchase goods or services. They cannot be redeemed for cash[1]. Employers must report the details of the date paid and the value of these benefits to the Revenue Commissioners as part of the Enhanced Reporting Requirements (ERR) introduced in 2024[1]. Compliance reviews by Revenue will commence in January 2025 to ensure adherence to these new reporting standards[1].
The enhancements to the Small Benefit Scheme in 2025 offer a valuable opportunity for businesses to invest in their employees’ satisfaction and engagement. By taking advantage of the increased tax-free limit and the ability to provide more frequent rewards, employers can foster a positive work environment and strengthen their company’s performance. As businesses prepare for the corporate gifting season, the updated SBS provides an excellent framework for meaningful, tax-efficient employee recognition.
References