Show Your Appreciation: Maximizing the Small Benefit Exemption Scheme
Recognizing and rewarding employees is key to fostering a positive and productive workplace. While cash bonuses are a common way to show appreciation, they often lose impact due to tax deductions. The Small Benefit Exemption Scheme provides a smarter alternative—allowing businesses to reward staff with tax-free benefits.
Updated for 2025, the scheme now offers even greater flexibility and potential savings for employers.
What Is the Small Benefit Exemption Scheme?
First introduced in 2004 and expanded over time, the Small Benefit Exemption Scheme lets employers give non-cash gifts to employees without tax liabilities. Recent updates in Budget 2025 have made it even more beneficial.
Key Changes for 2025:
Higher Tax-Free Limit: The maximum benefit has increased from €1,000 to €1,500 per employee per year.
More Flexibility: Employers can now provide up to five separate tax-free rewards annually, up to the €1,500 limit (previously limited to two rewards).
Understanding the Rules
To make the most of this scheme, employers should be aware of the following guidelines:
Non-Cash Only: The benefit must not be in cash. Common choices include gift cards, retail vouchers, and tangible gifts like homeware or jewellery.
Annual Limit: Employees can receive up to €1,500 in total per year tax-free. If this limit is exceeded, the entire amount becomes taxable.
Reward Frequency: Employers can give up to five tax-free benefits annually. Any additional rewards beyond this will be taxed.
No Salary Sacrifice: These rewards must be in addition to salary and paid separately from payroll. They cannot replace part of an employee’s wages.
Maximizing the Benefit
Employers are not required to give the full €1,500 amount—any sum up to the limit remains tax-free. This makes the scheme suitable for businesses of all sizes, offering flexibility based on budget.
Why This Matters for Employers
The Small Benefit Exemption Scheme provides significant cost savings. For instance, a €1,000 cash bonus would cost more due to employer PRSI, PAYE, and USC deductions. Using the scheme instead means employers avoid these additional costs, making it a more cost-effective way to reward staff.
How Employees Benefit
All PAYE employees, whether full-time or part-time, can receive tax-free benefits under this scheme. The exact savings depend on an individual’s income tax rate, PRSI, and USC contributions.
How to Implement the Scheme
Utilizing the Small Benefit Exemption Scheme is a straightforward process. Employers do not need to make payroll adjustments or submit a separate tax return. However, since January 1, 2024, the scheme falls under Revenue’s Enhanced Reporting Requirements, meaning all eligible non-taxable benefits must be reported to Revenue in real time.
✔ No payroll adjustments required
✔ No separate tax return needed
✔ Must report benefits to Revenue in real time
Gift Ideas for Employees
Employers can choose from a variety of non-cash rewards, including:
Gift cards for major retailers
Vouchers for department stores or supermarkets
Tangible gifts like homeware or electronics
Experiences such as gym memberships or spa days
Event tickets for concerts or sports matches
Key Takeaways
No Cash: Only non-cash benefits qualify. Cash gifts are fully taxable.
Up to Five Rewards: A maximum of five tax-free benefits can be given annually.
Stay Within the Limit: If the total exceeds €1,500, the entire amount is subject to PAYE, USC, and PRSI.
No Salary Sacrifice: The benefit must not replace salary.
Employer Must Purchase: The gift or voucher must be bought by the employer—reimbursements are not allowed.
The Small Benefit Exemption Scheme is an excellent way for businesses to reward employees in a tax-efficient manner. By using it correctly, employers can boost morale, improve job satisfaction, and demonstrate appreciation—all while keeping costs down.
Final Thoughts
This scheme presents a win-win opportunity for businesses and employees alike. Employers can show appreciation while making tax savings, and employees receive more value from their rewards.
Need help is maiximising the benefit of this scheme? Contact us for expert advice and support.