What Incentives Can I Give My Workers?
Staff turnover is one of the biggest concerns for all businesses. Nobody wants to be advertising for new workers on a regular basis.
Apart from anything else, if your customers cotton on to the fact that you cannot keep your workforce happy they are likely to ask why.
Rewarding them for their efforts is important. Naturally enough, for most people that will mean earning a decent salary. For any job there is a going rate. So how do you keep them happy?
There are a number of gifts and benefits you can give them, but if you choose to go down this route you need to take care to do this in the most tax efficient way. If you go about it the right way you can give tax free benefits to your staff and obtain tax relief for yourself.
Here at Accountants etc. we believe it's essential that you do things properly, so we have come up with a few ideas that may help you.
If you give your employees a cash bonus it must be put through the payroll and the appropriate tax and National Insurance must be deducted.
The good news is that if you provide gifts to your workforce such as a bottle of wine, chocolates or flowers there are no tax implications, but the gift must be considered to be trivial by HMRC. Please note, however, that cash gifts and gift vouchers are excluded from this. Just to complicate matters, there is no specific value that constitutes a ‘trivial’ gift, but it is thought to be up to approximately £30 - £40 per member of staff. If you have made gifts, or plan to make gifts to your staff in excess of this amount they are likely to be taxable.
You can entertain your staff without causing them a tax liability. You can spend up to £150 per year per head without any tax implications. This limit will include the Christmas party, the summer barbeque and any other similar functions. Once you spend over £150 per year per head, the whole amount becomes taxable, not just the amount over £150 so be careful. The £150 limit also applies to guests attending, which makes the limit £300 if a member of staff brings their partner.
Do you provide your staff with uniforms? If you do, the uniform must include a permanent employer logo or badge. If it doesn't, it may become taxable. Alternatively, you can agree with your employees that the uniforms are simply provided on loan.
You may be surprised to learn that if you provide food and drink to your staff for a lunchtime meeting, this may be taxable. For the lunch to be provided tax free, it must be available to all members of staff. So just ensure that everybody receives a meeting invitation, or at the very least that the leftover food is shared by everyone else - and there is always leftover food.
There is no way round it. If you give your staff gift vouchers it is a taxable benefit. You can declare the vouchers on each employee’s form P11D so that they pay the relevant tax and National Insurance or you can set up a ‘PAYE Settlement Agreement’ with HMRC which will arrange for the tax and National Insurance bill to be sent to the employer.
PAYE Settlement Agreements
Of course your employees will love the £100 Next voucher or the Christmas hamper you give them as a means of saying thank you for their efforts. But they should know that they will receive a tax bill from HMRC on their Christmas gift. Your staff will be sent the tax bill for any taxable gifts they receive, but if you want to foot the bill you can set up a PAYE Settlement Agreement with HMRC.
Cycle To Work Scheme
Everybody is conscious about the benefits of good health, and an increasing number of companies now run cycle to work schemes. Why not do the same and encourage your workers to get on their bikes? It will help them to improve their fitness and wellbeing, and if your workers are fit and healthy they will perform better. As an added bonus, it is good for the environment, especially at a time when we are all being told about the harmful effects of emissions spewed into the atmosphere by diesel engines. The good news is that HMRC agree that this is a good practice and actually allow employers to provide their staff with bicycles – tax free! After 12 months, employees can buy the bike from their employer at the ‘market value’ which can be anything as low as 5% of the original cost. So your workers get to buy a bike at a knockdown price and you can claim full tax relief on the net cost to them.
Childcare is one of the biggest expenses faced by young families today. Did you know that you can provide each member of staff with childcare vouchers worth up to £55 per week? And that they are tax free? You can gift the vouchers instead of salary. By doing so, you save the employer’s National Insurance and your staff save the tax and employee’s National Insurance, so everybody benefits. Vouchers can be used for nurseries etc as well as for some out of school activities.
You can provide each of your employees with a mobile phone, tax free. Again, this can be used to reduce their salary by the appropriate amount then provide the phone and save the associated tax and National Insurance.
You could also provide your staff with a computer and HMRC will not tax them - providing that they are used mainly for business purposes with any private use being insignificant. This does not apply to mobile phones which can be provided tax free even when there is no business use.
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