Question: With rising costs, I want to give my employees a gift card to reward them for their hard work. What should I consider?
Answer: Acknowledging an employee’s contribution to the company is almost always a good thing. Making the effort to recognize an employee’s hard work helps to reinforce their commitment to the company.
When you give a gift card (or any monetary benefit) to an employee, you should consider the tax implications. Some bonuses may be taxable and therefore must be reported accordingly.
Usually discretionary bonuses – those that are given “just because” – are not taxable. However, if they become expected or a regular occurrence, then they may be.
Conversely, non-discretionary bonuses – those that are given regularly or as part of a compensation plan (such as performance bonuses or holiday bonuses) – are usually taxable.
Regardless of the type, timing, or value of the reward, be sure to give it with the right message. Just handing someone a gift card will not have the same impact as giving it along with a personalized conversation or note about their contribution to express how much you value them.