How to Maximise the Small Benefit Scheme for Smarter Bonus Payments in 2025
Paying bonuses is one of the most powerful ways to recognise and reward employees – but when bonuses are taxed through payroll, a large chunk of the value can disappear in deductions. That’s why more companies in Ireland are turning to the Small Benefit Scheme to deliver tax-free bonuses worth up to €1,500 per employee, per year.
This is not just about giving a thank-you gift. It’s about making your annual, quarterly, or milestone-based bonus strategy more tax-efficient, while keeping employees happy with flexible, high-value rewards.
But to do it right, you need to follow Revenue guidelines, including the Enhanced Revenue Reporting (ERR) requirements introduced in 2024.
Why Pay Bonuses Through the Small Benefit Scheme?
Paying bonuses through the Small Benefit Scheme allows employers to provide non-cash rewards to employees without triggering tax, PRSI, or USC, up to €1,500 per year.
Instead of issuing a taxed payroll bonus, many businesses now use the scheme to deliver annual company bonuses in a more tax-efficient way. However, there are some key rules to follow:
Bonus Timing: Annual or Quarterly Works Best
You can issue up to five tax-free rewards per employee per calendar year. This makes annual, bi-annual, or quarterly bonuses ideal for companies that want to align tax-free rewards with performance or milestones.
Monthly bonuses, however, will not work well.
€1,500 and Over: Understanding the Threshold
If a bonus is €1,500 or less, it can be issued entirely tax-free.
If a bonus exceeds €1,500, then only the first €1,500 qualifies under the Small Benefit Scheme. The remainder must be paid through payroll and is subject to the usual tax and social insurance deductions.
Choose a Non-Cash Format
The Small Benefit Scheme prohibits rewards that are cash or convertible to cash. However, it’s important to choose a reward format that feels as flexible and valuable as cash to the employee.
Using a multi-use gift card like the AllGo Mastercard ensures employees can spend their bonus wherever they choose. Restrictive or single-retailer vouchers can lead to employee dissatisfaction and reduce the perceived value of the bonus.
Avoid Salary Sacrifice and Guaranteed Payments
You cannot reduce an employee’s contractual pay and replace it with a tax-free bonus under this scheme. Bonuses must be discretionary and not part of contractual compensation.
If a bonus is guaranteed as part of a salary package, it becomes taxable and is not eligible for relief under the Small Benefit Scheme.
Offer an Opt-Out (But Most Won’t Use It)
Some employees may prefer to receive their bonus through payroll, even though it results in less take-home value — often for reasons such as mortgage applications that require higher gross income reporting.
Best practice is to give employees a clear opt-out path while defaulting to the tax-free method. In practice, nearly all employees choose to receive the tax-free benefit.
ERR: Staying Compliant in 2025
As of 1 January 2024, all tax-free benefits issued under the Small Benefit Scheme must be reported to Revenue through Enhanced Revenue Reporting (ERR).
What Must Be Reported:
- Date the benefit is provided
- Employee name
- Employee PPS number
- Employment ID
- Value of the gift card or benefit
How to Submit:
ERR returns can be submitted:
- Through the ERR module in Revenue’s ROS (Revenue Online Service)
- Through compatible payroll software (check with your provider for support)
This return must be filed on or before the day the employee receives the benefit.
Why Choose the AllGo Mastercard Gift Card for Tax-Free Bonuses?
The AllGo Mastercard Gift Card is the most versatile and compliant option for delivering tax-free bonuses under the Small Benefit Scheme.
It provides all the flexibility of a debit card while fully meeting Revenue’s non-cash requirement – allowing employees to spend their bonus in-store, online, or even abroad.
Key Benefits:
- Dedicated employee support via allgogiftcard.com
- Accepted anywhere Mastercard is accepted
- Available in physical and Digital+ formats
- Certified by Revenue for the Small Benefit Scheme
- Tax-free up to €1,500 per employee per year
- Regulated by the Central Bank of Ireland
- Guaranteed Irish company
- No retailer commission fees
- 3D Secure online payments
- Secure funds held in a segregated Irish bank account
- 5-year validity on all cards
- Online balance and transaction portal
Make Your Bonus Budget Go Further
Whether you’re planning annual performance bonuses, project milestone rewards, or a one-time thank-you for your team, delivering your bonus tax-free is the most cost-effective and employee-friendly solution.
To order AllGo Mastercard Gift Cards or learn more, visit:
www.allgogiftcard.com
