Revenue Rules on Long Service Awards

staff member receiving award

by Dr Paul Gadie, Managing Director of Gift Innovations

Most companies are familiar with Revenue’s Small Benefit Exemption which allows up to two tax-free non-cash benefits per employee, per annum, up to the value of €1000. However, companies are less familiar with the Long Service Award Allowance. This allowance offers generous tax relief on awards made to recognise employees with 20 plus years of service once the awards take the form of tangible gifts. There are significant savings to be made with this allowance and this is a great opportunity to acknowledge long serving employees.

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What is the Long Service Awards Allowance?

When Revenue speaks about long service awards, they have in mind employees with 20 or more years of service with the same company.  This length of service certainly signifies a special milestone. With twenty years of service comes ‘veteran’ status. They have seen the peaks and the troughs; they are resilient and know how to get things done. Those with twenty-five years of service have reached the quarter century – a real milestone in anyone’s career. They will have much-stored knowledge, which they will want to pass on. It is important to help these awardees to reflect on their journey and to acknowledge their contribution over the years.

Celebrating employee years of service, right up to retirement age, helps increase employee engagement and improve retention. With the Long Service Awards Allowance, companies are encouraged to mark long service with tax-free gifts.

Revenue Rules on Long Service Awards

Revenue states that long service awards are not taxable if they meet all of the following conditions:

  • The award is made to mark long service of not less than 20 years.
  • The award is tangible (that is, it does not take the form of a voucher, bonds, or cash).
  • The cost is not more than €50 for each year of service.
  • No similar award has been made to the employee within the previous five years. 

Where any of the qualifying conditions are not met, PAYE, PRSI and USC must be applied on the full amount of the award.

Example: Charlie has 30 years’ service with his employer. His employer wishes to acknowledge this service and presents him with a gift valued at €1,200. Charlie can receive a tangible benefit with a maximum value of €1,500 due to the number of years’ service with this employer (€50 x 30 years of service). As the value of the watch does not exceed €1,500, Charlie’s employer does not need to apply PAYE, PRSI and USC on the value of the award.

Employees with long service are allowed tax-free tangible gifts up to a maximum of €50 for each year of service, starting at 20 years of service and every 5 years thereafter.

What makes a good service award gift?

A good gift to celebrate Long Service Awards is one that has meaning for the employee and that reminds them of your recognition and regard. Traditionally, companies presented a service award gift such as a watch or a painting to employees, which may not be to the liking of everyone. Today, companies can offer employees a wide variety of gifts on an easy-to-use rewards portal, which allows employees to choose something that suits them. Employees enjoy browsing the online catalogue and selecting multiple gifts with their points allocation.

Sustainable gifts

Not only do employees prefer choosing their own gift, but they also like quality, Irish-made gifts.  Quality gifts from premium brands last longer so they reduce excess waste. Irish-made gifts are more sustainable and of exceptional quality, perfect for showing employees that you truly care. You can offer employees a mix of gifts from Irish brands including Foxford Woollen Mills, Waterford Crystal, Spotlight Oral Care, Nicholas Mosse Pottery and Garrett Mallon together with reputable international brands including Samsonite, Seiko, Garmin, and Philips.

Celebrate the moment!

When planning to celebrate an employee’s long service award, make it a company-wide celebration. Employees typically receive a notification with formal recognition from the company and the CEO. This should be followed with a personal message or call from their line manager. The involvement of senior management and line managers is fundamental to the success of service award programmes.

Finding a strategic partner who can help deliver the programme on your behalf might be beneficial. From the awards notification to delivery and after-sales support, the long service awards process needs to be easy for Human Resources and provide a great gifting experience for your employees.

For all milestone moments, ensure that everyone in the company knows about the celebration and the recognition. Publish pictures and a short story in your internal newsletters about the recipient and their contribution. This helps to build a culture of recognition in the organisation. It also builds expectation and excitement around the approaching celebrations for other members of staff.

About the author

Dr Paul Gadie is the Managing Director of Gift Innovations. He holds various degrees including a doctorate in Theology, which focussed on leadership, and is a published author.