Ho Ho Holidays! What Can I Give My Employees for Christmas?

The holiday season is upon us, and regardless of your business’s customer base or employee group, you likely do some kind of holiday party, prizes, gifts, or rewards. But did you know some of the well-intentioned gifts you give your employees may subject them to extra taxes? Are you aware that some of your rewards or gifts could be interpreted as discriminatory? With the new social climate employers need to be more careful than ever on what they give their employees at Christmas/Holiday time. We’ve broken down some general rules and best practices for you when it comes to gift giving, as well as some GREAT gift ideas for your staff you can give this holiday season.  

The Rules

The Canadian government has some rules around gifts, awards, and rewards for employees. There are some extras you may give an employee that create a taxable benefit (even if it isn’t money) and you need to add it to their annual income and tax them on it. This type of extra or perk may be useful in the course of employment, but for the purposes of holiday gift giving, it might be more appreciated by your staff if you give non-taxable gifts or awards.

You may give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less annually. Items of nominal value (usually under $25.00) don’t have to be added to the $500.00 calculation.

Near cash (think gift cards) or cash items are always taxable, and you should include the taxable gift, award or reward in box 14 “employment income” and in “other information” area under code 40 in the employee’s T4 slip.

So what’s the difference between a gift, award, and reward? Because they carry different meanings and have different rules assigned to them, we have broken the definitions down for you here:

A gift must be for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child.

An award must be for an employment-related accomplishment such as outstanding service, or employees’ suggestions, or meeting or exceeding safety standards. It is recognition of an employee’s overall contribution to the workplace, not recognition of job performance. Generally, a valid, non-taxable award has clearly defined criteria, a nomination and evaluation process, and a limited number of recipients.

An award given to your employees for performance-related reasons (such as performing well in the job they were hired to do, exceeding production standards, completing a project ahead of schedule or under budget, putting in extra time to finish a project, covering for a sick manager/colleague) is considered a reward and is a taxable benefit for the employee.

If you give your employee a non-cash gift or award for any other reason, you must include the fair market value of the gift or award in the employee’s income.

Want a great tool to use to see if your gift is taxable or not? Check out Service Canada’s benefit calculator to find out:

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/gifts-awards-social-events/there-a-taxable-benefit-9.html

Best Practice Gift Giving

The employment landscape is becoming more and more inclusive and less and less discriminatory. Government regulations including OH&S laws have changed recently to reflect this. As an employer, it would be a shame to give a gift to an employee with good intentions, and have the employee be offended or unintentionally discriminated against by it. In general, we advise to stay away from the following:

1. Gambling gifts- many religions do not condone gambling and many people are morally opposed to gambling. It is also possible your employee or someone in their family has a gambling problem or addiction that you don’t know about, which could make this type of gift insensitive. Steer clear of Lotto tickets, scratch tickets, or vouchers to your local casino.
2. Alcoholic gifts- religious and personal values come in to play again on alcohol, as well as addiction issues that you may not be aware of. Wine, beer, spirits, liquors, and even chocolates containing liquor are not advised.
3. Hunting based gifts- there are some hobbies and interests your employees may be into, and others they are very against. Hunting, fishing, butchering, taxidermy, and a lot of animal wellness type gifts are not recommended. Even if one employee may appreciate a hunting knife, it may be something another employee finds against their values.
4. Human Rights Protected Grounds based gifts- here we are talking about any gifts that may be discriminatory against one’s religion, gender, ethnicity, family status, sexual orientation, etc. Gifts like a rainbow pride mug, items that specifically refer to gender such as “his” “hers” or marital status like “Mr.” and “Mrs.”, items that refer to race or ethnicity such as “black woman boss” or “basic white bitch” are best left on the shelf.
5. Rude or impolite gifts- here we are talking about gifts that may be intended to be funny, a joke, or prank, but can be offensive. Anything with a swear word, sexual connotation, or explicit material should be avoided.

So, what CAN I give my employees?

If you don’t want to trigger a taxable benefit or give a gift in bad taste, but you want to show some appreciation check out our top 5 ideas for employee holiday gifts:

1. Experience Gifts- Give your employees the chance to get out and DO something with their families or friends by giving them an experience vs an item. Keep it under $500 to avoid a taxable benefit. Ideas for this could be:
   1. Tickets to local sporting event
   1. Concert tickets
   1. Admission to local theme park, corn maze, petting zoo, etc.
2. Subscription Gifts- A paid year of Netflix, Disney +, apple TV, or even food delivery subscriptions make a great gift in that an employee can utilize the gift year round and multiple people can benefit from it
3. Household gifts- think about what an employee would use around their house or throughout the year: coolers, mugs, photo frames, steak knives, glassware, kitchenware, etc. are all very usable neutral gifts you can give.
4. Tech gifts- watch the amount on this, but TV’s, laptops, tablets, and chrome books are all very popular and usable items that usually draw a big wow factor
5. Company apparel- give the gift of your logo being worn around town! Leather jackets, winter coats, sweaters, t-shirts, dress shirts, and even active wear is a great way to give your employees a gift that also advertises your business.

Summary

The Christmas/Holiday season is a very big time of year, particularly in North America. Most employees bring with them the expectation of getting something at Christmas time, and it is a perfect time of year for an employer to do a little extra. We hope this has provided some clarity and ideas around a way to give your employees a little extra cheer this season!