4 facts you need to know about trivial benefits

First things first

However, there is a catch. It’s all very well, this idea of handing out lots of goodies to your workforce, but what about tax?

It's a valid concern and one that needs clearing up. We all know it's next to impossible to give anything of worth as an employer without alerting HMRC. However, there are clear parameters set by the government to distinguish a trivial benefit from an asset. 

What are trivial benefits?

Trivial benefits are best described as small ‘token gifts’, employees receive from managers. They can come in any shape or form but common examples include bottles of wine, chocolates, beer for the office, or team lunches. Essentially they're little everyday sweeteners that boost team morale.

A benefit is trivial if it: 

• Costs £50 or less to provide 
• Is not cash or a voucher
• Is not a reward for work or performance
• Is not in the terms of an employee's contract 

To better understand what trivial benefits are, it can be helpful to think of them as perks at work. Or in other words, things that you don’t expect from work, but that occasionally find their way into your office. We’ve all seen them in practice and have contributed to them ourselves.

Examples of a trivial benefit include: 

• A few drinks on a work night out
• A pizza in the office on a Friday
• A birthday present on employee's birthdays 
• A summer party

The key distinction when defining trivial benefits is that they're not intended to add financial value to an employee's pay-check. Nor can they be given in lieu of payment. They're trivial in the traditional sense of the word — having little actual value. 

Having such a definitive term for these gestures can be a little constricting — a little stressful even — but the trend has become a cultural aspect of working in a modern workplace. It's outgrown its token status and has become part of everyday work life. As such the powers at be had to figure out a way of regulating it.

Why are trivial benefits so popular?

Well, put simply, the job market is radically different now compared with a decade ago. There are plenty of company benefits that have gone from being an out-of-the-ordinary perk, to an essential in most job descriptions.

In part, this has all been a byproduct of the slow-growth economic climate that most young people have graduated in to. As a way to tackle slumped salaries, employers have had to find innovative new ways of attracting top talent in a busy job market. Trivial benefits presented itself as one of the most effective ways of doing so as its core principle is to make life at work more enjoyable.

However, this doesn't grant employers a free licence to buy whatever they want for their workforce.

Advantages of trivial benefits

Offering your teams trivial benefits has many advantages, including:

1. A generous allowance: Each employee can receive trivial benefits worth up to £300 per year. Each individual benefit or gift must not cost more than £50.
2. No tax or any NI payments: Because trivial benefits are so small they're exempt.
3. No notification to HMRC: This cuts down on a lot of administration time.
4. Additional wellbeing support: Treat your employees to new running trainers or a therapy session. As long as each costs £50 or less.
5. No inclusion in employee contracts: Give trivial benefits as and when you like.

Why does there need to be a restriction on employee benefits?

Although it might seem unfair to restrict employee benefits, there are practical reasons for implementing regulations on gifts.

To give an example, imagine that it’s the end of the year and you’re looking to give out bonuses. You know that a cash-bonus will be subject to Income Tax and National Insurance, so instead of a "payment", you offer a car or holiday. If there were no levies placed upon these types of gestures, the tax system as we know it would be defunct. Gifts or assets are commodities in themselves and if used as a means of payment, they must be taxed as such.

Examples of benefits not allowed under 'trivial benefits': 

• Gifts or incentives based on targets, results or performance
• Taxis when employees work late 
• Providing working lunches for employees

4 facts about trivial benefits

For a while the definition around trivial benefits wasn't clear. In fact, the legality of giving your staff tax-free gifts was seen as a bit of a grey area. However, as of 2016, HMRC passed legislation that set out clear limitations to trivial benefits, while creating a further category — benefits in kind.

1. Price cap

The clearest parameter to bear in mind is that any ‘gift’ given as a trivial benefit cannot have cost you more than £50. This is irrespective of how much has been paid for it but rather its market value. The reason being that if you give your employees £500 worth of clothes from your manufacturing business, while it didn't technically ‘cost’ you in money, it still has great value and could be sold on for personal profit.

The price cap is per person, which can be slightly difficult to calculate if a company lunch has cost £800 but a quarter of those eating ate half of the food. How is this calculated? To avoid splitting hairs in cases like this, HMRC have also put a yearly restriction of £300 per employee.

2. Non-cash

It has to be a material offering — you cannot simply hand someone a crisp fifty. This also includes any voucher that can be redeemed for cash. This is just too close to being a form of payment and so as a blanket rule, all cash gifts must be recorded and incorporated into the tax.

3. It isn’t a bonus

This has to be a purely altruistic offering. While that’s pretty difficult to define in a business environment, the best rule of thumb is that they cannot replace a bonus. So if someone’s landed you a new client and you give them a voucher, that isn't a trivial benefit.

4. It isn’t in their contract

Trivial benefits have to be one-offs or random acts of kindness. There cannot be a formal agreement about their supply and frequency. Again this resembles a type of payment.

Why would employers want to give trivial benefits?

Employee motivation is a crisis for many companies in this day and age. Managers are finding it difficult to unlock their younger employees' potential and keep them in the workplace for more than a year or two.

Much of this is a cultural shift in the way people work. Employees now lack a sense of allegiance, flitting between an average of 6 companies in their lives. However, this is in part the fault of a corporate culture that neglects to look after their employees socially and emotionally, and especially overlooks the importance of corporate benefits. A company that engages with its employees socially will build a stronger and better-connected workforce. This will ultimately boost your productivity and retention rates.

There are several ways to sell the benefits of company benefits but ultimately there's one key advantage — they make for a happier workforce. 

Why do employees love trivial benefits?

Well, this might seem rather obvious. After all, who doesn’t like a little pick-me-up present now and again? While this is undeniably true, it runs a little deeper. There is a hunger for ‘ethical workplaces’ that care for their employees and part of this is having a company-wide reward scheme for hard work. Employees want to feel valued in a modern workplace and a salary simply isn’t a big enough gesture. In fact, it’s not really a gesture at all — it’s a requirement by law.

On top of this, trivial benefits might not (and cannot) cost the employer much but it can make the world of difference to your employees, particularly your junior staff who need that little bit extra.

Examples of other non-taxable benefits

There are other more high-value benefits that you can offer your employees that are also tax-free. These include:

• Employer contributions to a registered pension scheme
• £500 worth of medical treatment to help an employee get back to work, after an absence of at least 28 days
• Expenses for home office equipment
• Parking near the office
• Childcare vouchers
• Meals in canteen

In summary

Trivial benefits are best described as small ‘token gifts’, given by management to their employees. This can come in any shape or form, but generally speaking, they are typified by gestures.

They're not intended to add financial value to an employee's paycheck and they can't be given in lieu of payment. But as they're still defined as a benefit — there are clear parameters set by the government to distinguish a 'trivial' benefit from an asset.

What makes a benefit trivial? 

1. There is a price cap of £50 per benefit.
2. It must not be cash. 
3. It isn't a bonus — it must be a purely altruistic offering. 
4. It isn't in their contract — it has to be a one-off or random act of kindness. 

Looking for a bit more information?

If you're looking to upgrade your current benefits offering, research what other companies are doing and contact different benefits providers.

Perkbox: give your team awesome perks

Choosing a selection of attractive, well-rounded benefits can be a difficult process. Genuinely good perks are usually quite expensive and demand a lot of admin. That's why Perkbox exists: to give teams awesome perks, hassle-free. Designed to support your team’s financial, emotional and physical wellbeing, our selection of benefits, discounts, salary sacrifice schemes and more cover all bases.

If you want to find out how you can use Perkbox, request a demo, and a member of our team will get back to you.