Is distribution of bonuses allowed?

westcoast66

Had a strange one earlier. Had an end of year meeting with one of my employees (say Employee A) and he performed well during the year and I offered him a 1k Xmas bonus. He asked me would I mind if I gave it to another employee (Employee . He said that he would only pay a lot of tax on it and Employee B is on a lower tax rate so would benefit more from it. Is this allowed? Would I be unwillingly be taking part in some sort of tax avoidance scheme?

jimmii

Just consider it goodwill from Employee A if they have come up with some agreement for that money that is their business and not your responsibility. How you divide up the bonus is really up to you I would just pay it as you see fit not how they see fit.

dbran

No

Its tax evasion on the part of the employer to reduce their exposure to pay payroll taxes by falsely declaring a salary to employee B when the employer knows it is to employee A.

There is potential concealment so it could be argued that it is a deliberate default and therefore the maximum penalty and interest as well as publication/prosecution depending on the amount involved.

The question would be asked on what basis did the lower paid employee get a huge bonus and the higher paid employee get a small one. It would not think it is worth the risk.

What does your accountant think?

dbran

ninty9er

Not if employee B is actually getting the bonus.

hfallada

OP you can give each employee to up €250 tax free in gift vouchers. So maybe give your employee €750 in wages and €250 in vouchers. Or even €250 in vouchers now and another €250 in vouchers in January, give him the €500 this year in wages

smcgiff

Probably not likely, but possible...

If employee B is paid a bonus, which you intended to give to A. Post payment employee A could claim HE should get a bonus and is being discriminated against.

I wouldn't do it, and not for the above reason alone.

dbran

ninty9er wrote: »

Not if employee B is actually getting the bonus.

This is not a valid argument especially if it is established that the bonus is ultimately destined for Employee A.

The fact that the money is initially paid to employee B would not be relevant in this scenario.

dban

Breffnigolfer

What seems to be happening is employee B will give employee A the money he would have received with B keeping the difference. That way both gain and the employer is no better or worse than he would be by just paying A.

Shelflife

Dont do it, youre leaving yourself wide open to a load of problems.

Tax evasion by A if you pay B and he gives the money to A

A could later say that he never got the bonus that he was entitled to.

B could then demand a bonus next year as he got one this year.

Not worth the hassle.

Mr. G

If employee A said that it would put him/her in a different tax band and to give it to Employee B for Employee B's own benefit as goodwill then I'd be ok with that. But if there's any doubt that Employee B would give it to Employee A don't do it. Surely though if it's just going into another tax bracket that Employee A's total net income would be greater than before. Obviously?

Bigcheeze

hfallada wrote: »

OP you can give each employee to up €250 tax free in gift vouchers. So maybe give your employee €750 in wages and €250 in vouchers. Or even €250 in vouchers now and another €250 in vouchers in January, give him the €500 this year in wages

Don't think this can be done selectively for one or two employees. This exemption is so companies can for example give all staff something like a gift hamper at Christmas without having to deal with BIK issues.