Employer offering to pay part of my wages in vouchers, is this legal?

T

tessaC

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My employer is offering to pay part of my wages in vouchers, is this legal?
 
If say you were being paid €500 a week, and your employer says, look I will give you €200 a week in vouchers and then €300 through payroll. You end up with more money (as you are only paying income tax on the €300

But
1. You will have to pay benefit in kind on the vouchers - revenue have specific rules around “gifts”
2. You will not be able to spend your money as you would like - vouchers often have restrictions and cannot be exchanged for cash. It might be grand if you spend €200 a week on groceries but you might find it does not work for you.
3. Your employer will need to make returns on gifts to staff to revenue also.

Now maybe this is just a once off for Christmas but if your employer wants to give you Christmas voucher gift this should be above and separate from your wages.

In general your wages should be a payment in money, any efforts to go around that will probably break specific revenue rules not to mind employment law. You can get other benefits, like health insurance, gym membership, subsidised canteen etc but revenue have lots of rules about benefit in kind payments that you end up paying tax on.
 
Not legal


Definition

Salary sacrifice arrangements
Salary sacrifice is where your employee agrees to give up some of their pay in exchange for a benefit.

However for the voucher


"This section provides an exemption from tax where an employer provides a small benefit or voucher to an employee where the following conditions are met–

*it is not connected to a salary sacrifice arrangement*



No 39 of 1997, Section 112B, Revenue Note for Guidance

No 39 of 1997, Section 112B, Revenue Note for Guidance
www.charteredaccountants.ie
 
tessaC said:
My employer is offering to pay part of my wages in vouchers, is this legal?
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No. Not unless you agree.

But by doing so, you’re effectively agreeing to a pay cut and you may be liable for benefit in kind if it’s more than a once-off.

Ridiculous way to run a business.
 
Not really, as it reduces the costs

Of course the employee. as you point out, suffers a reduction in their wage
 
Thinking out loud:- I can see the benefit to you and your employer how this scam (let’s call it what it is) can work.

But, there are pitfalls e.g Revenue Interest, reduced accumulative monetary earnings leading to other problems.

My Advice:- Don’t take the vouchers in lieu of payment and you won’t have to keep looking over your shoulder. You need Revenue to get on your case like you need Terminal Leukaemia.
 
Leper said:
My Advice:- Don’t take the vouchers in lieu of payment and you won’t have to keep looking over your shoulder. You need Revenue to get on your case like you need Terminal Leukaemia.
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Frankly baffled by this. There is nothing here to suggest that the OP has anything to fear from Revenue.

And your terminology is terribly insensitive.
 
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tessaC said:
My employer is offering to pay part of my wages in vouchers, is this legal?
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On regular basis? Or are you due a Christmas bonus and they are offering it as vouchers?

If it's the former, there is very little benefit from it. At present, you can get up to €1,000 in vouchers, which can be split into two. Any other vouchers are taxed as BIK. So after the first €1,000, there is no tax benefit. And you will be limited on where the money is spent.

If it is a Christmas bonus, go for it. I think @Gordon Gekko said he gets Dunnes vouchers as he spends so much there anyway and then he spends the saved money elsewhere. A dentist mate of mine even does vouchers for dental work so people can avail of the gift system (here you go, a voucher to get a root canal )
 
ClubMan said:
Maybe ask the employer to clarify the intention and reasoning here just in case you've misunderstood something. Maybe they're actually just offering you a nice Xmas bonus via vouchers and not trying to do salary sacrifice etc.?
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I have honestly never heard of an employer offering to pay someone in vouchers. If I was a betting man, I'd say it was for a Christmas bonus payment

I have though heard of employers giving employees vouchers for the company that they work for
 
T McGibney said:
Frankly baffled by this. There is nothing here to suggest that the OP has anything to fear from Revenue.

And your terminology is terribly insensitive.
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Surely there should be something to fear from Revenue as it appears from the post above by Cally1990 that the proposal by the employer in this case is illegal?
 
Deiseblue said:
Surely there should be something to fear from Revenue as it appears from the post above by Cally1990 that the proposal by the employer in this case is illegal?
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Illegal? No it's not.

Either way, not remotely the employee's concern.
 
Dr Strangelove said:
If my employer came to me and said “Hey, I need your permission to do something that is illegal” I would think twice.

As an employee I would also refuse as it would have impacts on tax relief for pension contributions and the like.
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It is not illegal to provide a taxable non-cash benefit to an employee.
It is not illegal to receive a taxable non-cash benefit from an employer.
 
T McGibney said:
It is not illegal to provide a taxable non-cash benefit to an employee.
It is not illegal to receive a taxable non-cash benefit from an employer.
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It's not illegal to get the non taxable cash benefit /voucher

You are correct. It's the small benefit scheme

However

It is wrong/not allowed to use it as part of salary sacrifice

They are 2 different things

The small benefit scheme is allowed but only separately to wages

An employer can choose to give a small noncash benefit

But

The scheme isn't compliant if the employer is asking the employer to give up some of their salary to get the voucher

The tax law clearly states

"This section provides an exemption from tax where an employer provides a small benefit
or voucher to an employee

where the following conditions are met–

*it is not connected to a salary sacrifice arrangement
 
We know all that.
The claim here was that there was inherent illegality in remuneration involving a non-cash benefit in kind. There is no basis to that claim.

The pertinent point here is that they favourable tax treatment of small benefits is lost if the benefits in question are paid in lieu of salary.
 
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