Companies reap benefits from giving presents to their employees. Recipients may feel a morale boost, increase their motivation to improve productivity, and more likely to apply their best efforts.
Gift Policies and Principles
Many companies establish an official gifting policy with a uniform set of rules. What is appropriate and prohibited? Corporate policies normally state from whom and in what circumstances an employee may accept a gift. Other protocols are based on a commonsense approach to office relationships and how to avoid embarrassment.
The standard rule is that gifts should flow down the supervisory line. The rationale behind this guideline is that it protects employees from ever feeling pressure to buy something for the boss. On the other side, companies need to discourage any situation where a superior might feel obligated to respond with favoritism. Group gifts are an exception, where it is acceptable for the entire team to contributed.
Another general rule is to avoid giving overly personal items, such as perfume and jewelry. However, some bosses may give their direct reports small clothing items such as scarves and gloves. If you are gifting to a team, never leave out anyone and make sure each gift has comparable value.
Compiling a Gift List
There are many ways for managers to express generosity without breaking office policies, such as:
- Do not exceed any prescribed set amounts.
- Be careful about alcohol: Many abstain because of health or religious reasons.
- Very inexpensive or thoughtless gifts can be offensive. Do not buy candy from the newsstand on the corner.
- Do not give cash, unless it is part of a formal bonus program, but gift cards and certificates are permissible.
- Do not pressure fellow team members to contribute to group gifts.
- Avoid donations to controversial charities.
- Do not give company swag.
Suitable gifts include:
- Flowers and plants.
- Food and wine (if no religious sensitivities).
- Event tickets.
- Meals.
- Books.
- Travel vouchers.
- Subscriptions.
- Electronic gadgets, such as noise-canceling headphones.
- Picture frames.
- Desk accessories, such as paperweights, calendars, pen sets, and monogrammed mugs.
- Fruit-of-the-month club memberships.
- Gift cards — ideally matched to employees’ individual interests.
When you present your gift, remember that wrapping paper and a note add a personal touch. Let the person know it is unnecessary to open it on the spot.
Tax Deductions
Donors can take tax deductions for their gifts. Be careful your generosity does not end up making an employee liable for declaring or paying tax. Any gift, from a bonus to a gift card, counts as income. Yet, the IRS has set out some exceptions. If the gift is occasional rather than regular and of little monetary value, it is classified as a “de minimis fringe benefit.” Alternatively, an award of less than $400 for outstanding work can also avoid taxes, but the rules are complex. According to the IRS: “Cash is generally intended as a wage, and usually provides no administrative burden to account for. Cash therefore cannot be a de minimis fringe benefit.”
Although the IRS limits tax donors’ tax deductions to $25 per item, business entertainment has more latitude, at a 50% deduction. Incentive gifts can also be written off. For example, travel or equipment awarded to your best-performing salesperson might qualify. Remember, IRS rules are subtle, and you should consult a qualified tax adviser about the tax implications of any gift.