Christmas Bonus

Do you give a Christmas bonus?  Do you give cash or a gift?  There’s a relatively new way of giving a bonus that costs less and gives more to the employee.

The Canada Revenue Agency changed their policy a few years ago on non-cash gifts to employees.  You are allowed to give up to a total of $500 (including taxes) in one or two non-cash gifts to an employee in a calendar year. 

This is a great idea.  If you gave an $500 cash bonus, you will pay employer taxes (CPP, EI etc.) on top of that and the employee will pay tax on the amount.  It may be that net value of the gift to the employee is only $350.

It is important to note that the gift must not be cash or “near-cash”, which is defined to be easily converted to cash or have a cash equivalency.  Gift certificates that can be cashed in or stocks fit in that category.

However, if you went out and bought everyone a $500 home theatre system, you got to deduct the whole expense and they didn’t have to declare the gift as a taxable benefit. 

CRA seems to have altered the policy this year.  When the policy change first came out in 2001, the press was full of stories of employers taking their employees out shopping and buying up to $500 worth of items for them. 

In fact, that is what I did with my own staff.  We had a staff luncheon and then went to the mall, with everyone buying gifts for themselves on my card.  It was a ton of fun for me and the employees seemed to like it. 

Now, their web site claims that “near-cash” includes “items selected by the employee and purchased by the employer (unless the number of items from which to select is very limited)”. 

What is that?  This means that we have to try to read their minds as to what they like and surprise them?  Do we have to buy everyone the same thing, instead of getting people what they really want?  I guess it is no problem if I buy something that they don’t like.

The annoying thing is that it makes no difference to the government coffers if the employer buys something the employee has selected, as opposed to following their new guidelines.  So why do they care?  They have taken most of the good parts out of a good policy - Scrooges that they are.

Why not make the policy very simple? You should be able to get up to $500 in non-cash gifts (which would exclude gift certificates and stocks) in a calendar year.  There should be no limit on the number of items and no restrictions on the employee choosing the gift.  It would be convenient, it would not cost anything for the Feds and employees would be happier!