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NIC on gift cards - reward for recruitment

Are recruitment rewards classed as suggestion rewards?

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What is the NI position when an employer rewards an employee (with a gift card totalling £150) for recommending a new member of staff (therefore saving the employer recruitment agency fees)?

Does this fall under s321(6) / 322 ITEPA 2003 as a financial benefit award for a suggestion and is therefore exempt from NI?

Thank you.

Replies (11)

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By David Ex
19th Nov 2021 12:03

Absolutely not.

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Replying to David Ex:
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By 27Spots
19th Nov 2021 12:13

Thank you, I'm grateful for your definitive and prompt response.

I am considering the conversation I'll be having on this later, so if you're able, would you consider advising why not?
I doubt the employer has read the legislation but if they have, why does the recommendation of a new employee not create an improvement in efficiency (which was the 'grey' area for me)? The employer has employed the suggested employee so the requirement for the employer to adopt the suggestion has been met and there is a financial benefit - no recruitment agency costs.

Many thanks again!

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Replying to 27Spots:
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By Wanderer
19th Nov 2021 12:33

Well this is about the most liberal interpretation of a suggestion scheme but I'll have a go!
It can't qualify as an exemption as an encouragement as it's over £25.

Therefore it will need to be financial benefit award. And it's difficult to see how it complies with the definition of a financial benefit award in 321(6):-

S321(6) wrote:
“financial benefit award” means an award for a suggestion relating to an improvement in efficiency or effectiveness which the employer has decided to adopt and reasonably expects will result in a financial benefit.

HMRC's interpretation of this:-
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim06630

Like you it's the "relating to an improvement in efficiency or effectiveness" that I'd be struggling with.

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Replying to 27Spots:
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By David Ex
19th Nov 2021 12:54

27Spots wrote:

I am considering the conversation I'll be having on this later, so if you're able, would you consider advising why not?

Others have got in ahead of me but the first question would be whether there is even a “scheme” as envisaged by the legislation. Not sure that first hurdle is passed from your original post. Is there a wider scheme or is this just a one-off idea someone had?

End of the day, unless there are a lot of these, NI on £150 isn’t worth sweating over.

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Replying to David Ex:
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By 27Spots
19th Nov 2021 14:15

I guess there is a scheme by virtue of the fact that employees are aware generally that if they recommend someone to a position, they'll be rewarded.

And you are right, of course, the monetary value is so small as to not be worth worrying about - I just want to be clear in case next time its a higher value or in case it becomes a more frequent occurrence.

Thank you for your help!

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By Bobbo
19th Nov 2021 12:35

What if the new employee is useless and doesn't result in an improvement in efficiency?

Also, how does this meet subsection (1) of S321:
" This section applies where an employer establishes a scheme for the making of suggestions that is open on the same terms—
(a)to employees of the employer generally, or
(b)to a particular description of them."

If anything, surely the idea of creating a specific job role is what could give rise to an 'improvement in efficiency', rather than the recommendation of a specific person for a job role which has already been decided upon?

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Replying to Bobbo:
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By 27Spots
19th Nov 2021 14:23

Haha, well that's a good point but as it happens, the new employee has been in post for a few months now and all is going well!

I was thinking the 'improvement in efficiency' was not needing to deal with recruitment agents - the suggestion being 'you could employ this person, then you won't need to use the time/money to engage an agent.'

All employees are able to make suggestions when posts are advertised so I guess that meets the subsection(1) of s321.

That being said...I'm not looking for ways to make it exempt, rather, supporting opinions as to how its not exempt as my reading of the legislation is that these kind of rewards are not what it is for but I have to communicate that to others :)

Thanks for your help!

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Replying to 27Spots:
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By gillybean04
19th Nov 2021 15:47

Is hiring a new employee improving efficiency? Being able to produce more doesn't mean there's been any improvement to efficiency.

And if it does improve efficiency, did the improvement to efficiency arise because of the referral by the employee? Or did it arise because someone had/made the suggestion of allowing employees to refer directly?

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By Munch
25th Nov 2021 12:30

Prima Facie a gift card is cash. Just deal with as if you gave them £150. Its over £50 so not a trivial benefit. In the case of a trivial benefit it cannot be a cash card. Trying to be clever here and deem it a suggestion will not fly at all. There is a grey area over how many triv bens you can give in a year. Also it is an average per employee. Like paying for staff entertainment it is a pain to administer.

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Replying to Munch:
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By Leywood
26th Nov 2021 11:08

It couldnt be a trivial benefit anyway, even if it did meet the £ condifition, as it fails on the reason for the reward.

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By Kate Upcraft
26th Nov 2021 09:28

Absolutely agree this is not a suggestion scheme - 10/10 for me smile on a wet Friday! Employers do this all the time but as it's hardly motivational to report on the P11D under section C and capture through the payroll for NI when given (it's a class 1 liability for NI) so they normally go in the PSA.

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