Gifts and Awards for Employees
|Policy:||Gifts and Awards for Employees|
|Policy Nr:||Sec 02 - 14|
|Target Review Date:||2020-08-28|
|Main Stakeholder:||Managing Director|
The Canada Revenue Agency (CRA) provides clear rules around gifts, awards and long-service awards to employees. In order to be in compliance with these rules, the Department of Internal Medicine provides the following guidance:
A gift or award that you give an employee is a taxable benefit from employment, whether it is cash, near-cash, or non-cash.
However, CRA has a policy that exempts non-cash gifts and awards in some cases.
Cash and near-cash gifts or rewards are always a taxable benefit for the employee.
- A near-cash item is one that functions as cash, such as a gift certificate or gift card, or an item that can be easily converted to cash, such as gold nuggets, securities, or stocks, or where the employee has an element of choice (e.g. a $100 gift card or gift certificate to a department store, since the employee can purchase whatever merchandise or service the store offers)
- Reward: An award given to your employees for performance-related reasons (such as performing well in the job he or she were hired to do, exceeding production standards, completing a project ahead of schedule or under budget, putting in extra time to finish a project, covering for a sick manager/colleague) is considered a reward and is a taxable benefit for the employee.
Non-cash and gifts or Awards may not be a taxable benefit for the employee
- Something where the employee is not given an element of choice, such as tickets to an event on a specific date and time, may not be a taxable benefit for the employee, if the other rules for gifts and awards are met.
- A gift has to be for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child.
- An award has to be for an employment-related accomplishment such as outstanding service, employees' suggestions, or meeting or exceeding safety standards. It is recognition of an employee's overall contribution to the workplace, not recognition of job performance. Generally, a valid, non-taxable award has clearly defined criteria, a nomination and evaluation process, and a limited number of recipients.
If you give your employee a non-cash gift or award for any other reason, this policy does not apply and you have to include the fair market value of the gift or award in the employee's income.
What you cannot do:
Because of tax reasons, the Department of Internal Medicine will not approve the purchase of gift cards, or gift certificates, along with other near-cash items, for employees, for any reason.
What you can do:
Non-cash Gifts and Awards for Employees
If you can determine that the gift is an award, and not a reward, you may give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less annually. If the fair market value (FMV) of the gifts and awards you give your employee is greater than $500, the amount over $500 must be included in the employee's income. For example, if you give gifts and awards with a total value of $650, there is a taxable benefit of $150 ($650-$500).