Seasonal benefits

Seasonal events may seem like a way of motivating staff, but beware of cultural and religious issues, says Jamin Robertson.

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In sporting circles, it is said that rain is a great leveller in terms of status. In the world of work, the same may be said of Christmas parties.

Most would agree that management staff are just as partial to a free bar as their basement-dwelling minions, when they aren’t picking up the tab that is, so the annual Christmas party typically sees all employees scrum together to take advantage of their employer’s hospitality.

This can leave HR with a massive hangover should it be called upon to deal with issues such as harassment and discrimination.

According to Alastair Kendrick, a tax partner at accountancy firm Wilder Coe, seasonal events have proved such a minefield for some employers in the past that they have elected to pull stumps on the traditional Christmas party. "Many people are moving toward a summer barbecue as a much safer event," he says.

But few HR professionals will want to be known as the Grinch who axed the annual Christmas bash. According to the Chartered Institute of Personnel and Development’s annual Reward management survey 2006, most employers are hanging in there. Some 64% stated they put on a Christmas party or lunch event each year.

Come the big night, employers will obviously be keen to avoid disasters such as an inter-departmental punch-up or an episode of sexual harassment.

Regardless of their location, Christmas parties are treated as a place of work. Cautious employers may choose to put on entertainment early on in the proceedings and then close the event, allowing employees the option of continuing festivities in their own time if they wish to do so.

Employers are advised to make it clear prior to the event that unacceptable behaviour will be punishable according to the organisation’s disciplinary procedures.

Christmas parties and similar events attract tax breaks from HM Revenue and Customs (HMRC). It allows a tax exemption of £150 per head for the provision of annual employee entertainment, the ceiling on which was raised from £75 in April 2003. Employers that fulfil this requirement do not have to enter this expense on the P11D.

But Lesley Fidler, director of the employer consulting group at Baker Tilly, advises employers to keep careful records. She believes HMRC is a keen watchdog, particularly around the festive season.

"They will pick a month to look at records, and December is closely looked at. Employers have to be vigilant. Basically [the exemption allows] for food, music and dancing. HM Revenue and Customs expect it to be of that nature, and will go through and look for that type of expenditure." The exemption also includes the cost of transport to the venue and any accommodation.

If employers wish to take advantage of this allowance, the total spend must be carefully controlled, because if the total goes over the £150 exemption limit they will be taxed on the entire bill.

Employers that hold a number of events for employees throughout the year are treated slightly differently. Although the tax exemption limit remains at £150, should an employer spend more, it may nominate its most expensive event to qualify for the concession.

Regardless of the number of soirees on offer to staff, however, employers must open the doors to all employees in order to qualify for the tax exemption.

Inexpensive giftsAside from the annual party, employers can obtain favourable tax treatment on Christmas gifts, as long as these are relatively inexpensive. These will be treated as trivial benefits for tax purposes, which are exempt from benefit-in-kind tax.

But Kendrick says uncertainty over the taxing of trivial benefits means many employers fail to take advantage of the rules.

"People haven’t warmed up to trivial benefits. These are tax free and they are expected [by HMRC]," he says.

HMRC guidance does not specify the value limits for these gifts except to state they should be restricted to small items. A bottle of wine, a turkey, flowers or a basket of fruit are thus likely to pass the litmus test. Doling out cases of wine to staff, however, may be testing the boundaries.

Employers looking at other methods of reward may find that vouchers or electronic gift cards allow a degree of flexibility, allowing them to avoid presenting unwanted or unsuitable gifts although these cannot be treated as trivial benefits.

John Sylvester, director of the motivation and incentives division at P&MM, says the period leading up to Christmas is the busiest time of the year for providers.

"If you take our reward and redemption overall, we’ll see about a third of redemptions take place in the last two months of the working year. November and December are by far the biggest months for us," he explains.

The festive season presents an ideal time for employers to distribute these rewards, as staff can use them during the January sales.

Andrew Johnson, director general at the voucher trade body the Voucher Association, adds employers should see a return on their investment. "It’s ultimately about choosing the right incentive. There are vouchers and gift cards available to catch every employee. For example, in call centres, where you might have teams of young females, maybe Virgin or HMV vouchers might fit the bill."

According to surveys commissioned by provider IncentiveDirect, when teamed with incentive schemes, vouchers and gift cards can have an effect on employee motivation and engagement levels.

The results show 45% of respondents which utilised incentive and motivation schemes have experiences a significant increase in their employees’ performance levels, while 48% claim to have seen a positive impact on employee loyalty.

However, where employers choose to distribute a uniform gift such as a bottle of wine, they may encounter unintended consequences. For teetotal or some religious staff, such a gift may be considered offensive, or at least unwanted.

Tim Clark, a partner at law firm Blandy & Blandy Solicitors, advises employers to err on the side of caution. "A gift of alcohol wouldn’t itself constitute harassment. Harassment essentially involves unwanted conduct which has the purpose or effect of violating a person’s dignity or creating a hostile or offensive environment. A hostile insistence on acceptance might well be [considered harassment].

"Avoiding alcoholic gifts is a solution and avoids the issue of what to do when one employee accepts the gift but another for genuine reasons hands theirs back and ends up with nothing." The festive season, therefore, can be a headache for employers. The 2003 Employment Equality (Religion or Belief) Regulations provide protection against unfavourable treatment related to individuals’ religious or philosophical beliefs.

For this reason, employers that operate policies such as a Christmas closedown period need to tread carefully. "If you force people to take holiday around what is a religious festival, and that’s not your religion, there is the potential [for staff] to say ‘Look, I don’t want to take my holiday at this stage," says Clark. Such policies can be construed as indirect discrimination, although employers may avoid claims by proving the shutdown is based on legitimate aims.

"If the employer can determine the shutdown is [legitimate], like staffing the premises, then it may well be able to justify the arrangement even if it’s not in the interest of some within the group," he adds.

Employers that pay little heed to the regulations could face serious ramifications. In 1993, 17 Muslim knitwear workers in Dewsbury successfully sued their employer on the grounds of racial discrimination for refusing to grant time off to allow them to observe Eid ul-Adha. Their employer had refused all employees’ requests for holiday during the months of May, June, and July.

Clark advocates taking an even hand. "If you’re going to force people to take time off at Christmas, be extremely careful about accommodating requests at other times of the year. Imposing rigid restrictions upon when holidays can be taken, which serve to prevent employees observing religious festivals, have been held to be unlawfully discriminatory," he explains.

Top Tips for seasonal planning

  • Ensure the annual budget for staff events does not exceed £150 per employee in order to qualify for the available tax exemption. Employers that overspend will be taxed on the entire bill.
  • Take advantage of the tax-free treatment of trvial gifts. A bunch of flowers or a couple of bottles of wine won’t trouble HMRC.
  • Be fair with holiday requests to avoid claims of discrimination.
  • Avoid distributing alcohol if it may be viewed as offensive, (for example on religious grounds) l Vouchers or gift cards allow employers to cater to a disparate workforce in the festive season.

Case Study: Perks easy to digest

Emap delegates the organisation of seasonal benefits to individual departments. Stewart Grant, group benefits manager at the company, which publishes titles such as Heat and Zoo, says staff identify strongly with their individual brand.

The company is aligned into three operating divisions: consumer media, communications, and radio, in addition to its advertising unit.

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Grant explains the group does not operate a co-ordinated approach to celebrating the festive season so each department has the discretion to organise its own festivities and distribute seasonal benefits.

"We don’t just have one event at Christmas, as we’re always hosting events throughout the year anyway. We’ve just had the Kerrang! awards, for example, which many of our employees attend."