A gift card for employee recognition: a double edged sword

October 08, 2010

The ever increasing popularity and the purchase of gift cards so readily accessible via the Internet it is easy to opt for these types of gifts to commemorate an anniversary, a birth or to simply say thank you. Although these types of gifts are very much appreciated by many people, from an employee’s point of view these little cards basically represent additional taxes. The thought is wonderful and as an employer it is important that you recognize the contribution of your employees, a gift card may not be the best way to show your appreciation. A gift card is considered a near cash gift and due to tax implications, it is better that employee recognition be offered in the form of a non cash gift.


Tax-free, non-cash gifts
According to the Canadian Revenue Agency, employees may receive two non-cash gifts per year on a tax-free basis in order for the employer to mark a special occasion such as a marriage, a birthday, Christmas or Hanukkah. As well as gifts, the employer may honour achievements (years of service, meeting safety standards) by offering two non-cash awards per year to an employee on a tax-free basis.

Total cost of gifts and awards
The total cost of the two gifts or the two awards, taxes included, may not be more than 500$ per year.

Benefit to the employer
The total cost of the gifts and the awards offered to employees can be deducted from the employer’s income.

Gifts and awards
A gift from an employer to an employee must underline a special occasion. (a wedding, the birth of a child, a religious holiday…)
An award must be given to recognize an accomplishment that is related to the job (years of service).

Cash and near cash gifts and awards
Always considered a taxable benefit to employees, cash and near cash gifts and awards are double-edged swords. On the one side, these give the employee the freedom to choose, but on the other, the employee must pay taxes on the gift or award.

Non cash gifts and awards
When an employee receives a non cash gift or award, the cost does not need to be declared as a part of their taxable income as long as it is just that, a gift or an award given to mark an occasion or an employment related achievement. A non cash gift or award that is given for any other reason will not apply to this policy and the fair market value for the gift or award will need to be added to the employee’s income.


An employee recognition program is one of the easiest ways to recognize employees’ hard work. Not only will it help you retain your valued staff, but it will also boost your entire team’s morale and increase productivity. Williams’ employee recognition programs are hassle-free and allow you to offer quality, non-cash, tax-free gifts and awards to your employees. Contact us for more information about our many employee recognition programs.

http://www.cra-arc.gc.ca/nwsrm/fctshts/2002/m12/gfts-eng.html

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