Your Guide To Giving Gifts to Employees (With Tips and FAQ)

By Indeed Editorial Team

Published April 2, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Many companies, managers and supervisors give gifts to their employees to recognize performance or special occasions. Managers often give personalized rewards to show their appreciation for their team's work performance. Learning about giving gifts to employees can help you discover appropriate tax-free or taxable income items that can enhance your professional relationships with your team.

In this article, we review the benefits of giving gifts, explore tax considerations for employee presents, discuss some tax-free gift examples, provide tips for personal gift-giving and examine some frequently asked questions about giving gifts to employees.

What are the benefits of giving gifts to employees?

Many managers and companies use gift-giving to help show their appreciation for their team members and employees. This can help employees understand their importance to the company and improve their performance. Some additional benefits to giving your team gifts include:

  • Increased employee engagement: Personalized gifts can help employees handle stress in the workplace, which can improve overall engagement. This can also increase their positivity in the workplace, which can foster a constructive work environment.

  • Enhanced employee loyalty: Providing gifts to your team can help strengthen the professional relationship between you and your team. This bond can improve the employee's loyalty to you, your goals and the company.

  • Improved productivity: Giving rewards for performance can help employees understand the company's value placed on achieving milestones or goals. This can increase motivation in the workplace and improve productivity.

  • Heightened job satisfaction: Offering breaks in the workday to provide gifts to your team or employees can help them relax and reduce stress. This can also help promote a positive and friendly work environment that employees value.

Related: 35 Ideas for Your Work Gift Exchange

Tax considerations for employee gifts

The IRS considers many gifts offered by employers as taxable employee income. Gift cards and cash bonuses are examples of taxable rewards for employees. Many items that employees can redeem for cash are also taxable income that a company reports to government agencies. Some examples of taxable gifts include:

  • $10 gift card for a local restaurant

  • $30 gift certificate for an entertainment venue

  • Season tickets to a local sports team

  • $50 performance bonus

  • Any item worth over $100

Related: 30 Top Corporate Gift Ideas for Everyone on Your List

What gifts are tax-free?

There are many items a company can offer its employees that are tax-free. These gifts or benefits are typically small items that are too trivial to justify tax considerations. Some examples of tax-free gifts or benefits include:

  • Employee-of-the-month parking

  • Non-cash gifts with a low fair market value

  • Occasional single attendance event tickets

  • Certain group term life insurance

  • Achievement awards or plaques

  • Occasional meal compensation

  • Business mobile phones

  • Occasional company meals

Related: 105 Gift Ideas To Thank Employees

What are personal gifts in the workplace?

Personal gifts are items that managers or other company individuals give to employees with no business purpose. Many managers give individual personal presents to their team members or other company employees due to their admiration or respect for the employee. Some instances of personal gift-giving without a business incentive include:

  • Birthday presents

  • Maternity gifts

  • Employee illness gifts

Related: 60 Coworker Gift Ideas To Celebrate Every Occasion

Tips for appropriate gift-giving

Review this list of tips to help you find appropriate items for your team or employees:

Understand your employee's interests

Asking about your employee's interests can help you find gifts they might appreciate. This can also show your genuine interest in their interests and improve the professional relationship between you and your team. Many managers send emails, ask questions or distribute surveys to inquire about employee interests because it's an effective method to gather information quickly. Some questions to consider incorporating into a survey, email or conversation include:

  • What are some of your hobbies?

  • What kind of gifts do you like to receive?

  • What is your favorite movie or TV show?

Related: 13 Fun Perks To Offer Employees in the Workplace

Determine gift motivation

Understanding the motivation behind the gift can help you find items that align with the occasion. Some common motivations for gifts include:

  • Individual performance

  • Special occasion

  • Team performance

  • Holiday or birthday

  • Company performance

Analyze tax implications

Researching the tax implications of a gift can help you find the correct type of gift for a situation. If you want to give tax-free gifts, consider items with a lesser fair market value. Understanding more about your employee's financial situation can also help you determine if taxable income rewards align with their current situation.

Frequently asked questions about giving gifts to employees

Review these frequently asked questions to help you understand more about gift-giving in the workplace:

How can I give employee achievement awards?

Determining whether you want to award taxable or tax-free achievements can help you narrow the type of gift you give employees. Taxable achievement awards can include cash, a vacation, meals, lodging, sports tickets or securities. Tax-free achievement awards have additional rules for employees. Some rules for tax-free achievement awards include:

  • The award is tangible personal property

  • You give it for length of service or safety

  • You award it as a meaningful presentation

  • The award aligns with a qualified plan award

What are occasional gifts?

Occasional gifts are items given randomly with no set schedule. A company might offer occasional gifts periodically throughout the year to recognize performance, certain events or holidays. Occasional rewards are also items that have a one-time use, such as a cooking class voucher or sporting event tickets worth under $100.

What are some other appropriate gifts for employees?

There are many gift options for managers to consider. Many professionals choose simple gifts that individuals can appreciate. Some additional presents that many employees might value include:

  • Desk accessories

  • Company-branded apparel

  • Tote bags

  • Keychains

  • Drinkware

What is an employee gift policy?

An employee gift policy or plan outlines the proper code of conduct for giving or receiving gifts in the workplace. This helps managers and employees employ equal treatment to distribute items in the workplace. Gift policies can also help prevent workplace conflict and decrease employee stress regarding giving or receiving items.

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