As we approach the Christmas period, it is important to be aware of additional employee costs that can arise so that they can be budgeted for as best as possible.
With staff shortages having become prevalent in all industries at present, it is going to be particularly important to ensure that remuneration packages are also competitive with industry, so that you are not left short-staffed.
In this article we have summarised some of the more common issues that arise for retail business during the Christmas season.
Staff Holidays and Casual employees
Most retail businesses will need Christmas casuals, because of busier than normal trading over Christmas, as well as permanent staff booking in annual leave. Where possible:
- Ask permanent employees to submit leave plans ASAP, so that Christmas casuals can be budgeted and advertised for, and to allow for training of new staff to be arranged.
- Have employment agreements and procedures up to date and ready for use for any new employees required.
- Conduct a review of current salary and wage rates, as well as other staff benefits provided to ensure that they are competitive with current industry norms. This will be crucial to ensure that you are able to retain and hire additional staff during this busy time.
It is important to be realistic about what is fair and reasonable while also considering what your business can afford when it comes to bonuses. Remember:
- Set a budget by considering the businesses current and projected profitability and cash flow;
- Your PAYG obligation will be higher than usual when it comes to lodging the December BAS (likely not payable until February 2022), as tax will need to be withheld from any bonus paid. Don’t let this sneak up on your cashflow!
- If a Christmas bonus is off the cards due to financial reasons, you may wish to consider a small gift instead.
The provision of gifts to employees are generally considered fringe benefits that will be subject to tax. However:
- The minor benefits exemption may apply for gifts valued at less than $300 per employee, meaning they will be exempt from Fringe Benefits Tax (FBT) (refer comments below).
- Non-entertainment gifts under $300 may also be tax deductible. For example, a gift voucher or bottle of wine.
- Entertainment gifts under $300, will not be tax deductible, however, will still be exempt from FBT. For example, theatre or sporting event tickets.
One common way to make an employee remuneration package more competitive is by providing staff discounts, which generally gives rise to a fringe benefit.
However, the way in which the provision of such benefits is structured, can have a significant impact on the income tax and FBT payable by employees and employers. As such, it is recommended that up-to-date tax advice be obtained in relation to this.
If planned carefully, a great result can be obtained for both employers and employees.
Christmas parties constitute entertainment benefits and may be subject to FBT unless an exemption applies, such as:
Minor benefits exemption:
- Applies where Christmas party is held on or off business premises where the cost is less than $300 per person, per benefit (i.e., venue hire, and food & beverage will each be considered separately).
- To claim this exemption, businesses are required to keep records of attendees including whether they were an employee or not.
Property benefits exemption
- Applies where a function is held on business premises, on a business day, for current employees and will exempt the cost of the function from FBT for current employees regardless of the cost per head.
- Although the property benefits exemption cannot apply to associates of employees (i.e., spouses), the minor benefits exemption still can.
Where an FBT exemption applies, the cost of the benefits will not be deductible to the employer. However, the tax saving on FBT will generally outweigh the loss of the tax deduction.
Don’t let the Christmas spirit and celebrations create a financial hangover for the new year. Plan ahead as much as possible.