Once your small business is thriving and the right team is in place, what's the best way to keep that going? While developing new products and offerings is one thing, making sure any members of staff aren't looking elsewhere is just as important.
The first step to stop them doing just that is putting an effective perks system in place. Whether it's subsidising events as a whole or even offering insurance benefits, the occasional treat can help keep employees motivated and, more importantly, with the company.
However, doing so has a number of tax implications that New Zealand's businesses need to be aware of. Here are a few things to keep in mind:
Bonuses and benefits can be varied
While treating the company to something relatively rudimentary such as a meal may be one thing, benefits can come in all shapes and sizes. For example, Fringe Benefit Tax (FBT) must be paid on any services or items that fall into the following four categories, as outlined by the Inland Revenue Department (IRD):
- Company vehicles made available for private use.
- Any services that are made free, subsidised or discounted by the company.
- Low-interest loans courtesy of the business.
- Any employer contributions to sickness, superannuation schemes and specified insurance policies.
FBT is changeable by employee
Offering the same perk to more than one employee can be an attractive way to keep costs down from the business's point of view. In cases such as this, the applicable benefit needs to be applied to the employee who used it most, and the tax figures worked out accordingly.
If the primary user of any bonus items or services cannot be determined, then the benefit needs to be pooled and again, the numbers crunched.
While offering perks and incentive schemes is one thing, keeping track of exactly what's going on with the appropriate finances can be tricky. Implementing small business software such as CashManager from Accomplish can keep the whole process simple, making it easy to keep an eye on the amount of capital flowing in and out of the wider organisation.