€1500 tax-free benefit is becoming a cost-of-living support tool

How Irish employers are using the Small Benefits Scheme to ease financial pressure on their workforce

Recent research shows that 84% of adults in Ireland say that the cost of living is a major concern, with almost half fearing they won’t be able to meet household bills in the year ahead. It’s a worry that carries over into the workplace too, as employees increasingly look for financial support beyond salary remuneration alone.

Against this backdrop, employee rewards are seen by employers as not just an engagement tool but as a practical way to support workforces financially. In fact, over a third of employers in Ireland say they are reallocating spend in response to rising costs to maximise impact from financial wellbeing programmes.

The increased tax-free employee rewards limit – uplifted from €1,000 to €1,500 last year - gives Irish employers a timely opportunity to deliver meaningful value to staff while managing overall costs. The Small Benefits Scheme allows employers to give non-cash rewards to employees, tax-free, providing businesses even more room to recognise their teams without adding payroll taxes.

No longer just a one-off Christmas bonus, rewards are easing cost of living pressures throughout the year, supporting financial wellbeing with the additional benefit of supporting the local economy.

Rewards are increasingly used by employees to help manage everyday expenses

Across Ireland, people are contending with high interest rates and rising inflation, while the average fixed-rate mortgage is at the highest level since December 2023. In fact, wage growth has consistently failed to keep pace with high inflation, leaving many feeling the squeeze on their day-to-day finances.

Unsurprisingly, cost of living issues are shaping employer priorities, with nearly a quarter (24%) of Irish employers citing this as a key business issue shaping benefit strategies. While employee rewards have long been used as a cost-effective addition to salary increases or bonuses to boost morale and commend performance, their role is evolving. Increasingly, rewards are being positioned as a more immediate and flexible form of financial support.

Our transaction data reveals that spend is emphasised on everyday essentials like groceries, utilities and clothing. Supermarket chains rank among the most popular merchants for reward spend in 2025. This indicates that rewards are not purely a discretionary extra, they serve as a commonly used option for everyday purchases.

This is further reflected in reward redemption patterns, with rewards typically redeemed within 49 days while nearly a third (29%) are activated within the first two days.

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Boosting morale with choice-driven rewards

Against a stalling economy, well-designed reward programmes offer a flexible way to financially support employees, while encouraging engagement and long-term loyalty.

It’s also in the interest of employers to help relieve financial stress which can impact productivity across the organisation. In the UK and Ireland, a recent report found that both employees and business leaders say financial stress has directly impacted work over the past year. In addition, a quarter of employees said it reduced overall productivity. Reward programmes that provide practical and flexible support act as an effective buffer against these pressures.

However, for real impact, employees need choice over how they spend. Many employees prefer greater flexibility than single‑merchant rewards can offer Employees want agency to spend in ways that are most meaningful to them, whether it's for groceries, travel, or personal hobbies.

This freedom helps employees feel recognised, valued and supported. By combining financial support with personal relevance, rewards become more than just perks – they are a strategic tool for building loyalty and sustaining morale through uncertain economic times.

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Driving employer value and cost efficiency

Nearly two-thirds (61%) of employers in Ireland say that rising benefit costs are a top business issue. Higher business costs, including employer PRSI contributions, can make it difficult for employers to allocate additional budget beyond base salaries.

As a result, benefits programmes must strike a balance between providing value to employees and maintaining cost efficiency for the business.

The uplift to the tax-free benefits allowance makes this a more achievable goal for many employers. In fact, estimations show that a 100-person organisation fully utilising the €1,500 tax-free allowance could generate up to €200,000, depending on utilisation patterns, in combined employee and employer value. With this, employees can maximise the impact of rewards without incurring additional income tax.  

For employers, the allowance means they are not penalised with additional payroll costs when providing incentives, making them a much more cost-effective choice. This helps control expenses and ensures that reward programmes remain scalable and sustainable.

Beyond financial value, tax-free rewards provide employers with a cost-effective way to motivate, retain and support staff in challenging economic conditions. By providing a tangible benefit to employees, in the way they choose to spend, businesses will build a supportive culture that encourages retention and loyalty.

Ultimately, as cost-of-living pressures persist, Ireland’s enhanced tax-free benefit allowance is redefining employee rewards as a practical, flexible and mutually beneficial solution. It also offers employers a chance to deliver meaningful support while strengthening workforce resilience and engagement – a trend we expect to see continue as organisations place greater emphasis on financial wellbeing and smarter, more impactful benefits strategies.

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PERX is an employee reward and incentive solution. Taxtreatment depends on individual employer implementation of the Small Benefits Scheme. Rewards are non-cash benefits and do not constitute income, savings, orfinancial advice.

 

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