Cover feature
A festive end to 2009?
Don’t cancel the Christmas party just yet. As Cath Janes says, it is your chance to get 2010 off to a better start
Even if 2009’s recession-induced hand-wringing is dying down, did you know that in the next few months you’ll be expected to negotiate yet another thorny, economic dilemma? And this time it really is a tough one. Yes, if it’s October then it’s time to consider the corporate Christmas and the credit-crunching is going to have a memorable impact on how you handle it.
As if it’s not hard enough to make employees feel valued: exactly how do you put a festive smile on every face in the organisation? In 2009, though, it really is a juggling act. Not only do you have reduced budgets to play with but you also have to create the perception of thrift whilst rewarding employees for slogging through the year from hell. Scrooge-like miserliness will suit the board but not the staff, while throwing fiscal caution to the wind may win brownie points from colleagues but the directors will throw a fit.
‘One of the trends we have noticed is that because we are in a recession people dislike wastage,’ says Kevin Harrington, director of Sodexo Pass which supplies corporate gifts and incentives. ‘However, people also have the desire for fun and frivolity, especially at Christmas. We are having to be careful but also having to meet the desire to celebrate surviving such a tough year. The trick is to be forward-thinking, spending a comparatively small amount of money while using it for maximum motivation.’
When the Chartered Institute of Personnel and Development surveyed organisations about their recession response to Christmas 2008 it found that 60% still planned to have Christmas parties and that the private sector was the most supportive of this trend.
Early signs indicate that employees expect their firms to make an effort this year as well, with a survey showing that 60% of staff want some kind of Christmas event. Nearly half of those surveyed (200 plus employees from a variety of industries) by Outsourced Events thought their company should spend £31 or more per head.
Those in the know say skimping on festive cheer is short-termism at its worst. ‘I don’t think this is the right approach at all,’ warns Nigel Cooper, MD of Motivcom, which works to improve business performance. ‘It’s all about getting the team together and looking forward as they move into 2010. There’s a fear that doing this will look like corporate largesse but you don’t have to reward employees with glitz. It can be simple, low cost and straightforward as long as it brings employees together. It’s about sharing the burdens and the pain as well as the success.’
Voucher schemes in particular are benefiting from this fresh approach. Companies such as B&Q have even announced changes to their incentive scheme programmes in time for Christmas in an effort to capitalise on their value to the employees who receive them.
Francis Goss is head of commercial operations at Grass Roots, strategic reward experts. He says, ‘One shift we have seen is that individuals like vouchers that can be spent on products that are essential to every day living. It used to be that vouchers were spent on luxury items and on things that people wouldn’t usually buy themselves. Now, though, they are more concerned with day-to-day support. Vouchers give employees the chance to treat themselves if they want to but also to take away the pressure of finding money for living expenses.’
Time to party?
The annual party is also being subjected to the same scrutiny. Celebrations may feel incongruous in the current climate but party-cancelling will be about as popular as another economic nosedive. Once again, it’s about being creative. Alternatives to traditional events are gaining ground with shared parties, in-office events, evening meals, lunchtime celebrations and even visits to events allowing employers to say thanks without breaking the bank.
‘Don’t be afraid to move away from the traditional Christmas party,’ advises Tim Stevens, managing director of Best Parties Ever. ‘Shared parties and in-office parties are more widespread as are smaller departmental functions which are more cost effective. They are a stress-free solution and you can also involve staff in all aspects of arranging the party, another cost effective exercise if they have useful contacts.’
Outsourced Events’ survey suggests some employees are at least open to new ideas. When given a choice of alternatives to a lavish party 38% opted for an extra day off and 25% for a team lunch.
Stevens also advises party planners cut costs by holding events on cheaper mid-week dates, trying alternatives to the usual turkey menus, asking staff to supply their favourite music or using low cost entertainment such as pub quizzes.
Saying thank you
And there’s one other key element – a thank you. Regardless of the gift or the event, what employees really want is acknowledgement that their difficult year has been recognised and that their efforts and loyalty are being rewarded. Essentially, the team at the top needs to buy into Christmas. The trick is getting them to let go of the purse strings first.
Grass Roots’ Goss believes that neglecting the needs of employees at Christmas has a devastating impact upon staff morale and the perception of the organisation. ‘To cut the budget to zero is even more dangerous than spreading the cost thinly,’ he says. ‘That’s why it’s up to payrollers to convince the top team that if they spend on Christmas they’ll get a return for their investment in terms of loyalty, motivation and discretionary effort, which is when staff go above and beyond what’s expected of them.
‘You have to produce evidence of this by referring to previous programmes or case studies of how such investment impacts positively on a company. Show them how sales went up as a result, for example.’
It’s also a question of confidence. After a hard year employees also want to know that their efforts are helping create a better future. This infectious spirit won’t just benefit organisations internally but will also ignite a greater confidence in the economy too.
‘It’s time to move on from the recession,’ explains Cooper, ‘and get back to doing business. By holding a Christmas celebration it gives employees the message that there is a brighter year ahead of them and if every business created this feeling then the economy would start moving forward again. It’s simplistic but it’s true.’
He continues: ‘Yes, businesses are right to keep a check on how they handle their Christmas budgets. Yet if they want 2010 to be brighter than 2009 giving employees a much-needed boost is where that starts.’
Something to celebrate
Tim Kelsey provides a reminder on the tax rules surrounding gifts and parties
Although employers are expected to cut back on seasonal generosity this year, nevertheless it’s likely that many businesses will mark whatever festive season they or their staff celebrate with the provision of entertainment, hospitality and gifts, which might create potential tax liabilities. Knowing the rules and exemptions available could save your employer money.
Firstly consider the provision of gifts to employees. Any gift of cash, cash vouchers or shares must be processed via payroll and subject to PAYE and NICs at the time of provision. Non-cash gifts and awards are potentially subject to tax, and normally should be reported to HM Revenue & Customs (HMRC) via form P11D. However, some ‘trivial’ gifts and awards won’t need reporting although there are There are no formal exemptions for such gifts, but HMRC has instructed Inspectors to take a common-sense approach in their treatment.
The guidelines explain that such non-taxable gifts must be given as part of routine staff welfare, and not as a reward for services. Examples listed include a turkey, one or two bottles of wine, or a box of chocolates. In order for the benefit to be deemed trivial, the cost of providing it per employee is considered, not the overall cost to the employer. Giving a £6 box of chocolates to each employee in a company with 5,000 staff would generate a significant overall cost, but the individual benefit would be considered trivial and therefore worthy of exemption from reporting. No trivial upper limit has been set by HMRC but typical figures agreed range from £15 to £30. Anything that is not ‘trivial’ must be reported unless the employer has a current PAYE settlement scheme (PSA) in place to cover the employees’ tax liabilities.
Businesses often give gifts to other companies’ employees as well, perhaps to mark appreciation of work on a joint project or as a thank you for continued business. Such gifts are also reportable to HMRC by the giver, unless a number of conditions are met. The gift must not have been provided or procured by the direct employer, nor given in recognition of specific services performed in the course of employment. It should not consist of cash, shares or services, and the total value of gifts given to the individual in a tax year must not exceed £250. If the terms of the exemption cannot be met, then if the employer has arranged the benefit they must return it via forms P11D or the giver must let the recipient know the value of the gift so they can report it under self-assessment.
Parties may also be provided tax free to employees provided a number of conditions are met. The party must first be open to all staff generally at a particular work location – separate departmental parties are allowed provided everyone gets the opportunity to attend one such event. In order to qualify, the total cost of the event should not exceed £150 per head. This includes VAT, transport, and overnight accommodation. Divide the cost by the number of attendees, including non employees, to calculate the cost per head. An employer may provide more than one function in a year, and provided the total aggregate cost does not exceed £150 per person all the events will be exempt from tax. If this is breached the employer must decide how best to maximise the exemption amongst the functions held, and report the total cost of the function(s) that exceed the limit via P11D.
Checklist
- Send an inter-departmental memo asking if anyone intends to give gifts to staff this year.
- Contact HMRC and ascertain whether or not the benefits will be considered trivial.
- Ask about gifts to be provided to non–employees and make sure sufficient information is recorded to allow accurate reporting. Consider extending any corporate gift register to include gifts given as well as received.
- Check the party arrangements and make sure everyone is invited.
- Make sure you can accurately count the total cost, number of attendees and are also aware of any other functions held in year.
- Is the business asking senior managers for personal contributions towards the cost? If it does these can be used to reduce the overall cost when calculating the per head charge.
Charity ideas for the festive season
Payroll giving
Ensure you have a payroll giving scheme in place for your employees – and your employees can sponsor a granny, child or gorilla for Christmas.
This HM Revenue & Customs approved scheme allows your employees to give to any charity they choose, directly from their gross pay. This is extremely tax efficient, especially for the higher rate tax payer. If they donate £6 a month to their favourite charity, this becomes £10 after the tax breaks. Many companies enhance their schemes to back the charity choice of their individual staff members.
You can also set up a sponsorship option through your pay for Christmas. Whether this be a child, gorilla, granny or even a Christmas dinner, there are lots of choices.
Give an hours’ pay for Christmas lunches.
Why not encourage everyone to join in and give an hour’s pay once a month. It usually works best if the most highly paid members of staff take the lead. You need to make sure you communicate the initiative effectively to all staff so that they understand what a huge difference that hour can make to somebody’s life.
Have a ‘D Day’ – to make someone’s Christmas.
Many of your employees will have watched the recent BBC2 programme Queen of Charity Shops featuring Mary Portas and want to have a Donate, Don’t Dump Day. A company’s employees could donate one good quality item each.
Recycle for charity – in particular unwanted Christmas presents.
Be part of the initiative to reduce waste and reduce poverty at the same time. There are so many every day office items that you can recycle for charity. Don’t just throw them away. Recycle mobile phones, inkjet cartridges, lap tops and so on with Greensource and help lots of different charities each and every time you recycle.
Operate a ‘shoebox’ scheme at Christmas.
This annual project enables caring individuals, families, schools, churches, businesses, and other organisations to fill ordinary shoe boxes with small toys, school supplies, sweets, and other gifts for needy children around the world.
No such thing as a free lunch!
If you have a staff restaurant, why not ask everyone to pay an extra 50p/£1 for Christmas lunch once a month and donate the proceeds to charity.
Ideas suggested by Workplace Giving UK