Bonuses, parties, gifts, Christmas closedowns and holiday entitlement…Osborne Clarke employment partner Victoria Parry charts a course through some legal and tax implications of these yuletide delights.
Victoria Parry, a partner of Osborne Clarke's employment law team, examines some issues which employers face at Christmas time.
Is the Christmas Party a taxable benefit?
Yes, if more than £150 (tax year 2003-2004) is spent per head on staff entertainment over the tax year. In this case, both the employee and the employer will have to pay tax and National Insurance on it.
What about Christmas gifts?
Cash bonuses are subject to tax and National Insurance in the usual way, but other gifts (e.g. a Christmas hamper) are not likely to be taxable in the hands of the employee. However, the employer may have to pay tax on such gifts unless it has an arrangement with the Inland Revenue not to do so (a PAYE Settlement Agreement).
Do we have to pay the annual Christmas bonus?
If you habitually pay a Christmas bonus to all employees, or all employees within a particular group (such as directors), and the amount of the bonus is always a percentage of salary or profits, the bonus may have acquired near-contractual status and employees who usually get it will have a legitimate expectation of receiving one. This means that, to avoid claims for breach of contract by disgruntled employees, you should continue to do so, unless you can show that it really is discretionary, or you can vary the terms of employment.
A point to check is whether part-time employees, or those on sick or maternity leave can be excluded from the bonus payments simply by reason of their absence. This will depend upon the terms of the bonus scheme and so it is generally worth taking legal advice on this. Sometimes it is possible to pro-rata their entitlement according to how much time they actually spent at work.
What rights do those employed for just the Christmas season have?
Seasonal employees have the same rights as permanent staff, although they will have insufficient service to exercise some of them. An employee with less than a year's service can still bring a claim for unfair dismissal on some grounds; for example, if they are dismissed for a reason related to the Working Time Regulations, pregnancy, childbirth, maternity, parental leave, dependant care leave, the assertion of a statutory right and more. A seasonal employee can also bring a claim for discrimination, as there is no qualifying period of service. Care should also be taken at the recruitment stage, as the employer could be liable for discrimination even though the candidate is not an employee.
The Christmas Party – can we finally let our hair down?
Staff should be reminded before the office Christmas party that improper conduct will not be tolerated. If staff are harassed by other members of staff, as their employer you may be the target of a claim by the harassed employee even though the party was not held in the office or during office hours. It is a defence to show that you took reasonable steps to prevent it; although in practice it is very difficult for employers to meet this standard (particularly if they have provided free alcohol!). This year there are two new anti-discrimination areas (sexual orientation and religious belief)in addition to the pre-existing areas (sex, race, disability).
If you do receive any complaints from staff, you should ensure that you deal with them in a sensitive manner and investigate where appropriate.
Remember to invite employees on maternity leave as well as ensuring that there will be appropriate access for any disabled invitees.
With the introduction of the new anti-discrimination laws mentioned above, employers must take care that when inviting 'other halves' of employees, same sex partners are included in the invitation.
Another point to remember is that if agency workers are invited to the party, it could be an indication that they are employees of the company rather than of the agency itself. This is significant when you no longer require their services as they may try to allege that you are the true employer in unfair dismissal proceedings. However, if they are employees of the agency, this will not be a problem.
An employee has asked if he can have time off to celebrate a religious festival – do I have to allow this?
Whilst employees have no right to time off work to celebrate a religious festival, employers should give careful consideration to any such request and refuse it for good business reasons only. Employers can insist that the time is taken as paid leave. However, if a significant proportion of the workforce is of one religion, it might be reasonable to recognise the religious festival in the same way as a public holiday rather than just allowing individuals to take time off that day.
Can I close the office at Christmas?
Obliging employees to take holiday at Christmas may not seem harmful on the face of it, but for non-Christian employees this could be a form of discrimination on religious grounds, especially if they would prefer to save their annual leave for their own religious festival at a different time of year. If it is possible to allow an employee to work on Christmas day, perhaps from home, or to keep the office open for that employee, then this should be considered, but if there are good business reasons why this is not possible, then an employee claiming religious discrimination on this ground is unlikely to be successful.