TÁNAISTE LEO VARADKAR has said Finance Minister Paschal Donohoe is working on the proposal to increase a tax-free bonus amount an employer can give an employee from €500 to €1,000 annually.

Under current rules, employees can only receive a benefit of €500 in value, tax free, each year from their employer.

This benefit must not be in cash but can be in the form of vouchers or cards that can be used to purchase goods or services. 

However, Varadkar told The Journal that the Government wants to find ways for workers to have more money in their back pockets after tax – including a higher tax-free allowance for annual bonuses.

“I think it is, he [Donohoe] is actually working on that at the moment,” he said.

The Tánaiste highlighted how public service workers were given a €1,000 Covid bonus tax-free, though he acknowledged that some employees have yet to receive it, stating he understands the “frustration in that regard”. 

The Tánaiste said it is not fair that workers in the private sector cannot avail of the same should their boss give them a bonus.

“An employer in the private sector who is giving a bonus to their staff, only a €500 can be given tax-free, and the second €500, if you like, would be taxed. And that is unfair in my view,” he said. 

“So Paschal [Donohoe] is doing some on work on that so that if people are getting end-of-year bonuses from a private sector employer, they can receive €1,000 rather than the €500 tax-free. And I think that would be welcome,” he said. 

The idea of increasing the tax-free benefit was first floated earlier this year when the Government was flying kites about its cost-of-living package announced a couple of months ago.

However, the proposal never made it into the package of measures.