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Despite constraints, employers can find ways to recognize workers and boost retention
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Despite the restrictions on employee achievement awards that were sustained by the Tax Cuts and Jobs Act enacted last December, employers can still give these awards, which can play a vital role in attracting talent, fostering engagement and promoting retention.
Tangible Property Gifts
The tax act clarified that tangible personal property awards for employee achievement are still deductible by an employer (or would be deductible but for the fact that the employer is a tax-exempt organization) and can be excluded from an employee's taxable gross income.
IRS regulations in place before the tax law restrict these tax advantages to length-of-service awards or safety awards given during "meaningful presentations." The award should "not create a significant likelihood of the payment of disguised compensation."
In addition, the IRS requires that:
[SHRM members-only toolkit:
Managing Employee Recognition Programs]
The Tax Cuts and Jobs Act makes clear to any doubters that tangible personal property excludes:
Attorneys in the New York City and Washington, D.C., offices of
law firm Morgan Lewis commented that the tax law "maintains, with only a minimal change, the current exclusion for employee achievement awards, essentially codifying the proposed regulations that have been applicable since 1987," namely, that the exclusion is limited to tangible personal property.
Mary Hevener and Jonathan Zimmerman, partners at the firm, and associate Anna Pomykala noted that
the conference report by the joint congressional committee responsible for finalizing the bill stated that "no inference is intended that this is a change from present law and guidance."
Recognition Fosters Engagement
Effective ways of
Using Recognition and Other Workplace Efforts to Engage Employees are highlighted in a new report from the Society for Human Resource Management (SHRM), based on a survey last fall of SHRM members. The report recommends that employers:
HR professionals are more likely to rate their employee recognition program as "good" at organizations where
any employee is able to nominate or recognize a peer, compared with those who had supervisors/managers, senior-level executives or HR give recognition, the survey found.
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