Should you give your staff a Christmas gift?
Some workplaces hand out a ham, some a supermarket voucher, some a bonus, and some nothing at all. There's no law that says you have to give staff a Christmas gift, and plenty of good employers don't.
If you do give something, it pays to know how the tax rules treat it before you buy. A $100 voucher, a $100 bottle of wine and a $100 cash bonus are each taxed differently. The timing matters too, because the gift usually lands just before the Christmas closedown.
How the tax rules treat gifts
Inland Revenue treats most gifts to staff as unclassified fringe benefits, which covers free gifts, prizes, and goods or services given free or at a discount. Fringe benefit tax (FBT) doesn't apply as long as the total stays under two limits.
The first is $300 per employee per quarter, or $1,200 per employee a year for employers who file annually. The second is $22,500 a year across all your employees, which quarterly filers measure over the last four quarters including the current one.
Go over either limit and FBT applies to the full value of those benefits, not just the amount above the limit. A Christmas gift on top of other perks given in the same quarter, such as a birthday voucher or a prize from a staff competition, can tip you over without anyone noticing.
Gift cards have their own option. Since 16 April 2025, Inland Revenue lets employers either apply the FBT rules to gift cards or treat them as employment income and deduct PAYE. Under the FBT rules, a gift card counts towards the same $300 and $22,500 limits.
Food and drink falls under the entertainment rules instead. Inland Revenue says food and drink you provide for social events such as parties is 50% deductible and not liable for FBT. Gifts of food and drink that are enjoyed privately by the person who receives them, such as a bottle of wine or a hamper, are also 50% deductible.
There's a catch for rewards. Inland Revenue lists entertainment given to employees as a reward for good performance, such as a restaurant gift voucher or a weekend away, as
100% deductible but liable for FBT. So a dinner voucher handed out as a thank-you for a big year is treated differently from a Christmas hamper.
A cash bonus is the simplest to administer. Inland Revenue treats bonuses as extra pays, alongside back pay and profit shares, and they're taxed through PAYE like other earnings. The employee pays that tax, so a $200 bonus is worth less than $200 in their pocket.
Whatever you choose, keep a record of what each person received and when. That makes the FBT limits easy to check at the end of the quarter, and it's worth running the numbers past your accountant if you also give staff other benefits during the year.
Gift, bonus or a work do
Bonuses are already a big part of pay in many workplaces. In Robert Half's 2026 New Zealand Salary Guide, 53% of employers surveyed said the bonuses they paid in the most recent cycle were higher than in previous years, and 41% said they were about the same. The survey, run in October 2025, covered 250 hiring managers in finance, accounting, and IT and technology, so it reflects those fields rather than every employer.
A gift is a different thing from a bonus. It's a thank you, and staff read it as one. Something useful the whole household can enjoy, given to everyone on the same basis, says more than an expensive gift for a few.
If the budget is tight this year, say so honestly. A shared lunch or a team outing can mark the end of the year without a big bill, and an honest word about why goes further than a token gift.
If you're holding a Christmas party, remember it's still work. Paul Jarvie, the Employers and Manufacturers Association's (EMA) manager of employment relations and safety, says a party the employer organises, promotes or funds may be considered an extension of the workplace. That brings your health and safety duties with it.
EMA's advice is to know your responsibilities when alcohol is available, remind staff of the behaviour you expect before the event, and encourage everyone to plan their transport home in advance.
Plan around the closedown
Many businesses close over Christmas and New Year, and Employment New Zealand sets out the rules. You can have only one annual closedown in any 12-month period, and you must give staff at least 14 days' notice before it starts.
Staff who haven't built up enough annual leave to cover the closedown can be allowed to take holidays in advance, or use other types of leave. Public holidays that fall during the closedown are paid if they'd otherwise have been a working day for that employee.
This summer, Christmas Day falls on Friday 25 December 2026. Boxing Day is Saturday 26 December, and it's observed on Monday 28 December for anyone who wouldn't normally work on a Saturday.
New Year's Day is Friday 1 January 2027. The day after New Year's Day falls on Saturday 2 January, and it's observed on Monday 4 January for staff who don't usually work Saturdays.
Put the closedown dates, the gift and any party in one message to staff, sent well before the 14-day deadline. It saves a lot of questions in the last busy week of the year.