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Best Practices for Handling Reward Taxes
Jonathan Alarcon
May 21, 2019

Our primary objective at Blueboard is to create an exceptional experience, and we’re fortunate to work with hundreds of clients who believe in investing in their employees in a meaningful way through Blueboard reward programs. 

A sensitive topic that often comes up during budget planning is the topic of taxes. Do we gross up the reward to relieve the tax burden, or do we pass the taxes onto the employee?

Ultimately this choice is yours, but our recommendation at Blueboard is to gross up the reward value, which relieves the rewarded employee of this tax burden. Why? Because passing taxes onto the employee can distract them and potentially cause hesitancy for something that was originally intended to feel rewarding. Bringing monetary decisions into the process switches the role of the employee from a recipient to a buyer because they now have financial skin in the game. Thus, the otherwise positive and energizing anticipation effects associated with the start of their experience journey might change to stressful decision fatigue. When taxes are reimbursed, the employee continues to perceive the reward as a gift and can focus their mental energy around their exciting activity ahead.

Your company has two choices when it comes to planning and managing taxes, here’s our perspective for each side:

Pros to Grossing up

Things to Consider when Grossing up

Pros to Taxing the Employee

Things to Consider when Taxing the Employee

While we can’t officially consult you on how to manage your taxable rewards, we are happy to connect and share best practices from our clients beyond what's covered in this short article. We also recommend you consult the experts (our friends at the IRS), reviewing their official recommendation in this informative article.

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