Business belt tightening set to cut back staff Christmas parties

Start-ups can celebrate Christmas with their staff without breaking the bank, experts say, after it was revealed less than two-thirds of employers will organise a staff Christmas party this year.

According to employment law consultancy Employsure, which surveyed 663 employers in October and November, only 63% of employers will organise a staff Christmas party this year.

This compares to 84% in 2011.

Alarmingly, the survey shows 66% of bosses have cancelled Christmas parties out of fear they are liable for the acts of employees, which could result in a claim before Fair Work Australia.

Employsure managing director Edward Mallett says the staff Christmas party can be an expensive and often troublesome event, so start-ups need to plan carefully.

“The office party used to provide amusing team-building stories for the rest of the year. Now it is more likely to result in a claim before Fair Work Australia,” Mallet says.

“Potential claims include harassment and discrimination. The risk of workplace injuries should also be considered, particularly when alcohol is involved.

“Employee shenanigans at the Christmas party may cost the employer money, and a fair amount of thought and organisation needs to be considered to ensure a trouble-free party.”

According to Mallett, there are a number of ways employers can watch their spending.

“Look at the possibility of providing an extra half day off work. Employees who take fewer sick days throughout the year could be rewarded with extra pay,” he says.

“Alternatives to the Christmas party could include gifts, bonuses or even a company donation to a charity selected by staff.”

However, Mallet warns against cash incentives, claiming they can often be confused with salary and bonuses, and – on occasions – can be expected every year.

“Consider giving gift vouchers, allowing earlier finishes, providing an extra day of holiday or dress-down days where the business allows,” he says.

Meanwhile, tax expert Sean Urquhart says firms should be wary of being too generous with their staff and clients at Christmas, warning they could be hit with unexpected fringe benefits tax.

Urquhart, a tax partner at chartered accounting firm Nexia Australia, says employers should not assume all their Christmas party expenses are tax deductible.

“Only entertainment expenses that are subject to FBT will be tax deductible as exemption negates deduction,” Urquhart says.

“For employers hoping to avoid FBT this festive season, it is a good idea to have the work Christmas party on business premises, during work hours, with only current staff members. Or keep the total cost to less than $300 per person.

“Most company Christmas parties are traditionally held at night time, off the premises, and with partners invited.

“All of these factors could lead to fringe benefits tax if the costs exceed $300 per person.”

An added complexity is the concept of gift-giving as some items are considered to be “entertainment” such as theatre or sporting tickets, which attract FBT.

“Instead of hosting a Christmas party, it would be more tax-effective to provide non-entertainment gifts to staff costing less than $300,” Urquhart says.

“The entire cost is tax deductible to the business with no FBT payable, although [this option is] probably not as much fun as the end-of-year party.”