Gifts in the Workplace
Showing Your Appreciation Appropriately
It's the holiday time again and you've been put in charge of organizing gifts. Specifically, your company wants you to choose gifts for everyone on your team, as well as for your most important clients and suppliers.
Immediately, however, you run into some dilemmas. For instance, are you supposed to reward the most productive members of the team with a higher quality gift, or should everyone's gift be the same?
It's even trickier to choose gifts for your firm's clients. One client in particular is thinking about awarding your organization a significant project in the next few weeks. Your boss has already hinted that the gift for this client should be given special consideration.
Would this gift be seen as a bribe? Could you or your firm get into legal trouble over corporate gift giving? And is there a risk that you could be held personally responsible?
Giving gifts in the workplace is an issue that's fraught with potential ethical and legal problems. On the one hand, giving gifts is universally recognized as a way of saying "thank you" for hard work and repeat business. But on the other hand, there's a very fine line between a gift and a bribe; and it can be confusing to understand what's acceptable (and taxable) in another organization, or in another country of operation.
In this article we'll examine the dos and don'ts of corporate gift giving, and offer comments on the proper etiquette to follow when choosing workplace gifts.
This article is meant as a general guide only and is intended merely to alert you to legal issues that apply in some jurisdictions.
We are not lawyers, and we cannot give you legal advice. If you have any doubts about your own situation, you must make further enquiries within your own organization, or seek legal advice from a suitably qualified lawyer.
Is It a Gift or a Bribe?
One of most important issues when it comes to giving corporate gifts is understanding the difference between a gift and a bribe. You, or your organization, can get in a whole lot of trouble if you make a bad judgment on this.
So what's the difference? Generally, gifts are given without expectation of reward or benefit in return. But a gift turns into a bribe as soon as there is any expectation of getting something back. (Therefore, giving a special gift to a client in order to win their business, as in the example of the client awarding a contract above, would probably be classed as bribery.)
In the U.S., the legal distinction between a gift and a bribe is not completely clear. The Foreign Corrupt Practices Act (FCPA) makes it illegal for companies to give any gift to a foreign official, or their representative, in order to assist in obtaining or retaining business. This includes non-monetary gifts, like dinners and hotel stays. As the details in the FCPA are considered to be unclear, many major corporations hire consultants to oversee their gift giving, to make sure that they don't unwittingly cross any lines.
Also, U.S. legislation also extends to all U.S. companies working overseas. For instance, imagine that your firm wants to expand to Taiwan. They hire a third-party contractor to go in and take care of the initial paperwork and legalities. To speed things along, the company authorizes this contractor to give "gifts" to officials, with the expectation that they'll approve the application and cut through the bureaucratic red tape. This is bribery.
The UK's Bribery Act 2010 explains what constitutes a bribe in Britain, and for any British company operating overseas, regardless of location. Put simply, when you promise or give a financial, material, or other incentive to another person in order to get them to do something improper, then you're bribing them. (Therefore, non-cash incentives can also amount to bribery.)
If you offer a "gift" after someone has behaved improperly but to your benefit, this is also considered to be a bribe. Just as in the U.S., British companies can also prosecuted back in Britain for giving or accepting a bribe in any other country. Overseas companies doing business in the UK can also be prosecuted under the Act.
Additionally, under the UK Bribery Act, a gift becomes a bribe when the gift is given in order to obtain or retain business. A good example of this would be if your organization is trying to secure a lucrative contract, and you give the potential client a substantial holiday gift. The unspoken expectation is that this will "sweeten the pot" and your company will win the contract. Again, this is bribery.
An organization will also commit a corporate offence under the Act if bribery occurs and the organization has failed to take steps to prevent it happening. (For instance, by not providing adequate training and guidance for employees.)
When there aren't specific laws in place to guide you, it's important to do your own test when giving employee or corporate gifts. For instance, ask yourself, "If this ended up on the front page of a newspaper, how would I feel? Would I be able to justify and defend it?"
It's important to look at how others will view the gift exchange. For instance, public officials, government workers and media professionals such as journalists have to be very careful when it comes to accepting gifts. If your organization does business with people in these fields, it might be best just to send a thoughtful card. Gifts can often be interpreted as bribes in these situations.
If your company is involved in any kind of bidding process, merger or acquisition, then you should avoid giving any gifts until the deal is through. Once again, it's all too easy for gifts to be seen as bribes during tense negotiations.
It's important to do your own research before engaging in corporate gift giving. Your country (and even your individual state) may have its own laws on this issue. Make sure that you fully understand what's legal, and what isn't, in your area.
If you work for an American or British company, never forget that the national anti-corruption legislation applies to operations anywhere in the world.
Think hard before accepting a gift – in some countries, accepting a bribe is also a criminal offence.
Organizations often have their own policies and codes of conduct when it comes to corporate gift giving. The larger the organization, the more likely it is that there's an official policy, so find out if your firm already has rules in place before selecting or giving any gifts.
For instance, some companies ban employees from giving gifts to their manager, as this could be seen as an opportunity for encouraging favoritism. Other companies only allow gifts that can be shared, such as catered lunches or fruit baskets. There can also be limits on how much a gift can be worth: some organizations will only let employees and executives accept gifts that cost $50 or less.
In addition to checking with your own company, it's important to check the policy of the company that you're giving to, as many corporations don't allow their employees to accept gifts at all. (Some donate all of their corporate gifts to non-profit organizations at the end of the year.)
The profession of the person you are getting a gift for can also play a role. Doctors, lawyers, tax auditors or accountants, journalists and government officials are among those who must follow strict codes of conduct when it comes to accepting gifts. Make sure that you're familiar with the limitations placed on people in these professions before giving them gifts.
There can also be tax implications when you give and receive gifts, and these will vary widely depending on your country and region.
For instance, in the United States, the IRS limits the tax-deductible element on business gifts to $25 per item. So, if you buy three presents for three clients, each costing $100, you can only claim $75 ($25 for each gift) as tax deductible.
Tax implications in the U.S. loosen up when it comes to business entertaining. For example, what if you give a favored client tickets to a sporting event to thank them for their business? Well, you can treat the tickets or restaurant meals either as a gift or as business entertaining, whichever is to your greater advantage. (Business entertaining allows you to write off 50 percent of the expense.) If you go with your client to the event, however, it must be treated as business entertaining, and you don't have the option to count it as a gift.
"Incentive gifts" also fall under a looser set of standards in the U.S. If, for example, you offer a new laptop as a gift to the person on your sales team who sells the most in a month, then the IRS views this as an incentive. This means that you can write off the full purchase price of the laptop as tax deductible.
In the UK, corporate gifts of food, drink or tobacco are not tax deductible. Corporate gifts that advertise your company, however, do count as deductible, as long as they cost no more than £50 per head.
Again, we are not tax advisors, and these are just general comments: speak to an appropriate professional to confirm the precise tax rules that apply to your situation.
Around the world, expectations about gift giving and related customs differ widely.
For instance, corporate gift giving is well established and accepted in most Asian countries, notably Japan, and in some South American countries such as Bolivia and Colombia. If you do business in these countries, then your clients or employees will likely expect a gift from you following the signing of a major contract, or to mark religious or other significant holidays.
By contrast, businesses in Australia, Western Europe and the United States tend to exchange gifts less frequently.
It's also important to research a culture's customs before giving a gift. For instance, in China the color red is considered very lucky. Red gifts are often much appreciated. White, black or blue gifts, or anything containing the number four, are considered very unlucky, because these colors are all associated with death and funerals.
In Japan, the color red is considered unlucky. Items like knives and scissors symbolically represent the severing of a relationship, so these items should never be given as gifts. Books are also considered to be inappropriate presents for a business relationship.
So it's essential you fully research the customs and expectations of other countries and cultures before choosing gifts. Also keep in mind that often, the way that you give a gift is often more important than the gift itself.
There are definite dos and don'ts when it comes to gift-giving etiquette.
- Do your homework when choosing gifts, and take into account the other person's culture, religion and ethics. For instance, giving leather to a Muslim could be highly offensive.
- Avoid giving extravagant gifts that might be misconstrued as bribery. This is especially true if you give a gift to your boss or to a client.
- A good rule of thumb is to "give gifts down" rather than "up." So, skip gifts to your boss or executive team, and focus instead on giving gifts to those on your own team.
- That said, if you and your colleagues all want to get a present for your boss or manager, why not pitch in together and get him or her a more significant joint gift? This way, no one can be accused of "sucking up", and you should be able to get something nicer than if you all do it individually.
- Avoid gifts that are too personal. Clothing, perfume, jewelry and items handmade by you are best avoided, as are any gifts that center on a religion, race or gender.
- Consider giving office gifts that can be shared with everyone. Fruit baskets, chocolates or a catered lunch are often safe options, because no one can be accused of trying to influence a specific employee.
- When choosing gifts for individual clients or suppliers, try to choose a gift that's specific, and caters to their interests or hobbies. This shows you took time considering their present.
- If you want to give a gift to a colleague that you're particularly close to, do so outside the office, especially if the gift is noticeably nicer than the gifts you would get others on your team.
- If a favored client or company has prohibitive gift acceptance policies, or you want to make sure that your gift can't be misconstrued as a bribe, consider donating to a charity in their honor. Try to choose a charity meaningful to that company's industry, or to that person's personal interests or values.
Gift giving in the workplace is full of both ethical and legal dilemmas, and it's vital to stay on the right side of the law. If your firm is American or British, don't forget that UK and US anti-corruption legislation applies to your company's dealings worldwide. Other countries will have similar legislation.
You need to be certain that your gift could in no way be interpreted as a bribe. So, don't give anything extravagant, and if you're in the middle of business negotiations or a merger, avoid giving anything at all.
If you're going to give a client or supplier a gift, check your own organization's policy on gift giving, as well as theirs. Many firms, especially larger ones, have strict guidelines when it comes to giving and receiving gifts.
Make sure that you research your country, state, or region's tax laws regarding corporate gifts. You'll also want to investigate cultural expectations and practices if you're giving a gift to someone in a foreign country.
Practice good etiquette when it comes to workplace giving. Choose modest gifts, tailored to the individual person. If you do business with several people in an organization, consider gifts that can be shared, like chocolates or fruit baskets.