The rise of the ‘sugar boss’: Employers are showing appreciation to their staff by splashing out on lavish gifts—but does that cross a line?

If you don’t know, the term is used to describe the relationship between a wealthy older person who gives lavish gifts and cash to a young person in exchange for their time and attention. 

But the sometimes seedy practice is creeping its way into the workplace.

Instead of giving their workers bonuses or upping their salaries, some bosses are choosing to splash out on jewelry for their staff – and in one extreme case, an employee’s bills.

Ellie* is 28 years old and works as a receptionist for a logistics company. As the only woman in her office, she was instantly insulted when her boss bought her a necklace to show his appreciation for her hard work.

She couldn’t help but wonder if the men in her team, were given the same treatment. It wasn’t long before Ellie’s boss was making more grand gestures, like leasing a Mini Cooper, seemingly just for her.  

Things escalated when she broke up with her then-boyfriend. Despite all these generous gifts from her employer, Ellie soon realized that her salary didn’t quite stretch to rent on her own.

To keep his star performer, Ellie’s boss offered to cover her rent. The gesture didn’t sit right with her. But desperate and desolate, she accepted.  

“Check out my Rolex,” another friend, Hank* – a director at a small finance brokerage – recently announced as he flashed his newly decorated wrist at a New Year’s eve party.

He received the gift from his company’s founder as a substitute for his Christmas bonus, which ordinarily would’ve been subject to income tax and national insurance.

Unlike Ellie, Hank was impressed by the bling bought by his boss.

As the cost of living forces both employers and employees to be more cost-effective, this exchange could become more prevalent. 

Back in her “executive days and now as an executive coach”, Catherine A Baudino has “always believed in the power of thanking.”

Although she notes that this can be done through more formal means such as a promotion or a bonus, she thinks that jewelry is more personal.

“It is something I myself have practiced and mainly for the following reason: it is a gift that defies time – as have their contributions,” she says.

“I have always ‘staged’ the gifting: I ask the recipient to stand and explain the choice of jewelry – always with the proviso that they can return it without offending me. Sometimes, the exchange has been in private; on others, it has been more ceremonial. But in all instances, the token of my appreciation has always been met with wide eyes of surprise and even bewilderment,” she adds.

Is it legal to splash out on gifts for your workers?

The short answer is yes, but it depends globally on the size and frequency of the gift.

In the UK no tax is payable on gifts costing less than £50. However, it is important to note that it must be a genuine gift (for example, a birthday present) and it cannot be a re-occurring expense.  

“The giving of gifts other than token ones is not illegal but the failure to pay tax on the gift is tax avoidance,” Corinne Aldridge, head of employment at the solicitors, Kingsley Napley.

“It is the employer who would be scrutinized by the tax authorities in respect of any arrangement as it is responsible for the deduction and payment of tax with potentially no recourse to the employee,” she warns.

Likewise, in the U.S. Employers are limited in how much they can gift their workers – the rule of thumb is below $25.

“From a tax perspective, the presumption will be that gifts should be treated as taxable income to the employee,” says Joy Matak, Partner at the tax advisory firm, Sax LLP.

She adds that there are occasions when employers can make gifts to employees without tax consequences “but, this is typically only in the context of de minimus gifts, like a turkey/ham for the holidays or an Amazon gift card in a small amount.”

So in most cases, splashing out on a Rolex (and not declaring the taxable gift) for your staffer instead of paying their Christmas bonus would be deemed unlawful.

How to reward staff with gifts appropriately 

There will always be some workers, like Hank, who love a personable approach from their employer and others who like to keep a strict boundary between their personal and professional life. 

The main issue is that you will never really know. 

Employees will always want their manager’s approval and so will unlikely air whether a gift is unwelcome, or worst, creeping them out.

This could be particularly problematic between elder male bosses and younger female workers.  

While rewarding people for their hard work is key to employee engagement, as Giles Gibbons, CEO of Good Business points out, when gifts are given in a “secret clandestine way, then other motives and ethical questions arise”. 

So if a traditional bonus or promotion, really is out of the question, then honesty is the best policy. Like politicians who must acknowledge gifts on a register, Gibbons advises gift-giving bosses to make generous gestures as public as possible.

“Being open and transparent removes any potential unethical motivations and allows us to continue to support and thank people for the work done,” he adds. 

*Names have been changed to maintain confidentiality.