What is a Length of service award?
A length of service award is tangible personal property presented to employees at five-year employment intervals beginning after five years of service that qualifies for tax-advantaged treatment when properly structured. Awards must be given during meaningful presentations and cannot represent disguised compensation. The first eligible award occurs after five years of continuous employment, with subsequent awards at ten, fifteen, and twenty years, and continuing intervals. Under nonqualified plans, employers may deduct up to $400 per employee annually, while qualified plans with written documentation permit deductions up to $1,600 per employee. Employee achievement awards programs strengthen retention while providing legitimate tax benefits for recognizing employee loyalty.
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