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Employee suggestion schemes

30 May 2024

There are many advantages to creating an employee suggestion scheme where employees are rewarded for making suggestions that benefit your business.

Maximizing Business Potential Through Employee Engagement

An employee suggestion scheme offers numerous benefits, rewarding employees for ideas that enhance business operations. These suggestions can lead to substantial cost savings and the development of innovative business concepts. Additionally, employees enjoy tax-free benefits for their contributions, fostering a culture of continuous improvement and collaboration.

The HMRC recognizes two types of awards for employee suggestions:

  • Encouragement awards for good suggestions or special efforts, which are tax-free up to £25.
  • Financial benefit awards for ideas that save or make money, tax-free up to a generous cap of £5,000.

The exempt amount is the greater of:

  • 50% of the expected savings or earnings in the first year after implementation.
  • 10% of the expected savings or earnings over the first five years.


Implementing a Tax-Efficient Employee Suggestion Scheme

To ensure payments remain tax-free, certain conditions must be met. We can assist in creating and setting up a tax-efficient suggestion scheme with clear rules. This encourages employees to share ideas that benefit your business and gives them a sense of ownership in its success.

Encouraging employees to contribute not only taps into a wealth of untapped potential but also builds a more collaborative and innovative company culture. Employees who see their ideas come to life are more engaged and motivated. This leads to a more dynamic workplace where continuous improvement becomes the norm.

Recognizing employees for their contributions is crucial. It’s not just about the financial reward but also about acknowledging their effort and ingenuity. This recognition can boost morale and inspire others to come forward with their ideas, creating a virtuous cycle of innovation and improvement.

Ultimately, an employee suggestion scheme is a win-win. Your business gains valuable insights and potential cost savings, while employees enjoy the satisfaction of contributing to the company’s success and the possibility of a tax-free bonus. It’s an investment in your workforce that can pay dividends in more ways than one.

Source: HM Revenue & Customs Tue, 28 May 2024 00:00:00 +0100

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