Benefits of a fall in inflation
May 28, 2024Change
June 4, 2024There are many advantages to creating an employee suggestion scheme where employees are rewarded for making suggestions that benefit your business. Apart from the value that these suggestions can have in saving money or driving new business ideas there are also tax-free benefits associated with running these schemes.
HMRC list two kinds of award that can be given to employees:
- Encouragement awards – for good suggestions, or to reward your employees for special effort. Encouragement awards are exempt from tax and National Insurance up to a small limit of £25. Any excess paid above £25 will need to be reported through payroll.
- Financial benefit awards – for suggestions that will save or make your business money. Financial benefit awards are exempt up to a generous, maximum cap of £5,000.
The amount that is exempt is the greater of:
– 50% of the money you expect the suggestion to make or save your business the year after you implement the idea, or
– 10% of the money you expect it to make or save your business in the first five years after implementation.
There are other conditions that must be met for the payments to employees to be tax-free. We can assist you in designing and setting up a tax efficient suggestion scheme and providing basic scheme rules.