Suggestion schemes have been around a long time in some enlightened businesses, and, no doubt, there have been both good and bad to challenge the thought processes of the management.
If only some of the better suggestions could be rewarded in some way, without worrying about PAYE and National Insurance costs. WELL, THE GOOD NEWS IS, THEY CAN!
We need to tick a few boxes first:
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The suggestion must be outside the scope of the employee’s normal duties.
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The scheme must be set up formally, with written guidance on how it will operate. There must be rules.
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It must be open to all employees and not be part of any contractual entitlement.
So how much can an employer pay tax-free?
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Up to £25 for a genuine suggestion (it must be bona fide and helpful to the company in some way).
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Up to £5,000 (this is not a typo, it really is £5,000!!), if the suggestion is implemented and the financial benefits calculated and recorded. The amount awarded must not, however, be greater than 50% of the expected net financial benefit in the first year, or 10% of the estimated net financial benefit over a five year period, whichever is the higher. Some realistic calculations are needed to support the payment made.
No formal meetings or discussions should take place at the employee’s place of work, or in the normal working day on matters relating to suggestions put forward. This could be interpreted as part of the employee’s duties and so make the award taxable.
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