How to Stay Safe from HMRC
3 December 13 | By: Jas Jhooty
Do you have an Employee Suggestion Scheme in place?
Forward thinking employers should be actively welcoming employee suggestions as they can result in the generation of a wealth of creative and valuable ideas that can save your organisation both time and money. Encouraging employees to provide work-related suggestions can help to improve customer satisfaction, reduce costs and otherwise improve efficiency. Employees are an extremely valuable tool in idea generation, as they often see possible improvements from the front line that managers perhaps do not.
Is your company receiving enough (if any) innovative ideas from your employees? If not, surely it’s time to think about how to encourage this. Involving employees in improving company processes is an excellent way to make them feel engaged and loyal. They will want your organisation to do well, and will feel that they are contributing to its’ success.
Tax advantages of suggestion schemes
As well as providing for a mechanism to relay efficiency savings ideas that will benefit your organisation, there are also some generous tax concessions to reward employees for participating in the suggestion scheme. There are two types of awards that employers can make relating to suggestion schemes that can enjoy significant tax breaks. These are: -
The legislation allows for some generous tax breaks for suggestion schemes. Encouragement awards of up to £25 can be paid both tax & NIC free for an employee suggestion that has merit or that shows special effort on the employee’s part. Any excess above £25 will have to be payrolled.
Financial Benefit Awards
Employers can also provide a financial benefit award to employees for suggestions that meet the following three conditions: -
Financial benefit awards are exempt from tax and NICs up to the greater of the following, subject to an overall limit of £5,000: -
Conditions for these exemptions
How emTax can help
Any suggestion scheme will require guidelines to ensure its success. The focus must be on quality over quantity – you don’t want to end up with hundreds of suggestions which are all completely unfeasible. emTax consultants can help you to set guidelines around specific aspects of your business where suggestions will be welcome e.g. cost saving ideas and process improvements. This will help ensure that the suggestions received are sensible and well thought out.
Finally, make sure the suggestion scheme is promoted effectively! The communication should be ongoing, and should make sure employees are aware of how the scheme works and how to make a suggestion. If the idea is implemented, ensure this positive news is communicated across the company – this will ultimately encourage staff to make further suggestions.