Pay Staff Tax Free - Staff Suggestion Scheme
Posted by Ben Williams on Mon, Jul 25, 2011 @ 06:51 AM
The staff suggestion scheme is very simple to operate, and is specifically allowed, as well as provided for, in the legislation. It works as follows:
• Conditions apply, but employees can be rewarded for making suggestions that relates to your business activities, and the payments to that employee can be made without any tax or NI being payable! If that’s not good enough, you even get tax relief on the payments through your accounts, just as you do with paying normal salaries/wages.
• If your employee makes a suggestion, you implement it, and you expect a real financial benefit to your business, then the employee can be paid the lower of:
- Half the annual benefit expected in the short or medium term, or
- £5,000.
• Regardless of if the suggestion is implemented, staff can be paid up to £25 each suggestion as an encouragement, and your employees may make as many suggestions as they want.
• The suggestion must not be related to your employee’s normal duties, so for example, a sales director could suggest a different approach in production or something similar, but not a new sales method.
• The suggestion cannot be made in a meeting specifically held for the purpose of suggesting new ideas.
• Although the Staff Suggestion Scheme doesn’t need formal approval from HMRC, it has to be formally set up.
• If you decide to use this scheme, it must be open to all of your employees, and not a part of their contractual pay, or benefits entitlements.
How Keepers Can Help You
We can advice, and assist you, in setting up a staff suggestion scheme, helping you to pay your employees tax free. Use our free Ask an Accountant service if you have any questions.
Make sure you're aware of the new National Minimum Wage Rates for 2011 - they come into effect in October 2011.
