Top 5 tax-efficient ways to reward employees

4. Recreational benefits

There is a well-known exemption for annual parties and functions. Employers can provide functions to a total cost of £150 per head (with certain criteria) without creating a tax liability.

This exemption could gain you a lot of goodwill from staff if you use it to hold an annual function or perhaps give staff a gift to thank them for their work – although note that any gifts need to meet certain criteria otherwise HMRC will dub them ‘non trivial’ and disallow the tax exemption.

Taking this further, employers can provide sporting or other recreation facilities tax-free provided that certain conditions are met. This might cover a facility such as a workplace gym, provided that the facilities were not made available to members of the public.

5. Staff suggestion scheme

Something that many employers forget about is a suggestion scheme, which can lead to your team delivering tangible savings for your business. Under a suggestion scheme employers can pay up to £25, tax-free, for any employee suggestions for improving the way the business is run.

Where employee ideas deliver a financial benefit for the company they can pay the employee 50 per cent of the financial benefit achieved in the first year following adoption, or 10 per cent of the financial benefit from the first five years, subject to a maximum of £5,000.

In order to implement a suggestion scheme HMRC’s approval is needed. You’ll find more information on the criteria on the HMRC website.

Susan Ball is a partner at national audit, tax and advisory firm Crowe Clark Whitehill.

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