Employee Suggestion Scheme: Setup, Rewards, Examples (2026)

An employee suggestion scheme is a formal, standing invitation for every employee to propose improvements, with a defined process for assessing each suggestion, deciding on it, rewarding the people behind it and reporting what happened. The formal part is what separates a scheme from a suggestion box on the wall. A box collects. A scheme commits the company to answer, within a stated time, and to share the benefit when a suggestion pays off.

That commitment is also where most schemes fail. The rules get written, the poster goes up, a burst of suggestions arrives, and then assessment queues build, rewards get disputed and the scheme quietly dies within eighteen months. This guide covers how to build one that does not: the process, the reward rules (including the UK tax limits), the examples people actually submit, and a policy template you can copy. If you are replacing a scheme that has already stalled, start with why suggestion boxes end up collecting dust and come back here for the rebuild.

What is an employee suggestion scheme, and how is it different from idea management?

Three things get called a suggestion scheme, and they behave very differently:

Approach	What it is	Strength	Weakness
Suggestion box	An open channel (a box, an inbox, a form) with no defined process behind it	Costs nothing to start	Nobody owns the answer, so nothing comes back
Suggestion scheme	Rules, roles, deadlines and rewards written down, usually in a policy or a collective agreement	Predictable, fair, auditable	Slow and administrative if run on paper or email
Idea management	The scheme’s process run in software, with campaigns, scoring, tracking and reporting on top	Fast feedback, visible pipeline, data for leadership	Needs a budget and an owner

The scheme is the rules; idea management is the modern way of running them. The two are not rivals. Every organisation we know that runs an effective programme has both: a written policy that says how suggestions are handled and rewarded, and a platform that makes the policy happen without a clerk chasing assessors. If you want the wider picture, the complete guide to idea management covers it; this guide stays with the scheme itself.

Where do suggestion schemes come from?

Older than most people think. The first documented clause is in an 1853 employment contract at the chemical firm Merck in Darmstadt, promising that improvements suggested by a worker would be specially rewarded. Alfred Krupp’s company rules of 1872 asked the workforce to submit suggestions for improvements in writing and promised they would be gratefully received. The idea travelled, was systematised in Japan after the war as part of what became kaizen and continuous improvement, and came back to Europe and the UK as the staff suggestion scheme most large employers ran through the 1980s and 1990s.

The history matters for one reason: the classic scheme was designed for a world of paper forms, monthly committee meetings and a suggestions officer with a filing cabinet. The rules were sound. The machinery was slow. Most of what follows is about keeping the rules and replacing the machinery.

How does a suggestion scheme work, step by step?

Seven steps, each with an owner and a deadline. The deadlines are the scheme. Without them you have a box.

Step	What happens	Owner	Target
1. Submission	The employee describes the problem, the proposed change and the expected benefit	Employee	Two minutes on a phone, no company account needed
2. Registration and acknowledgement	The suggestion gets a number, a date and a named contact; the submitter is told it arrived	Scheme coordinator	48 hours
3. Assessment	A subject-matter assessor checks feasibility, cost and benefit and writes a short opinion	Assessor from the affected department	10 working days
4. Decision	Accept, decline with reasons, or park with a date; larger benefits go to a small committee	Line manager or committee	30 days from submission
5. Reward	Calculated according to the published rules and paid through payroll	Coordinator and payroll	With the decision, or when the saving is measured
6. Implementation	The change is made and the owner confirms it	Implementing department	Set per suggestion
7. Feedback and reporting	The submitter sees the outcome; leadership sees the numbers	Coordinator	Continuous

Two of these steps decide whether the scheme lives. Step 2, because a suggestion that vanishes for three weeks teaches everyone not to bother. And step 4, because a decline with an honest reason keeps people contributing, while silence or a form letter does not. Our guide on giving feedback that builds trust has wording for both cases. If you expect volume, the two-hour triage method gets a hundred suggestions sorted before the assessors see them.

How should rewards work, and what about tax?

Reward rules are the most argued-over paragraph in any scheme policy, so write them down precisely and publish them. Four models cover almost every scheme:

A share of the first-year net saving. The classic model for measurable suggestions. The percentage and the cap are set in the rules; the saving is measured, not estimated, before the final payment. Pay a small amount at acceptance and the balance once the number is known.
A flat award for suggestions without a measurable saving. Safety, quality, morale and customer-experience ideas rarely produce a number. A fixed amount, or a points scheme, keeps them from being treated as second class.
Recognition. A named mention at the site meeting, a certificate, a photo on the noticeboard. Cheaper than cash and, in most workplaces we have seen, at least as motivating for the second and third suggestion.
Team awards. When a suggestion comes from a shift or a cell, split the award or fund something the team chooses. Individual-only rules quietly discourage the collaboration that produces the best ideas.

In the UK, HMRC exempts two kinds of suggestion scheme award from tax and National Insurance, provided the scheme is open to all employees or to a whole group of them, the suggestion is about the business, it is not part of the person’s normal job and it was not made at a meeting for proposing ideas. Encouragement awards are exempt up to £25. Financial benefit awards are exempt up to £5,000, with the exempt amount being the greater of 50% of the expected saving in the first year or 10% of the expected saving over five years. Anything above the limits is taxed as earnings through payroll. Those conditions are worth designing the scheme around: an open scheme with published rules is exactly what the exemption rewards.

Two rules prevent most disputes. First, when two people submit the same idea, the first registered submission wins the award, which is why step 2 has a timestamp. Second, no reward is finalised on an estimate. The finance team confirms the saving after the change has run for the period the rules specify.

What do employees actually suggest?

The most common question from a manager about to launch a scheme is “what will we get?”. Twenty years of running these programmes gives a consistent answer: mostly small, specific, operational improvements from the people closest to the work, with a few large ones a year that pay for everything else. Typical examples:

Reordering a workstation so a part is reached without turning, cutting seconds off a cycle that runs thousands of times a shift
Switching off a compressor, oven or lighting zone during a break it was never needed for
Replacing a paper form filled in three times with one filled in once
Changing a delivery slot so a store is not restocking during its busiest hour
Standardising a packaging size to cut a supplier’s minimum order
Adding a mirror, a sign or a floor marking at a spot where near misses keep happening
Letting the team who answer a recurring customer complaint change the process that causes it
A rota change that removes a handover nobody could explain the purpose of

At scale the pattern holds. Halfords, a UK retailer with over 1,000 engaged colleagues across 400 stores, collected 515 ideas in six months and verified £759,000 in value from them; the Halfords case study shows how a modern scheme reached the shop floor without accounts or training. Linköping Municipality in Sweden collected 200 ideas in three months and cut the administrative time of running the scheme by 66% by moving off email and spreadsheets. For more examples by sector, see cost-saving ideas in manufacturing and idea management in retail.

Why do classic suggestion schemes stall?

Five failure modes account for nearly every scheme we have been asked to rescue:

Speed. Monthly committees mean a 30-day decision is the best case and 90 days is normal. People stop submitting long before the third month.
Opacity. The submitter cannot see where the suggestion is, so every enquiry is an email to a coordinator who has to look it up.
Reward disputes. Estimated savings, unclear percentages and “we already had that idea” arguments poison the scheme for everyone watching.
No capacity to implement. Accepted suggestions pile up because implementation was never resourced. An accepted idea nobody implements is worse for morale than a decline.
Paper and email. Forms in trays, spreadsheets with the wrong version, assessors who forget. The process is fine; the medium cannot carry it.

The guide on why employee ideas get ignored covers the human side of these, and how to recover credibility once a scheme has lost it.

How do you modernise a suggestion scheme without losing what works?

Keep the rules, replace the machinery. Six moves, in the order that has worked best:

Carry the policy over unchanged at first. Reward rules, eligibility and deadlines stay as they are. Changing the tool and the rules at once makes every complaint about the tool.
Give the assessor role a home. In software, an assessor sees a queue, a deadline and a scoring form rather than an email. Late assessments are visible to the coordinator without chasing. A shared idea scoring scorecard keeps assessments comparable.
Make status visible to the submitter. Received, under assessment, decided, implemented. This single change removes most of the coordinator’s inbox.
Add campaigns to the open channel. The standing scheme keeps running, and three or four times a year leadership asks a specific question: energy use, a safety hotspot, the onboarding process. Campaigns typically produce more, and better-targeted, suggestions than the open channel alone. The guide to writing an idea challenge shows how to frame one.
Reach the people without a desk. A QR code by the line or a link in Teams, with no company account required, is the difference between a scheme the floor uses and one it hears about. Our guide on getting frontline workers to share ideas is built on the Halfords rollout.
Report monthly. Suggestions per 100 employees, time to decision, implementation rate and verified benefit, on one page, to the people who fund the scheme. How to measure an innovation programme has the metric definitions.

On tooling: the digital suggestion box guide explains what to look for, and the best suggestion box software round-up compares the options with prices. Hives.co runs suggestion schemes for organisations from 250 to 90,000 employees at a flat €695 per month with unlimited users, EU hosting and no client to install, which is usually less than the coordinator time a paper scheme consumes. If you need to make that case internally, the business case guide has the template.

What should the scheme policy contain? A template

Copy this outline, fill in your numbers, and have HR, finance and the employee representatives sign it off before launch. Ten sections are enough.

Purpose. One paragraph: why the company runs the scheme and what counts as a suggestion (an improvement to how the business works, beyond the submitter’s normal duties).
Scope and eligibility. Who may submit (all employees, including agency and part-time staff, is the simplest and, in the UK, what the tax exemption expects), and who is excluded for a given topic (usually the people whose job it is to solve it).
How to submit. The channels, the minimum content (problem, proposal, expected benefit), and confirmation that anonymous submissions are or are not accepted.
Registration. Number, date, named contact, acknowledgement within 48 hours. First registered wins in case of duplicates.
Assessment. Who assesses, within how many days, against which criteria, and how the submitter can add information.
Decision. Who decides at each benefit level, the 30-day target, and the requirement to give reasons for a decline.
Rewards. The models used, the percentages and caps, when payment happens, how savings are verified, and the tax treatment.
Implementation and follow-up. Who owns implementation of an accepted suggestion and how completion is confirmed.
Intellectual property and data. What the company may do with a suggestion, how the submitter’s personal data is handled, where the data is stored, and how long records are kept.
Disputes and review. How a submitter appeals, who arbitrates, and when the policy is reviewed (annually is normal).

If a works council, union or staff forum exists, several of these sections are subject to consultation or agreement in many European countries, and the reward and data sections almost always are. Involve them in drafting rather than presenting a finished document; it is faster in the end.

Which numbers show the scheme is working?

Five, tracked monthly and compared with the previous quarter rather than with a benchmark from another company:

Participation rate: the share of eligible employees who submitted at least once in the last twelve months
Suggestions per 100 employees per year: the volume measure, useful mainly to spot a site or department that has gone quiet
Time to decision: median days from registration to a decision, against the 30-day target
Implementation rate: the share of accepted suggestions implemented within their agreed time
Verified net benefit: savings and revenue confirmed by finance, after implementation, minus reward and implementation cost

The first and third numbers predict the scheme’s future; the last one justifies its budget. A scheme with rising participation and falling time to decision will produce the benefit figure within two or three quarters. One with the reverse pattern is about to stall, whatever the current savings say.

Frequently asked questions

What is the difference between a suggestion scheme and continuous improvement?

Continuous improvement (kaizen, lean, CI) is a method for improving processes in small steps, usually driven by teams close to the work with tools such as gemba walks and improvement boards. A suggestion scheme is the standing channel and reward mechanism through which any employee can propose an improvement. Most organisations run both, and the same software usually handles the scheme’s suggestions and the CI team’s actions. See employee-driven continuous improvement for how they fit together.

Are suggestion scheme awards taxable?

In the UK, encouragement awards up to £25 and financial benefit awards up to £5,000 (the greater of 50% of the first-year benefit or 10% of the five-year benefit) are exempt from tax and National Insurance if the scheme meets HMRC’s conditions. Above those limits, or outside the conditions, awards are earnings and go through payroll. Rules differ elsewhere; in Germany, for example, awards are generally taxable pay and the works council co-determines the scheme’s principles. Confirm the treatment with payroll before publishing the policy.

How many suggestions should we expect?

It depends on how easy submission is and how fast decisions come back, far more than on the industry. Schemes that run on paper and monthly committees typically see well under one suggestion per employee per year. Programmes that reach the frontline from a phone and decide within 30 days see several times that. Track your own trend rather than chasing someone else’s number.

What happens when two employees submit the same idea?

The first registered submission wins the award, which is why every suggestion gets a timestamp at registration. Say so in the policy. Some schemes split the award when submissions arrive within the same day; either rule works as long as it is published before it is needed.

Do we still need a scheme if we already run kaizen events?

Yes, for the ideas that fall between events and outside the teams that take part in them. Kaizen events are scheduled and scoped; a scheme is always open and covers the whole organisation. The two feed each other: suggestions often become the topic of the next event, and events generate suggestions their participants cannot implement alone.

Should suggestions be anonymous?

Offer the option, and expect most people not to use it once they trust the scheme. Anonymity removes the fear of a bad reception but also removes the reward and the follow-up conversation, so it works best as a setting per topic (safety concerns, for example) rather than as the default for everything.