The SAYE (also known as ShareSave) is a long-established, tax-advantaged share option plan which must be offered to all employees in a company.
SAYE: About the Save-As-You-Earn Scheme
The scheme operates by way of a savings account that enables employees to save money over a three or five year period; at the end of the period they can either use the money to exercise options and buy shares, or they can take the savings (with a tax free bonus, when interest rates allow).
Employees can choose to save up to £500 per month under the SAYE. Because employees can choose to take their savings at the end of the savings period, the plan is effectively risk-free.
If employees choose to exercise their options, there will usually be no Income Tax (or National Insurance Contributions) to pay on exercise. Gains are subject to Capital Gains Tax (CGT) on the sale of the shares.
The exercise price is usually set at market value at the date of grant, but companies can also choose to offer a discount of up to 20% of the market value.
A company operating an SAYE must make it available to all employees on similar terms (i.e. it is not possible to differentiate between higher and lower paid employees).
SAYE: Benefits of the Save-As-You-Earn Scheme
One of the biggest advantages of SAYE is that it encourages savings, and is broadly risk-free for participants. If the share value drops over the option period, employees are not obliged to exercise their options, but may simply take their savings instead. When interest rates are higher than currently, a tax-free bonus may also be payable.
For the company, SAYE can help tie employees in for the medium to long term.
SAYE has been in operation in the UK for nearly 35 years, so it is a tried and tested concept. Many thousands of UK employees have participated in, and benefited from, SAYE over the years.
SAYE benefits therefore include:
- Familiar, tried and tested arrangement
- Government guaranteed tax efficiency
- Additional discount available
- Flexibility and choice for employees mean risk free investment
- Help tie employees in for the medium to long term
- In larger plcs, SAYE can help employees throughout the business develop a closer understanding and greater interest in the effect of company performance on share price
- Protect current shareholders from immediate dilution and loss of control
- Promote long-term retention of employees throughout the business
- Recently increased monthly limits provide additional savings opportunities for higher earners
For more detailed information on the benefits of SAYE, please download our fact sheet, or call 020 8949 to speak with a member of our team.
SAYE: How we can help
At RM2, we believe in taking a consultative approach to building share plans and finding out precisely what our clients are looking to achieve. This approach helps us to deliver a professional and effective service, helping clients meet their goals and plan for the future. Our highly experienced team is well positioned to guide your company through every stage of the share scheme process, including:
- Strategic review
- Plan design
- Shareholder resolutions
- Articles of association
- Share valuations
- Employee communications
- Plan administration
- Option expensing
- Ongoing support
We have successfully designed, implemented and administered over 700 share plans across a range of sectors, so you can rest assured your plan will be in the best possible hands!
If you would like to find out more about how SAYE can help your business, why not call us directly on 0208 949 5522, book a free consultation, download our fact sheet or send an email to firstname.lastname@example.org!