SAYE Schemes – A Better Way?
Here’s a great article from Penny Sleuth espousing the virtues of SAYE schemes: http://moneyweek.com/penny-sleuth-save-as-you-earn-schemes/ (or see our fact sheet)
I can’t disagree with the principle of the argument – SAYE schemes are a great way for employees to make good money if the share price goes up and, even if the share price doesn’t, they will still get their cash back at the end of the savings period.
It’s also interesting to note that the writer sees employee share ownership as a plus point when he’s looking at companies from an investment perspective. It’s unlikely to be the only reason you might choose an investment but, as David Thornton points out, it does suggest that the managers of the business are paying more than lip service to motivating and engaging their employees.
The only point I’d disagree on is the argument that every company should offer an SAYE scheme. While an SAYE is often the go-to scheme for larger listed companies, it may not always be appropriate for a private company, where there’s no ready market for employees to sell their shares. In addition, the costs of running an SAYE scheme – which requires a specially regulated share scheme provider – can be minimal per head if you have large numbers of employees, but less so for smaller businesses.
Don’t get me wrong – SAYE schemes are popular for a good reason. They’ve been running for years so many people are familiar with them, and the savings limits have recently been increased from £250 per month to £500 per month – £6,000 p.a. When you read about supermarket checkout staff making a killing on share option exercise, it’s almost always as a result of an SAYE scheme – and sometimes that creates a life changing event for lower paid employees.
However, SAYE isn’t for everyone. Another employee share plan that’s well worth considering is the Share Incentive Plan (SIP). Like the SAYE it can allow individuals to save money over a period of time in order to buy shares. The tax treatment available for a SIP – which is a government recognised share plan - is second to none. Shares can be purchased out of pre-tax salary and, provided certain rules are followed, it can be a completely tax free plan – that’s no Income Tax, no National Insurance Contributions (for employee or employer) and no Capital Gains Tax on the sale of the shares.
If the principle of SAYE sounds like a good idea, but the plan doesn’t quite work for your business, don’t assume you can’t put in an excellent equity incentive plan for all your staff. Download our SIP factsheet to find out more, or call 020 8949 5522 and speak to one of our advisers.