SAYE it again: Revival of the Save As You Earn Scheme

Revenue approved Save As You Earn (SAYE) Schemes offer employees a risk-free savings method with the option to purchases company shares in a tax efficient manner.  For employers, an SAYE Scheme can encourage employee engagement and improve retention. While historically a very popular scheme, following Brexit the number of licensed savings carriers in the Irish market fell and the last licensed savings carrier exited the market in early 2021. Since then, it has not been possible to establish or grant new options under a SAYE Scheme.  

However, with the anticipated announcement of a new licensed savings carrier before the summer, employers should reconsider the benefits of offering a Revenue approved SAYE Scheme. 

Overview of the Revenue Approved SAYE Scheme 

SAYE Schemes operate by the employer granting an option to all participating employees to acquire shares in the company. These options can be granted at a discount of up to 25% of the value of the shares at the time of the grant. When the option is granted, employees enter into a contract with an approved savings carrier and must save an amount between €12 and €500 per month, for a predetermined period of three, five or seven years. At the end of the term, the employee uses those savings to purchase all or some of the shares granted by the option. If the employee decides not to purchase shares, all savings made during the term will be returned to the employee tax-free.  

Employees exercising the option at the end of the predetermined period are exempt from the payment of Income Tax on any gains arising. Employees will still be liable to Universal Social Charge (USC) and Pay Related Social Insurance (PRSI). 

For further detail on the benefits of an approved SAYE Scheme, see our Guide to Employee Share Incentive Schemes

Approved Savings Carriers

Post-Brexit, Ulster Bank was the sole Irish-licensed bank offering new accounts for SAYE Schemes in Ireland. In February 2021, Ulster Bank announced its intention to exit the Irish market, meaning that there was no longer an approved savings carrier for setting up new SAYE Schemes, and uncertainty attached to existing SAYE accounts. 

With new SAYE Schemes no longer viable, and uncertainty as to whether existing grants would reach maturity, most employers opted to grant alternative share incentive arrangements to employees, including unapproved share option schemes. These arrangements are less tax-efficient for employees, with Income Tax payable on any gain arising at the end of a savings period. 

It is expected that a new licensed savings carrier will be announced before the summer, allowing the re-establishment of SAYE Schemes, and the consequent tax benefits for employers and employees. 

Employer considerations

SAYE Schemes offer a flexible savings method for employees, and are a valuable tool for increasing retention and employee engagement. As an SAYE Scheme must be made available to all employees, it can increase engagement in the goals of a business across all levels of the organisation. There are also significant tax advantages for employers, employer PRSI is not payable on share-based remuneration if the shares are awarded in the company employing the individual, or a company that controls the employing entity, and the costs of establishing an SAYE Scheme are deductible for corporation tax purposes. 
With the expected announcement of a new savings carrier, employers should reconsider the benefits of establishing or reintroducing an SAYE Scheme as a method of retaining key talent and rewarding employees. 

How can we Help 

McCann FitzGerald LLP provides expert advice on the establishment, implementation and tax reporting of share incentive schemes. If you would like to discuss the advantages of implementing a Revenue approved SAYE scheme, please contact the team below or your usual McCann FitzGerald LLP contact for further information. 

Also contributed to by Beth Devlin

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.