Overview Save As You Earn (SAYE) plans are an excellent way of providing employees with the opportunity to participate in the future success of the company. A SAYE plan is an HM Revenue & Customs (HMRC) tax-advantaged plan and provides favourable tax treatment for share options granted to employees. Experience has demonstrated that employees who participate in these plans take a more active interest in the performance of the business.
How does it work? The SAYE plan is an arrangement whereby an employee is granted a right (known as an ‘option’) to buy shares at a future date at a price determined shortly before the options are granted. The company can choose to discount the price at which the option is granted by up to 20% of the market value, providing an added incentive for employees to participate. Shares are purchased with the proceeds of savings made under a special SAYE savings contract, set up by a third- party provider which will be a bank or building society. The length of the option can be three or five years. Savings are made by payroll
deduction from the participant’s net salary, with the employer remitting proceeds to the third-party savings provider. Employees can choose to save between £5 and £500 per month and, at maturity, a tax free bonus based on the number of monthly contributions is payable. Who is it for? The SAYE plan is an all-employee arrangement, meaning it must be open to all employees. The company is able to determine a qualifying period of service before eligibility is granted although this must be no greater than five years. However, the majority of companies operating SAYE plans will choose to operate a much shorter eligibility period.
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