Recent changes doubling contribution ceiling could encourage more people to use SAYE Profits employees have made through the Save As You Earn (“SAYE“) employee share option scheme have more than doubled in the last year, up by 141 percent from £360 million to £870 million, says Pinsent Masons, the international law firm.
Employees who have joined SAYE share schemes as a way of buying shares in the company they work for, have benefited from a strong recent stock market performance. Shares in FTSE 100 companies rallied strongly in 2013, with the FTSE 100 index up by 14.4 percent. In addition, Pinsent Masons says employees have made tax savings from the SAYE scheme of £430 million in Income Tax and National Insurance in the last year, up from the £170 million saved in 2012. Pinsent Masons explains that employees who join a SAYE scheme have money deducted from their pay each month, which is put aside to buy shares in their company at a discounted price, free of Income Tax and National Insurance. If the company’s share price has risen*, the employee can take up their option and then keep or sell the shares. If the share price of the company has fallen, employees will get their money back. In most, but not all, circumstances no income tax will be charged on any profit made when the share option is exercised. It is often also relatively easy to mitigate any capital gains tax arising when the shares are sold.
Pinsent Masons adds that the SAYE scheme is proving increasingly popular amongst a broader range of employees, such as middle and lower management positions, as businesses promote the benefits of owning shares in the business to their employees as part of their overall reward package. Matthew Findley, Partner and Head of Share Plans & Incentives at Pinsent Masons, comments: “SAYE is a highly tax efficient and risk free route for employees to invest in the stock market, and to take a financial stake in the company they work for. Employees who have joined a SAYE scheme and then opted to sell their shares this year have really reaped the benefits of an improving stock market.”
“SAYE demonstrates that share options are not the preserve of senior directors. As businesses get better at communicating the benefits of schemes like SAYE, more and more staff from companies offering them are looking to sign up.” Pinsent Masons adds that the recent doubling of the amount of money that employees can contribute to a SAYE scheme each month is likely to encourage further interest in the scheme, from both employers and employees. From April 6th 2014, employees have been able to contribute up to £500 each month through the SAYE scheme, up from £250 per month.
Matthew Findley says: “The amount of money that employees are now making through SAYE schemes brings to life the concept of wider employee share ownership. Significant profits and tax savings are available. If the stock market continues to perform well participation rates should increase further. The popularity of SAYE should also increase as companies start to look more seriously at the role share schemes can play in long-term wealth creation, particularly given the shortfall in pension savings and the dramatic recent reform of the pensions market.”
Value of gains made by employees through the Save As You Earn share option scheme
* At the conclusion of the scheme, which normally last either three or five years.
The recent recession caused a considerable contraction in UK business, and it is usually in the context of distress that most people are familiar with interim management, which has traditionally been synonymous with turnaround situations, cutting-costs, post-integration mergers and a whole array of other specialist requirements. These more often than not are associated with reduction in head count, consolidation, and the restriction of a company’s long-term aims.
However, as the economy and job market in the UK continue to strengthen, companies are feeling more positive, and are now increasingly focused on growing revenues and market-share, achieved through the diversification and innovation of products and services, as well as breaking into new markets and geographies. This is the new environment that interims are working in. For example, an organisation may want to diversity from traditional Facilities Management to Data Security. Achieving this would require specialist subject matter expertise, but also deep cultural change within a business.
