The SAYE and SIP employee share schemes broadly achieve their objectives, but simplification of the rules and making sure wider groups of employees can access the schemes are the way forward, says the CIOT. The CIOT was responding to the Treasury consultation Non-Discretionary Tax-Advantaged Share Schemes: Call for Evidence which looked at the effectiveness of the save as you earn (SAYE) and share incentive plan (SIP) schemes.
While the schemes generally meet the original policy aims of aligning employee and shareholder interests and improving recruitment and retention of staff, both would benefit from modernisation. In particular:
The three and five-year saving/holding periods may be less suited to a workforce which is far more ‘mobile’ than when the schemes were introduced (although, if retention of staff is a policy objective, there seems a certain logic in maintaining these periods).
Many employees are unable to afford to save money into SAYE schemes, and most of those who do participate tend to sell the shares on exercise (i.e. buy the shares using the amount they have saved and sell the shares immediately). This effectively means that SAYE is being used as more of a short-term savings scheme, although there is a longer-term context where individuals routinely take out a new savings contract every year. SIP shares are often held for longer periods.
Key recommendations are to increase employer awareness of both schemes (particularly in the SME community), reduce the administrative burdens and costs associated with operating the schemes, and consider reducing the holding periods and widening access to more employees. These measures could improve participation by employers and take-up by employees, suggests the CIOT.
The SAYE and SIP employee share schemes broadly achieve their objectives, but simplification of the rules and making sure wider groups of employees can access the schemes are the way forward, says the CIOT. The CIOT was responding to the Treasury consultation Non-Discretionary Tax-Advantaged Share Schemes: Call for Evidence which looked at the effectiveness of the save as you earn (SAYE) and share incentive plan (SIP) schemes.
While the schemes generally meet the original policy aims of aligning employee and shareholder interests and improving recruitment and retention of staff, both would benefit from modernisation. In particular:
The three and five-year saving/holding periods may be less suited to a workforce which is far more ‘mobile’ than when the schemes were introduced (although, if retention of staff is a policy objective, there seems a certain logic in maintaining these periods).
Many employees are unable to afford to save money into SAYE schemes, and most of those who do participate tend to sell the shares on exercise (i.e. buy the shares using the amount they have saved and sell the shares immediately). This effectively means that SAYE is being used as more of a short-term savings scheme, although there is a longer-term context where individuals routinely take out a new savings contract every year. SIP shares are often held for longer periods.
Key recommendations are to increase employer awareness of both schemes (particularly in the SME community), reduce the administrative burdens and costs associated with operating the schemes, and consider reducing the holding periods and widening access to more employees. These measures could improve participation by employers and take-up by employees, suggests the CIOT.
