Employee share incentive schemes can be an effective way of offering tax savings to employees in addition to encouraging employee participation and loyalty.
Irish tax legislation allows for many types of schemes which facilitate employers in allocating shares, or granting options to buy shares, to employees tax efficiently. Depending on the type of scheme, employees may have to hold the shares for a number of years before they receive the tax benefits.
Employee share schemes are in operation in many Irish companies. In fact they have become best practice for rewarding and retaining employees. In some industry sectors employees expect share participation as part of their total remuneration package.
Employees have always welcomed share schemes as they allow the employee to participate financially, and in some instances tax efficiently, in the growth of their employer’s share price.
There is a tax saving of employer PRSI (at 10.85%) for the employer where remuneration is by way of equity participation when compared to cash or other benefits.
We consider the following type of schemes:
The benefits, together with the conditions and restrictions of the different schemes, are outlined in this booklet.