Employee share schemes

Employee share schemes are an invaluable way to boost employee retention and drive growth. Incentivising employees with the expansion of your business is a win-win and these benefits are further enhanced by the tax efficiencies available to you.

There are a number of employee share  schemes available for employers to offer their employees/directors.

Restricted share schemes

To safeguard the shares of your business, you could introduce a share clog scheme. This is a tax efficient way of rewarding key employees by granting shares which are subject to a clog on disposal.

The clog ensures that shares will be subject to restrictions prohibiting their sale for a specified period laid down by the employer.

Share option schemes

You can allow your employees to purchase shares in the future at the market value of the shares. The option holder can make a profit if the shares increase in value and the option is exercised.

Save as You Earn (SAYE) schemes

This employee share scheme allows your employees to save part of their after-tax salary over a three year period and use those savings to purchase shares in their employer company at the end of the 3 years.

Approved Profit Sharing Schemes (APSS's)

Implementing an APSS will allow your  employee exemption from income tax on the shares received up to an annual limit of €12,700 in a tax year and is also granted favourable income tax treatment on any growth in the value of the shares. However, if the employee sells the shares within three years, income tax is charged at 100% of the value of the shares at the date of sale.

Growth share/Flowering share schemes

The growth and flowering employee shares schemes involve your company issuing  a new class of ordinary shares which entitle the holder to capital generated by the future growth of the business above its current value. In order to a) reduce the initial cost of acquiring the shares and b) to create an incentive for your employee(s), the flowering shares will include a requirement that the company reaches an agreed level of future growth (known as the “hurdle”). Shares are issued at day one value.

Key Employee Engagement Programme (KEEP)

The KEEP scheme is a tax-advantaged share scheme, intended to allow Irish employers to compete with the share option schemes used by large multi-national employers in order to attract and retain employees. The principal benefit of the schemes that the multi-national companies use is that employees can quickly convert their shares into cash by selling them. This is not possible for shares held in private Irish companies as it is not easy to convert them into cash.

The KEEP scheme compensates for this by providing a scheme that allows employees to sell their shares and pay capital gains tax at 33%/10% rather than income taxes of up to 52%. This scheme is a huge benefit key employees and their employers.


How can we help?

At RSM Ireland we have extensive experience in establishing up and implementing employee share schemes. If you would like to discuss setting up a scheme or restructuring an existing scheme please don’t hesitate to contact us.

Employer share scheme reporting obligations

9 March 2022
Employers are obliged to report certain share scheme benefit provided to employees by the deadline of 31st March 2022.  The transactions to be reported are for the calendar year 2021.

Irish share scheme update - ESA Return

7 July 2021
In June 2021 Revenue introduced a new update to the Share Schemes Manual and the Share Schemes Reporting Return, which brings an additional requirement for employers offering share-based awards to their employees.