COVID-19: Managing Your All Employee Share Plans
SAYE Update

COVID-19: Managing Your All Employee Share Plans

27 March 2020

A special Equiniti briefing

During these exceptionally challenging times, you’re probably thinking carefully about how to keep your workforce safe, informed and financially supported. Clearly, your all employee share plans (SAYE/Sharesave and SIP/Share Incentive Plan) are a key part of the picture, contributing to employees’ savings, morale and their engagement with the business.

It’s not unusual for share prices to fall and for plans to go underwater, but what makes the current situation extraordinary is the speed and reach of the changes taking place. That’s why we’re committed to helping you through the coming weeks and months, working hard to provide the information you need to navigate your way through a rapidly shifting landscape.

In this special briefing, we will help you to tackle key concerns around your plans, including:

1.  Should we continue with our SAYE launch?
2.  What are our choices on maturities?
3.  How about contributions from employees taking unpaid leave?
4.  Will SIP purchases be impacted?
5.  What about our ERS tax returns?

1  Should we continue with our SAYE launch?

Several of our clients have been wondering whether to press ahead with their SAYE launch. Most have decided to continue, which is consistent with previous times of extreme market turbulence.

Here are seven key issues to consider:

 

  • What should you do if the share price continues to fall and the option price moves underwater during the invitation period? It’s unlikely that the option price can be reset. However, there may be an opportunity to relaunch the invitation with a new option price calculated against a more up-to-date market price. It may then be possible for any applications in the current invitation to be rolled over into the new invitation.

  • If rescheduling a launch, ensure that key dates don’t fall within a Closed Period.

  • Are there any impacts on headroom for shares available for the new grant and any scaling implications?

  • Ask your finance team for information about the impact on IFRS2 reporting.

  • Do you want to include any additional launch information about how to cancel current schemes that are underwater?

  • When calculating an employee’s overall maximum savings amount, some scheme rules enable the company to include an employee’s savings from current plans, even when they have withdrawn their savings and the option has lapsed. If that is the case, it should be very clear in the invitation information pack.

  • Given that many of your employees may not be in the workplace during the invitation period, review your range of communication channels to ensure that the invitation reaches everyone eligible. You may have to factor in additional planning time and costs if you’re looking at paper/postal invitations.

2  What are our choices on SAYE maturities?

Most maturing schemes are now underwater but, as the maturity period lasts for six months, a decision doesn’t need to be taken immediately. Participants can retain their savings and wait to see if the price recovers.

Here are five key issues to consider:

  • Monitor the option price/market price gap, with a plan for what to do if the scheme is likely to go above water and what you should communicate to participants.

  • Should savings be automatically repaid at maturity or six months after maturity? The extra steps involved for both participants and administrators generally mean that the auto repayment of savings is carried out six months after maturity.

  • Participants who are still keen to acquire shares at the point of maturity can still do so by using their savings to make a market purchase. This can be done by participants using our usual dealing services. In some cases, it may be possible to offer market purchase as a maturity choice and we are happy to discuss this with you.

  • Impacting international plans, we’ve recently seen sterling drop below $1.20 for only the fourth time since 1985. Given that foreign exchange turbulence is further exacerbating the challenges caused by low share prices, it’s worth looking at the benefits of cashless exercise.

  • Understandably, some clients have asked whether the maturity period could be extended to 12 months. Unfortunately, SAYE rules set the maturity period at six months (or less for some international plans not falling under UK tax advantaged scheme rules).

3  How about contributions from employees taking unpaid leave?

Some of your employees may be taking unpaid leave and wondering if they can pay their SAYE contributions directly to us, rather than through payroll. They can, of course, miss up to 12 payments, but some may be concerned about the knock-on impact of delayed maturity, and potential headroom issues around entering new contracts.

The current HMRC guidelines enable participants to pay directly under specific circumstances such as maternity leave, parental or adoption leave and long-term sick leave. However, we’re speaking to HMRC to push the case that, during the following months, it would be helpful for them to allow payments from all employees on unpaid leave.

 

4  Will SIP purchases be impacted?

You may be considering relaunching your SIP to fit in with the beginning of the new tax year. Given that many of your employees may not be in the workplace, it’s best to review your range of comms channels to ensure that the information reaches everyone who is eligible. You may have to factor in additional planning time and costs if you’re looking at paper/postal invitations.

As Partnership monies are taken from pre-tax pay, any employees taking unpaid leave will not be able to make their usual SIP contributions. As well as allowing regular payments, offering a ‘lump sum’ or ‘top-up’ feature can provide your employees with flexibility as to payments.

 

You may be concerned about what happens to regular SIP awards if the stock exchange is closed. We’re required to return Partnership contributions if more than 30 days have passed since employees have made their contributions. However, we’ve asked HMRC to confirm that, if faced with this situation, we can continue with the award, completing the purchase when the stock exchange is next open.

 

5  What about our ERS tax returns?

As we’re coming to the end of the tax year, we’re getting ready to produce ERS annual returns so that they can be filed electronically before 6 July 2020. However, given everything else that’s going on, we’re also asking HMRC for an extension to give us all a little more flexibility.

We’re here to support you

Even in these extraordinary circumstances, Equiniti is here to support you and ensure the successful management of every aspect of your SAYE. We’ve been working on the potential consequences of COVID-19 for several weeks, and continue to do so as the situation develops.

 

If you have questions or require any form of support from us, please don’t hesitate to contact your Relationship Manager or myself, Jennifer Rudman, Industry Director, Employee Plans, jennifer.rudman@equiniti.com.