Employee benefits legislation and practice is constantly changing.
Employers must ensure that they both take their legislative and regulatory obligations seriously and also are aware of the growing array of employee benefits packages that are available in Ireland to attract and retain staff.
Any Employee Benefits process must therefore be well planned, properly controlled, efficient, cost effective and individually tailored to the needs of the business.
The provision of group risk benefits will offer a cost-effective solution for the provision of benefits that employees would otherwise need to arrange for themselves on an individual basis.
It will also promote goodwill within the company in situations which would otherwise result in potential financial hardship for employees.
For senior employees an employer sponsored Executive Pension can create an extremely flexible and cost-efficient retirement vehicle.
However, the employer is required to make a “ meaningful contribution” to the arrangement
Rewarding key employees with equity in the company should provide a focus on increasing the value of the company and promote an inclusive culture within the business with more of a sense of career rather than a job.
Although tax benefits have been cut back with the removal of approved share options schemes, marginal tax incentives are still available to employers and employees.
The alignment of employee’s interests with those of the owners of the company should lead to enhanced employee loyalty, motivation and commitment resulting in a sustained improvement in company performance.
Over the 17 years to October 2009, employee owned companies have outperformed FTSE All-Share companies each year by an average of 10%. Over successive three year periods they have outperformed by 41% and over successive five year periods by 78%.
The Key Employee Engagement Programme (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 to attract and retain employees.
This scheme is likely to be of benefit to employers who wish to award employees the opportunity to earn a bonus based on future share price performance without them necessarily becoming long-term shareholders in the company.
KEEP applies to qualifying share options granted between 1 January 2018 and 31 December 2023.
In summary the scheme works as follows:
An employee is granted an option to acquire shares at a price that is no lower than today’s market value – therefore the employee is not awarded any existing value in the company.
If, by the time the employee exercises the option the shares have increased in value they are not subject to tax on the uplift at that time.
Instead, they will be subject to Capital Gains Tax on the uplift if and when they dispose of the shares and realise this uplift.
The employer will not be liable to Employers’ PRSI.find out more
In some cases, an employer may wish to award shares directly to some key employees. In addition to giving them a greater sense of responsibility and incentivising them to drive company performance, it may also serve to instil loyalty to the company. Unlike the KEEP Scheme, the Restricted Share Scheme allows the employer to give the employee some of the existing value in the company.