Shares for employees
Employee Share Purchase Plans and cash-settled share-based awards
Employee Share Purchase Plans (ESPPs)
Many companies, particularly subsidiaries or branches of United States' (US) corporations, operate an ESPP.
An ESPP enables your employees to purchase shares in your company, or your parent company, at a discount. The purchase is funded through deductions from the employee’s net salary or wages. The discount allowed is normally 15% of the market value of the shares, on either the first or last day of the offer period, whichever is the lower. The offer period is normally six months.
ESPP schemes are normally treated as share awards and taxed through the Pay As You Earn (PAYE) system. If the ESPP provides the employee with an option to acquire the shares, then the award is treated as an unapproved share option. This will depend on each individual plan.
From 1 January 2024, unapproved share options are also taxed through the PAYE system.
Cash settled share-based awards
Some employee benefit plans offer cash payments to employees based on the value of shares in a company. The method of calculating the cash sum will vary depending on the scheme. The payment may equal the value of the underlying shares on a particular date, or any increase in their value over a set period.
Examples of such awards include phantom shares, Stock Appreciation Rights (SARs) and cash-settled restricted stock units (RSUs).
Where such awards are paid as cash amounts, the cash payment should be treated as normal pay. You must deduct as appropriate under the PAYE system:
Cash payments are not exempt from employer PRSI.
Sometimes an employee is entitled to cash payments equivalent to the dividends accruing to the underlying shares. These dividend equivalents are taxable emoluments of the employment and are subject to normal payroll deductions.
Reporting requirements
You must report details of the ESPP and cash-share awards on the Form ESA.
For further information, please see Share reporting obligations.
Next: Unapproved share options