Shares for employees

Share awards

Free and discounted shares

An award of free or discounted shares is a benefit-in-kind (BIK) chargeable under the Pay As You Earn (PAYE) system to:

The value of the benefit is the:

  • market value of the free shares at the date of award
  • or
  • value of the discount (difference between market value and amount paid).

You must include this share-based remuneration under gross pay and under the relevant heading on the payroll submission.

Employer PRSI does not apply if the shares are in the employer company or a company that controls that company.

Restricted Stock Units (RSUs)

A RSU is a grant (or promise) to an employee that, on completion of a ‘vesting period’, the company will grant:

  • shares
  • or
  • cash to the value of shares.

RSUs delivered as a cash payment are not exempt from employer PRSI. They must not be included as share-based remuneration on the payroll submission. Treat this payment as normal pay.

Sometimes an employee is entitled to cash equivalent to the dividends accruing to the shares promised by way of the RSU. These are taxable emoluments subject to normal payroll deductions.

Convertible securities

These are securities that can be converted into or exchanged for another type of share or stock.

This right of conversion is ignored when computing the charge to tax at the date of award.

The amount subject to tax depends on whether the convertible security is treated as a:

If the security is a share option, your employee will pay the tax directly to Revenue. If the security is not an option, you must operate Pay As You Earn (PAYE) on this award.

Forfeitable shares

You may award shares subject to the condition that they will be forfeited if certain circumstances arise. For example, if an employee ceases employment.

Tax is charged on the date the shares are awarded even though they may be forfeited. You must operate PAYE on this award.

If the shares are forfeited, Revenue will repay the tax directly to the employee on receipt of a claim.

Growth shares

Growth shares are a special class of shares that generally have a low or nil value until a certain target is reached. They are also know as hurdle or flowering shares.

If the shares are free or discounted, you must operate PAYE on this award. No tax arises on shares with a nil value at the date of the award.

Reporting requirements

You must report details of share awards on the Form ESA for any year:

  • you award any of the categories described above
  • a chargeable event occurs regarding convertible securities
  • shares are forfeited
  • an RSU is share settled or cash settled.

The Form ESA must be filed by 31 March following the relevant tax year.

The return must be completed offline and then uploaded to Revenue Online Service (ROS). The return contains detailed instructions on how to complete and upload it to ROS.

Next: Restricted shares