Participants in Sharesave (or SAYE) plans who are on parental leave will from April 2018 be able to miss up to twelve months savings as opposed to just six months savings, which is the current position.
Employees save monthly over a three or five year period before they can exercise their option and receive shares. They may only miss up to six contributions in that period. If they miss more, they stop being able to save and more importantly lose their option.
While a six month payment holiday coincided with normal maternity leave periods some time ago, the introduction of a twelve month maternity leave in recent years has made the maximum six month payment holiday under SAYE increasingly out of sync. It seemed inconsistent that one side of Government actively promoted twelve month absences (and increasingly absence rights not just for the mother, with fathers and others also being given statutory rights to take time off from work for parental reasons), while another part responsible for supervising SAYE savings arrangements only allowed six payments to be missed.
To be fair, employees on maternity leave and other employees with statutory rights to be absent were able to make alternative savings arrangements, but this was not always possible. It was also an unwelcome arrangement to have to make during a time when an employee could well have other things on their mind. Having to remind employees and deal with inevitable employee ire if the option was lost was also a burden for employers.
Accordingly, the announcement in the Budget that those with statutory entitlements to take parental absence can miss up to 12 monthly contributions will be welcome. As is currently the case, they will then catch up when they return to work. They will therefore exercise their option when they have made the full numbers of savings and so receive their shares up to 12 months later than other employees.
The change is to take effect from 6 April 2018. It is not clear at this stage whether:
- this change will take effect automatically or companies will be able to choose whether to take advantage of it;
- SAYE plan rules will need to be changed to take advantage of this change or they will be automatically changed by legislation; and
- whether the change will only affect options granted/savings arrangements entered into after April 2018 or all options/savings arrangements whenever entered into.
The changes are to be set out in HMRC guidance which will be issued in due course.