Details of how the new Save As You Earn profit-sharing scheme for employees will operate have been outlined in the Finance Bill. The SAYE scheme was announced in the Budget and aims to make it more attractive for employees to take a shareholding in their company. Employees will have an incentive to make regular tax-free savings through the scheme and can use the proceeds to buy shares.

The Finance Bill stipulates that where individuals are granted options to buy shares in their companies under the savings-related share-option scheme, they will not be liable to pay tax either on receipt of that option or when it is exercised unless that is done within three years.

Savings made by employees into the scheme will also be exempt from income tax, and DIRT will not be deductible from any bonus or interest payable on these savings.

All employees and full-time directors of a company who have been employed there for a minimum of three years must be eligible to participate in the scheme. The only exception is where employees or directors had a shareholding of more than 15 per cent in the company within the previous 12 months.

The maximum monthly savings allowable under a certified contractual savings scheme is £250 (€317) and participants must save a minimum of £10 a month. The price at which the shares may be acquired must be settled at the date the option is granted and may be at a discount of up to 25 per cent of the market value at that time. The SAYE scheme must lodge employees savings at one of the qualifying financial institutions, namely a bank or building society, the TSB, ACC Bank, ICC Bank, the Post Office or the Credit Union.