Revenue has told IPSA that employees who had their pay reduced in 2020 as a result of the COVID19 pandemic must have their entitlements for APSS, ESOT and SAYE schemes based on their reduced salary.
In response to an equiry by IPSA, Revenue said: “If the pay cut is permanent then Revenue cannot agree to allow the reference base salary to exclude the pay reduction. We also do not consider it appropriate to permit a blanket concession permitting the use of a reference base salary that is higher than the actual salary received, even if the pay cut is only temporary. If companies wish to amend the basis of entitlement in their scheme rules then they must submit this on a case by case basis to Revenue for approval.”
IPSA had sought clarification on this matter regarding the basis of entitlement for SAYE, APSS, ESOT and KEEP cases where an employee’s pay has been reduced in 2020.
In relation to the impact of reduced working hours and/or emoluments on entitlements for employees participating in a KEEP scheme, Revenue said: “In respect of the qualifying individual, the requirement for working hours is either someone who works at least 20 hours per week or who devotes not less than 75% of his or her time working for the qualifying company or group. The 75% condition can still be satisfied even if an individual’s working time has been reduced in 2021 below 20 hours per week due to the pandemic. The Finance Act 2019 amendments permit part-time workers to qualify.
“Revenue cannot agree to permit the market value of shares under option to exceed an employee’s actual annual emoluments in a year. It is not intended for KEEP shares to replace or exceed actual salary payable to individuals and a maximum 1:1 ratio is permitted.”