Schedule 3 SAYE Option Scheme: General requirements: Participation on similar terms
The scheme must require that:
- all employees who satisfy the statutory eligibility requirements (ETASSUM31050) must be eligible to participate in the scheme on “similar terms”, and
- all those who actually do participate in the scheme (who may include some employees or directors not meeting those statutory requirements, ETASSUM32210) must do so on “similar terms”.
It is acceptable for invitations not to be issued to employees under notice of dismissal or who will have ceased employment at the date of grant. Nor need invitations be issued when there will be a very short interval between the grant date and the cessation of employment.
Schemes must not restrict employees approaching retirement from participating if they are otherwise eligible. But it is acceptable for companies to make them aware that the extent to which they can exercise options will be limited to the amount of repayments from the linked savings contract, which may be quite small.
“Similar Terms” is defined in the legislation in a negative way. Paragraph 7(2) directs that, in deciding whether options have been granted to all participants on similar terms, variations for certain reasons may be disregarded. Specifically, variations made according to:
- levels of remuneration,
- length of service, or
- any similar factors
may be disregarded in deciding whether participation is on “similar terms”.
In practice, potential participants are usually invited to participate in Schedule 3 SAYE share option schemes on the same terms for all, within the maximum aggregate monthly savings limit permitted by the scheme under paragraph 25 Schedule 3 (see ETASSUM34210). Only if the invitation is over-subscribed will it be necessary for the company to decide the basis on which applications are to be scaled down.
In determining the extent to which an individual may apply for new options, a provision in a scheme which deems monthly savings contributions due under an existing contract prematurely terminated by the participant as still being paid until the earliest bonus date may be acceptable. Companies may wish to include such a provision to discourage participants from allowing their current options to lapse by terminating the linked savings contract, with a view to applying for larger new options at what may (if share prices have fallen) be a lower option price.