Understanding the Sharesave Scheme for Employees: A Comprehensive Guide‍

Casey Fenton


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Did you know that in the UK, where the Sharesave scheme originated, an estimated 2 million employees have participated in these programs since its inception in 1980? That's not just a quirky piece of trivia; it's evidence of the widespread impact and attractiveness of Sharesave schemes for employees. 

If you're looking to maximize your savings while investing in your company's future, you're in the right place. This article offers a comprehensive guide to help you understand the ins and outs of Sharesave, from eligibility to advantages and even potential risks. 

What is Sharesave Scheme?

Sharesave, also known as the Save As You Earn (SAYE) scheme, is a savings program that allows you to buy shares in your company at a discounted rate. You commit to saving a fixed amount of money each month for a specified period, typically 3, 5, or 7 years. At the end of the period, you have the option to buy shares in your company using the savings you've accumulated or take the money as cash savings.

Who Are Eligible for Sharesave?

Eligibility for Sharesave schemes can differ depending on the company, but there are common threads that define who can join this exclusive financial journey.

1. Employment Status

Your employment status plays a key role. While most permanent, full-time employees are eligible to join a Sharesave scheme, temporary and contract workers may find themselves in a gray area. Companies often require a minimum period of continuous employment before you're eligible to participate. This could range from a few months to even a year.

2. Location Matters

If you're part of a global company with operations in multiple countries, location might be a factor. The scheme may be primarily geared towards employees in the home country, but multinational corporations sometimes extend these benefits to international staff.

3. Age Requirements

Don't be surprised if there's an age requirement. Some companies set a minimum age for participation, often aligned with the legal working age in the respective country.

4. Exclusions

Certain roles or departments within a company may be excluded from participating in the scheme due to regulatory or internal policies. For instance, those in highly speculative roles, like stock trading within the company, may be ineligible.

5. Board Members and Executives

Interestingly, while one might assume that higher-ranking officials always have access, some companies limit Sharesave schemes to non-executive employees. The goal here is to democratize share ownership across different levels of the organization.

6. Joining Window

Even if you're eligible, keep an eye out for the "invitation window," which is the period during which you can enroll in the Sharesave scheme. Missing this window often means waiting for the next cycle, which could be months or even a year away.

7. Check Company Policy

When in doubt, the best course of action is to consult your company's specific Sharesave policy or speak with the Human Resources department. They can offer guidance tailored to your unique employment situation.

History of Sharesave Scheme

Sharesave schemes were introduced in the UK in 1980 as part of a government initiative to encourage employee share ownership. The aim was to foster a sense of ownership and engagement among workers. Over the years, the scheme has grown in popularity, and many companies, both large and small, now offer Sharesave as a part of their employee benefits package.

Although Sharesave started in the UK, its success has inspired similar schemes in other countries. While the specifics may differ, the underlying philosophy of promoting employee engagement and financial participation in company success has become a global phenomenon.

How a Sharesave Scheme Works

Navigating the Sharesave scheme can seem daunting at first, but understanding its step-by-step mechanics can demystify the entire process for you.

Step 1: Invitation and Enrollment

Your company will periodically open an invitation window for the Sharesave scheme. During this period, you'll receive an invitation package that includes key information, such as the option price of shares, the discounted rate, and the different contract terms available. You'll need to enroll during this invitation period to take part in the scheme.

Step 2: Decide Your Monthly Contribution

Your next move is deciding how much to contribute each month. Companies usually set a range for this—often as low as £5 and up to £500 per month. Consider your financial situation carefully; this should be an amount you can consistently set aside.

Step 3: Choose a Contract Term

One of the distinctive features of Sharesave is its flexibility in terms. You generally have the choice between 3, 5, or 7-year contracts. Your selection should align with your long-term financial planning.

Step 4: Savings Account Setup

Your monthly contributions are directed into a designated savings account, usually managed by a financial institution affiliated with your employer. You'll receive periodic statements, either online or in the mail, to keep you informed about your savings and any interest accrued.

Step 5: Interest Earnings

Your savings will earn a fixed interest rate over the term of your contract. Though typically not as high as other investment opportunities, the interest is a bonus on top of your principal savings.

Step 6: Option to Buy or Save

As your contract nears maturity, you'll be notified about your options. You can either buy shares at the initially discounted price using your savings or withdraw your savings and accrued interest as cash. If your company's stock has done well, buying at a discounted rate could result in substantial financial gain.

Step 7: Execution or Exit

If you choose to buy, the shares are usually transferred to a brokerage account, from which you can sell or continue to hold them. If you opt for the cash, it will be returned to you, typically through direct deposit or a check.

Step 8: Tax Implications

While the details can vary, it's essential to understand the tax implications of your decision to buy shares or take the cash. You might be liable for capital gains tax if you sell the shares at a profit, so consult a tax advisor to navigate this complex aspect.

Step 9: Plan for the Next Cycle

Many companies allow employees to enroll in a new Sharesave contract after their existing one matures. So, you can continue to save and invest in the next cycle, taking advantage of any lessons learned from the previous term.

What Advantages Can I Get from Sharesave Schemes?

If you're contemplating joining a Sharesave scheme, understanding its potential benefits can tip the balance in its favor. Here are some advantages that make Sharesave schemes an enticing option for employees:

1. Financial Upside with Minimal Risk

One of the most appealing aspects of Sharesave is the risk-free nature of your investment. You're not buying shares upfront; you're saving money in a special account. At the end of the contract term, you have the option to buy shares at a predetermined, often discounted, price. If the company's share price has increased, you stand to gain a substantial profit.

2. Employee Discount

Your company generally offers shares at a discounted option price, often up to 20% off the market value when the scheme starts. This discount gives you a head start in the investment game, amplifying your potential profits.

3. Flexibility

Sharesave schemes are usually quite flexible. You can choose from different contract lengths and adjust your monthly contributions within the limits set by the company. Furthermore, in case of financial difficulties, you often have the option to pause contributions or withdraw your funds, although this may forfeit certain benefits.

4. Employee Engagement and Loyalty

Ownership creates a sense of belonging. When you own a piece of your company, you’re likely to be more invested in its success, which can lead to increased productivity and job satisfaction.

5. Forced Savings Mechanism

If you're the type who finds it challenging to save, the automated monthly contributions act as a "forced savings" mechanism. The money is deducted before it reaches your spending account, making it easier to commit to long-term savings.

6. Tax Benefits

In some jurisdictions, the Sharesave scheme comes with tax advantages. For example, you may not be required to pay income tax on the difference between the discounted share price and the market price when you choose to buy the shares.

7. Compound Interest

Though the interest rates on the savings account may not be sky-high, they offer a guaranteed return, and thanks to compound interest, even small rates can add up over time.

8. Inclusion and Equality

Sharesave is a great leveler in the corporate world, offering employees at all levels an opportunity to invest in the company. Unlike executive stock options, which are usually reserved for upper management, Sharesave schemes are open to a wider range of employees, promoting a sense of inclusivity.

9. Liquidity at Maturity

Whether or not you opt to buy shares, at the end of the term, you have a lump sum of cash plus interest that you can withdraw. This liquidity can be a boon for other financial needs or investments.

Are There Any Risks for Employees?

While Sharesave schemes are generally a low-risk investment vehicle, they are not entirely without challenges or pitfalls. Understanding these risks can help you make a more informed decision.

  • Opportunity Cost: Your monthly contributions to a Sharesave account earn a fixed interest rate, often lower than what you might earn through other investments like stocks or mutual funds. By locking in your money for a set period, you may miss out on potentially higher-yielding opportunities.

  • Share Price Volatility: Yes, you have the option to buy shares at a discounted price, but what if the share price falls below even that discounted rate? In such cases, you may decide not to exercise your option to buy, effectively turning your scheme into a straightforward savings plan with modest interest. While you don't lose your principal, the chance for higher gains is missed.

  • Economic Factors: Economic downturns, market instability, or poor company performance can all negatively impact share prices. While these risks don't affect your savings directly, they can reduce or nullify the financial advantage of buying shares at the end of the scheme.

  • Illiquidity: Your money is locked in for the term of the contract, which could be as long as 7 years. While some schemes allow you to withdraw early, doing so usually means forfeiting some benefits, like the option to buy shares at a discounted rate.

  • Contract Terms and Conditions: Like any financial agreement, Sharesave schemes come with fine print. This may include clauses related to employment status, company performance, or other variables that could impact your ability to benefit fully from the scheme.

  • Tax Implications: Though the scheme may offer some tax benefits, there could also be tax liabilities, particularly if you sell your shares for a profit. In some jurisdictions, you might have to pay capital gains tax on the earnings, which could eat into your profits.

  • Inflation Risk: The interest rate on your Sharesave account might not keep pace with inflation, reducing your purchasing power. While you won't lose money in nominal terms, the real value of your savings could diminish over time.

  • Emotional Investment: Owning shares in your company can be a double-edged sword. While it may increase your engagement and loyalty, it can also heighten your emotional response to company news, both good and bad, possibly affecting your job performance or overall well-being.

How Much Do I Need to Join a Sharesave?

The minimum and maximum monthly contributions can vary by employer, but they often range from as low as £5 to as much as £500 per month. Look at your budget and decide on an amount that won’t strain your finances.

How Long Should I Save?

The length of time you should save depends on your financial goals and the terms of your company’s Sharesave scheme. Typical contract lengths are 3, 5, or 7 years. Consider your long-term plans and financial commitments when making this decision.

How the Sharesave Scheme Impacts My Employer?

When employees buy shares, it can help boost company morale and align their interests with those of the company. However, it could also mean that the company has to manage a larger number of shareholders.


Sharesave schemes offer a fantastic way for you to engage more fully with your company while enjoying a host of financial benefits. If you’re eligible, consider signing up during the next enrollment period. Remember, Sharesave is a low-risk, high-reward way to save and invest in your future and your company's success.

Want a more flexible equity stake and guaranteed returns? Ask your company about Restricted Stock Units (RSUs)! For more info about how this equity compensation type fits into your long-term financial planning, feel free to browse Upstock’s learning materials here.

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Casey Fenton

Founder, Upstock & Couchsurfing, AI and Equity Innovator

Casey Fenton, the founder of Upstock & Couchsurfing and an AI and equity innovator, has revolutionized how we perceive and implement equity in the workplace. His foresight in creating platforms that not only connect people but also align their interests towards communal and corporate prosperity has established him as a pivotal figure in technology and community building. Casey speaks worldwide on topics including ownership mindset, worker equity, With Upstock and Couchsurfing, he has demonstrated an unparalleled expertise in harnessing technology for the betterment of community interaction and organizational benefits.

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