Salary Sacrifice Plans & Company Share Match Plans

In 2023, a number of companies have introduced or are introducing Share Match Schemes. Employee engagement, retention and incentives are the key drivers for the companies to implement these plans.

So, what is a Salary Sacrifice Plan?

A Salary Sacrifice Plan involves an employee making an election to apply a portion of their salary towards the purchase of company shares. It allows employees to own shares in the company with the company generally paying for the cost of purchasing these shares.

Key Features
Legislation	ESS provision regulated under Division 1A of Part 7.12 of the Corporations Act . Subdivision 83A-C of the Income Tax Assessment Act 1997
Plan Type	Salary Deductions Tax Exempt or Tax Deferred Scheme
Period of Contribution	Equal instalments over 12 Months or one-off annual bonus
Method of Deduction	Equal instalments over pay period or one off at the time of bonus payment
Purchase or issue of shares	Generally, purchased on market, shares can also be issued to satisfy the allocation.
Frequency of Purchase	Monthly, quarterly or bi-annual. Monthly is the preferred purchase option for the majority of companies.
Price	On market purchase price or 5 day VWAP for share issuance up to allocation date
Restriction Period	Minimum 3 years and maximum 15 years
Restriction period election	At the time of the offer or set by the company
Tax	Payable at the end of restriction period
Eligibility	Permanent employees (full and part time) with minimum employment past probation period
Option to Opt out from the plan	Employee can withdraw from the plan at any time. They are unable to participate again in the current plan year
Offers	Annual

What are the Salary Sacrifice Plan Design options?

Each company, and industry is different, and the plan design for one company may not be suitable for another company. Below are some of the design options for rolling out a Salary Sacrifice Plan.

Plan Type	Award Value	Description	Average Offer Participation	Benefits
Tax Exempt – Share Purchase Plan	$1,000 (Fixed)	Employees contribute pre-tax salary to purchase shares	20%-35%	No Brokerage/Admin fees paid by employees for acquisition of shares Shares are tax exempt (Income tax)
Tax Deferred – Share Purchase Plan	Min. $1,000 p.a. Max. $5,000 p.a. employee elected	Employees can nominate (in multiples of $500) to contribute up to $5000 (p.a.) of their pre-tax salary towards purchasing shares	10% - 15%	No Brokerage/Admin fees paid by employees for acquisition of shares Larger amount of shares can be acquired in a year (relative to Tax Exempt) Tax is deferred until date of release Ability to elect tax deferral point. Maximum 15 years

Sample plan designs with company share matching plans

Plan Type	Award Value	Description	Average Offer Participation	Benefits
Tax Exempt – Share Purchase Plan (Matching)	$1,000 (Fixed)	Employees contribute pre-tax salary to purchase shares and company matches the purchase 1:1 ratio. i.e. $500 purchased by employee, $500 purchased by the company, or any other combination making up a $1,000 purchase of shares	60% - 75% (50-50 matching)	Discounted Share price No Brokerage/Admin fees paid by employees for acquisition of shares Shares are tax exempt (Income tax)
Post Tax Plan with Matching Shares or Share Rights	Min. $1,000 p.a. Max. $20,000 p.a. employee elected	Employees can nominate (in multiples of $500) to contribute up to $20,000 (p.a.) of their post-tax salary towards purchasing shares. Company matches 1 share for each 10 shares purchased at the end of the year.	20% - 35% ( 1:10 matching)	No Brokerage/Admin fees paid by employees for acquisition of shares Larger amount of shares can be acquired in a year (relative to Tax Exempt) Tax is deferred on matching shares until date of release Ability to elect tax deferral point. Maximum 15 years Purchased shares are available to be sold on market subject to trading policy
Post Tax Plan with Matching Shares or Share Rights	Min. $2,000 p.a. Max. $7,000 p.a. employee elected	Employees can nominate (in multiples of $500) to contribute up to $7,000 (p.a.) of their post-tax salary towards purchasing shares. Company matches 1 share for each share purchased at the end of three years.	20% - 40% ( 1:1 matching)	No Brokerage/Admin fees paid by employees for acquisition of shares Larger amount of shares can be acquired in a year (relative to Tax Exempt) Tax is deferred until date of release Ability to elect tax deferral point. Maximum 15 years

What are the current share plan trends?

An increasing number of listed companies made employee incentive schemes available to employees in the past year.

Below are some of the key findings based on S&P/ASX 200 plans managed by EPS.

ASX Top 50 – 30% offered a Salary Sacrifice Plan
ASX Top 100 – 40% offered a Salary Sacrifice Plan
ASX Top 200 – 30% offered a Salary Sacrifice Plan

Take Up Rates

The chart below reflects sample percentage range of employees who accept the offer to participate in the contribution plan i.e. the take up rate. Generally, higher take up rates can be attributed to employee engagement, the industry’s profile and the perceived value by the employee.

Take up rates by type of Plans:

Type of Plan	Average Take up rate %
Tax Deferred or Exempt Purchase Plan with Company Share Matching Plan	35%
Tax Deferred Employee Share Purchase Plan	20%
Tax Exempt Employee Share Purchase Plan	25%

Take up rate by industry and Number of Employees

Below chart represents the take up rate by industry and the key engagement strategy in place for the roll out of the plans. Information below is based on a sample of companies in the ASX 200.

Client	Industry	Take up Rate	Type of Plan	Key Engagement tool
Company 1	Software & Services	40%	Company Share Match Plan	Town Hall presentations
Company 2	Materials	35%	Company Share Match Plan	Offer Microsite
Company 3	Energy	27%	Tax Deferred Share Purchase Plan	Town Hall presentations
Company 4	Software & Services	25%	Tax Deferred Share Purchase Plan	Town Hall presentations
Company 5	Energy	11%	Tax Deferred Share Purchase Plan	Email Campaign
Company 6	Financial Services	9%	Tax Deferred Share Purchase Plan	Offer Microsite
Company 7	Media & Entertainment	54%	Tax Exempt Share Purchase Plan	Offer Microsite
Company 8	Food & Staples Retailing	16%	Tax Exempt Share Purchase Plan	Offer Microsite
Company 9	Consumer Services	9%	Tax Exempt Share Purchase Plan	Email Campaign

What are the ways company can engage employees to drive up take up rate?

Companies with a simple communication strategy that actively promotes the plan throughout the year have seen higher acceptance rate.

Some of the ways to do this are:

Briefing and training sessions prior to offer and during offer season.
Plan Microsites – providing clear plan information including calculators for employees to work out the salary contribution amounts.
Reminder emails and SMS sent throughout the offer period.
Managers provided with offer acceptance progress reports so they can discuss with their direct reports.

Key Considerations

What are the key considerations post offer for Salary Sacrifice Plans?

Once employees have accepted the offer to participate in the Salary Sacrifice Plans, the focus shifts to:

The administration of employee contribution deduction
The purchase of shares.

Contribution deduction process for payroll

The payroll team plays a vital role in setting up deductions in the system for each participant. This ensures employees are contributing the correct amount in accordance with their offer election.

Some key considerations for the payroll team are:

Calculating the correct deduction amount for varying pay frequencies e.g. Weekly, fortnightly or monthly
For global plans, considering the timing of deduction i.e. are all payrolls processing pay at the same time each month, or if at different times, how do we align the deductions with the share purchase
Reviewing the process for reversal of deduction for leavers and withdrawals from the plan
Updating the PAYG summary to include deduction information
Securing data file transfer between payroll and plan administrator.

Share purchase and allocation

Companies may elect to issue or purchase shares on market. Below are indicative timings and the steps required to complete the allocation.

Sample Allocation Timetable – Issue of Shares method

Days	5 days prior share issuance date	2 days prior to issuance date	Issuance date	Day after share issuance	Within 5 days after share issuance
Activity	Provide monthly employee list with the contribution amount.	Upload the contribution amount on the system.	Calculate the VWAP (5 days up to allocation date). Provide the updated file with number of shares to issue based on the VWAP. Review/approve and instruct to share issue. Issue shares and process the allocation.	Confirm the change in Issued Capital Balance.	Prepare and Lodge Appendix 2A with the ASX. Send allocation email to the participants.

Sample Allocation Timetable – Purchase Method

Days	5 days prior share issuance date	2 days prior to issuance date	Issuance date	Day after share issuance	Within 5 days after share issuance
Activity	Provide monthly employee list with the contribution amount. Transfer contribution funds to Link Group’s account.	Upload the contribution amount on the system.	Purchase shares on market.	Process allocation of shares.	Send allocation email to the participants.