Can an employee delay the payment of monthly save as you earn contributions as a result of the coronavirus (COVID-19) pandemic?

In order to be granted a save as you earn (SAYE) option, the option holder must enter into an HMRC-certified savings arrangement. At the outset, the employee must select how much they intend to contribute from their monthly salary under the savings arrangement during the applicable savings period. Each monthly contribution cannot be more than the maximum individual limit which applies under the SAYE legislation (which is currently £500 per month) and the scheme cannot require a minimum contribution of more than £10 per month.

From the 1 September 2018, the terms of the SAYE prospectus allow an employee to delay the payment of monthly contributions, by up to 12 occasions in total, without causing the savings contract to be cancelled prematurely but if the participant fails to make a contribution on the due date for a thirteenth occasion the employee is treated as if they had given notice of intention to stop making contributions permanently. Employees with savings contracts that started before 1 September 2018 can also delay the payment by up to 12-monthly contributions in total. However, in the Employment Related Securities Bulletin 35 (June 2020), HMRC confirmed that it will allow contributions to be postponed for a longer period where the additional months are missed due to coronavirus and the SAYE prospectus was updated to reflect this. New SAYE contracts do not need to be issued for contracts that started before 10 June 2020. All employees with a savings contract in place on 10 June 2020 can delay the payment of monthly contributions without causing the savings contract to be cancelled, beyond 12 months, where those additional months are due to coronavirus.

In addition, the Employment Related Securities Bulletin 36 (July 2020) provided further clarification as to how the 12 month extended coronavirus payment holiday for SAYE schemes will apply in practice. It provided four examples which focussed on the scenarios where the extension would potentially exceed 12 months due to coronavirus.

Example 1— If a SAYE participant had already postponed contributions by up to 12 months pre-coronavirus and did not resume their payments on the 13th occasion their SAYE contracts will be cancelled. The extended payment holiday terms will therefore not apply to those participants.

Example 2—If a SAYE participant postponed contributions up to the maximum 12 months but resumed payments on the 13th occasion and then after coronavirus became furloughed or on unpaid leave and needed to postpone contributions again to their SAYE plan then they will benefit from the extended pause.

Example 3— If a participant had postponed payments by up to 11 months in February 2020 and became furloughed in March 2020 and as a result then missed contributions in April and May a total of 13 months payments will have been missed. If the additional missed payments were the result of coronavirus then the extended payment holiday terms will apply in these circumstances.

Example 4— Participants who were due to resume payments on the 13th occasion in March 2020 but who were then furloughed or took unpaid leave due to coronavirus and who were then unable to afford to resume payments, the extended payment holiday will apply to them.

Temporary postponement of contributions will put back the three or five year maturity date of the savings contract, and the rights of option exercise linked to it. Examples of this were given in the Employment Related Securities Bulletin 35 (June 2020).