Hi all,
Interested to see how many people salary sacrifice to buy shares in the company they work in.
Specifically, what is the limit your employer allows you to salary sacrifice into?
Is there a legal limit?
Cheer
Do You Salary Sacrifice for Shares in The Company You Work for?
LemonShapedRock on 25/09/2020 - 23:30
Comments
$30,000 USD a year. Can't sacrifice more than 50% of our paycheck. Company (big and old US tech giant) keeps shooting up in shares so I have no idea how many shares I have. All done through fidelity.
You're investing 30k of your own money per year into the corporation you work for? Imagine paying a worker and them putting 30k a year value back into your own company.
That is how the MNC make modern slavery. Work 100% and get paid 50% in FIAT and the other 50% in hot air.
Also by staging bonuses so the 'bonus' you earned this year you only get 25% of up front, then 25% of it over the next 3 years if you stick around.
@Mechz: It is amazing that people don’t realise that they are getting ripped off right in front of them.
@whooah1979: I read recently about a guy who worked at Netflix. He thought his colleague was crazy for investing 50% of his paycheque into shares, he did 5% himself and sold them off early. He worked out his colleague now had shares worth $3.5m where as he had made about $75k. It's a risk/reward decision, getting equity in a company that has huge growth potential can net you a very early and happy retirement, or you could end up with stuff all.
With the staged bonuses they are intended to make people stick around, and they can do so quite effectively, depending on the individual's mindset. I had a friend who wouldn't leave their employer as they received a bonus of $30k in shares that wouldn't be paid for 3 years. They could easily have earned and extra $30k per year by moving employer, which I would have done myself, but they stuck around to get their share bonus.
Share price only goes up since i've been there so i'm not complaining. We have every kind of sports car in the carpark so I'm guessing the managers and senior people are raking it in!!
They're about to get more money now that the printer is about to go into overdrive.
It can sometimes be a trap - as mentioned above seek professional advice. I got burnt getting company shares (banking) pre-global financial crisis and then after the price tanked post GFC they were worth nothing but I had to pay tax on what they were worth when I received them.
You'll probably be pretty safe in the long run with a blue chip company like a big 4 bank, but just keep it in mind.
I was allowed to salary sacrifice up till AU$5,000 pa in my previous company before I got retrenched. Salary sacrificed for 4 years.
I got back my money and a bit more when the company started announcing layoffs around April this year. My RSUs were force sold. Due to the massive fall in share prices at that time, it was a double blow for my finances. Getting a 20-30% cut in your share investment in the company in addition to getting laid off sucked.
Have been living off my investments since then. Hope the economy improves. Finding good work has been challenging since.
Needs a poll
Yes.. Up to 10% of pay. US corporatation
Worked very well until last 5 years when they started going downhill
lucky for me i don't need to salary Sacrifice, they give me free shares every January. but personally i wouldn't go out of my way to go buy them. better shares to go buy
Ther are s a few ways to look at it, I used to work for one of the companies that administers these plans and most of the companies I have worked for have offered some form of employee share plan. The TLDR of considerations is: Current vs future income tax considerations, capital gains tax, discounts/free shares/matching shares, stability/outlook of the company, what happens if you leave voluntary or forced, will you miss the difference in take home pay.
I worked for one US company that just allocated 14% of your annual take home pay to buying share options at the price they were at the end of their fiscal year. They then vested over a period of 4 years, so you got 25% each year and they were yours to do as you please with, so there was no cost to me, essentially just a long term incentive to stick around.
I worked for one of the Big 4 banks, they gave us $1k in shares every year, which was tax free as long as your taxable income was less than $180k (may have changed now), they also had a scheme where you could salary sacrifice (pre-tax) up to a certain amount at 5% discount. They then vested over a period of years, and you would pay income tax based on when they vested. So essentially you were deferring income tax, which could be good or bad depending on timing (e.g. you could defer it if so you paid tax in a year where you wouldn't be working like maternity leave, sabbatical, retirement etc). This was the only company I didn't take up the option of salary sacrifice as I didn't thing 5% discount was worth it, and my income was a lot lower when I worked there, so had more use for cash.
I worked for the company that administers the plans, who are ASX listed. If you salary sacrificed up to $3k pre-tax, they would match it, so you would double your investment. With these guys you could pick the vesting period for a period up to 7 years. Similar to the last plan you were deferring the income tax, so could try and plan it for when you would be on the lowest marginal rate. I didn't hesitate to take up a plan where the company matched my investment, and my salary was about 40% higher than the big 4 bank, so I didn't miss the cash in hand so much.
I then worked for a British company, where you could salary sacrifice up to 150 GBP per month from post-tax salary, and they would give you 1 free share for every 5 you bought, which you had to keep for 3 years to get the free shares. So again, a long-term incentive to stick around, but to me 20% extra seemed worth it, despite there being no tax benefits to this one.
My current company is US listed, and they allow all staff to do a post-tax salary sacrifice of up to 10% to purchase shares every 6 months at a 15% discount. You have instant ownership of the shares to do with as you please. They are very large, growing and the share price has steadily gone up since they existed, so this one was a no brainer for me as well, so I do the full 10%.
My partner's current company allows up to $5k pre-tax salary sacrifice, and the shares vest in 3 years. There is no discount or anything so we ordinarily wouldn't bother as the share price is a bit risky, but we worked out that the $5k sacrifice just now will reduce our childcare outgoings, and in 3 years we won't need that, so there's a double benefit there. When it came to tax return time we realised last year that if we had been able to deduct another $1k we would have been $500 better off as we just tipped over one of the private health insurance rebate tiers. So there are a lot of considerations to make.
So I have always weighed it up based on my income at the time, do I really think it's a beneficial scheme and my risk tolerance.
Current company used to give some as part of bonus but now always seem to just get given some
Previous company wasn’t sacrificed but if you bought up to $2k worth they would double it. Didn’t do it as was only new, one month later company got bought and shares got bought at double, so could have turned my $2k into $8k in just one month of employment.
Hubby's one allows him to purchase 10% of his salary. We do it every month and it's sort of a set and forget thing. Very reputable company in health and share price has gone up over twice the amount when he first joined the company 10 years ago. They have a employee discount too so very worthwhile for us.
I don't think there is a legal limit but it will be the limit the company sets.
I work for a big 4 bank. We can salary sacrifice between $2,000 - $5,000 per annum, however they are then restricted for two years.
I have not looked into the tax implications so I do not do it. I don't know about a legal limit but I'd imagine that the company would not want to be adversely impacted by potential fringe benefits tax hence the low limits.
You should consult a professional if you are considering this so you can understand the various implications.