The modern employee is increasingly becoming an investor.

Across Ireland, tens of thousands of workers now receive part of their remuneration through shares, options or other forms of share-based remuneration. 

What began as a hallmark of Silicon Valley start-ups has evolved into a mainstream feature of compensation across multinational groups and an increasing number of indigenous businesses – both small and large.

Even keeping track of the various share-based incentive arrangements can feel like a job in itself: unapproved share options, restricted stock units (RSUs), restricted shares, employee share purchase plans (ESPPs), phantom shares, stock appreciation rights (SARs), convertible securities, growth shares, “keep” shares, and forfeitable shares.

The money involved across share-based remuneration is significant. 

In 2023, the last year data was publicly released, the value of share-based pay was €2.3 billion. Most of this was exempt from employers’ PRSI – in fact, the cost of this exemption that year was €310.5 million. 

Such is the size of the relief that the Tax Strategy Group, a high-level group that advises the Minister for Finance in advance of the Budget, noted in 2024 of the “significant costs” being incurred, specifically in terms of income tax and PRSI foregone.

That shift has not gone unnoticed by the taxman.

Buried within the Revenue Commissioners’ latest annual report is a striking statistic: a national compliance programme examining employee share schemes generated €22.8 million in tax, interest and penalties during 2025. Nearly 400 interventions were completed, and Revenue has made clear that its review of share option exercises and other equity awards is far from over.

This is on top of the €34.9 million that the tax authority yielded from 932 interventions over the previous three years (the programme began in 2022).

The numbers tell a broader story about the changing nature of compensation in corporate Ireland.

Over the past decade, share options, RSUs, employee share purchase plans and other equity-based incentives have moved from being niche executive rewards to a mainstream component of remuneration. 

In technology companies, multinational groups and an increasing number of domestic businesses, employees are being paid not only in cash, but in ownership.

The vast majority of this usage went to employees working in large tech and manufacturing companies – figures from Indecon, which examined the issue on behalf of the state in 2024, revealed that 82 per cent of the tax breaks went to individuals working in companies that employed more than 250 people. 

But the tax implications have led to complications, as evidenced by the number of interventions by the Revenue. 

Unlike a salary payment, a share award can generate multiple tax consequences over its lifecycle. Tax may arise when shares vest, when options are exercised, when shares are sold, or when an employee moves between jurisdictions. The rules vary depending on the type of award and the circumstances of the individual. 

Plus, while some of the schemes require pre-approval from the Irish tax authority, most do not. Some are generic, off-the-shelf products. Others are tailored to suit the different needs of the specific employers. Some shares can be awarded either through a formal scheme with written rules; others are conducted on an informal once-off basis.

It has the potential for confusion. 

The yield generated from its interventions indicates that significant amounts of tax have gone unreported or incorrectly reported. 

Furthermore, Revenue said in its annual report that it will continue to contact taxpayers who exercised share options between 2021 and 2023, offering them an opportunity to review their affairs before more formal interventions occur.

The timing is significant. 

From January 2024, Ireland fundamentally changed the way many employee share option gains are taxed, moving responsibility for collection into the PAYE system. While the reform was designed to simplify compliance, it also reflects a recognition by policymakers that share-based remuneration is here to stay – and needs to be absorbed within the wider tax system.

The fact that the Revenue has found such a significant level of non-compliance points to a misunderstanding of the tax status and implications of share-based remuneration. 

Indecon looked at the wider issue in its 2024 review, commissioned by the Department of Finance.

The report made several recommendations, including potentially introducing measures to contain the growth in the overall exchequer costs of share-based remuneration. One option, Indecon said, would be to introduce a cap on the level of employer PRSI exemption.

This would be highly unpopular within the multinational sector, who use options to entice highly specialised staff as part of their overall package. And given Ireland’s reliance on multinationals, it seems unlikely that the Government will move on this, despite the increased costs of the various schemes.  

The report also proposed measures to improve the Key Employee Engagement programme (Keep), a scheme that was designed to help start-ups and scale-ups award options in a tax-efficient manner. To date, the response to the scheme has been underwhelming, despite a number of tweaks. The consultants also proposed changes to the RSU tax treatment to bring Ireland in line with other jurisdictions, and called for the simplification of the administration of various schemes. 

Finally, it proposed reforming Employee Ownership Trusts to promote indigenous businesses and reducing the benefit-in-kind tax rate on loans for funding purposes.

All the proposals made sense. Ireland might as well make sure it is ahead of the game on it, rather than being part of the chasing pack.

Share-based remuneration is here to stay. And that is why it has caught the attention of the tax authority.

The question is no longer whether Revenue is paying attention to share schemes. The latest figures suggest it already is.

Elsewhere last week…

Adrian Lambe, director of Douglas Wallace, the design firm co-founded by the famed TV architect Hugh Wallace, spoke to Michael about dealing with his sudden death, how he had been a “constant” in his career and the firm’s desire for “considered growth”.

Sean O’Connor never thought of himself as an entrepreneur but the StatSports co-founder has built one of Ireland’s biggest sportstech success stories. He talked to Tom about saying no to Adidas, yes to Sony, and bringing global sports stars on board. 

BWG, the Spar-owned retail franchisor, is providing a timely exit for the owner of Abrakebabra, O’Briens Cafe, and Bagel Factory ahead of a major refinancing deadline. Thomas had the detail. 

Sinn Féin performed poorly in the recent by-elections and the aftermath has led to questions about what exactly the party stands for. Housing spokesperson Eoin Ó Broin mounted a robust defence in a podcast with Dion.