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New Employee Status ‘Employee Shareholder’ New Employee Status ‘Employee Shareholder’

News / Articles

May 13

New Employee Status ‘Employee Shareholder’

Written by Liz Pollock
Associate

DDI: 01423 724608
E: liz.pollock@raworths.co.uk

It has recently been announced that the government intends to implement the new “employee shareholder” employment status on 1 September 2013.

This means that in consideration of the individual becoming an employee shareholder (instead of just an employee), the company can issue or allot a minimum of £2,000 worth of shares to the individual, with any gains made on the first £50,000 of shares being exempt from capital gains tax.  Income tax will also not be payable on the first £2,000 worth of shares.

An employee shareholder will have the same rights as an employee subject to the following significant exceptions:

  • no right not be unfairly dismissed (except in health and safety cases, automatically unfair cases or cases where the dismissal is discriminatory);
  • no right to a statutory redundancy payment;
  • no right to request time off for study or training;
  • no right to make a flexible working request (except from those returning from parental leave who must make a request within 14 days of their return to work); and
  • the individual must give 16 weeks’ notice if they want to return early from statutory maternity, adoption or additional paternity leave.

Since these are significant rights for an individual to give up in return for receiving shares, the government has now decided that the individual will be entitled to the following additional protections:

  • An offer of employee shareholder status must include a statement explaining which employment rights would be sacrificed and the rights attaching to the shares;
  • Once the individual has received the written statement, they must receive advice about the offer from an independent solicitor, barrister, legal executive, union official or advice centre;
  • The individual will then have seven days to consider whether or not to accept the offer.  During this period any acceptance of the employee shareholder status offer will not be binding.  The employer must meet the individual’s reasonable costs incurred in receiving advice about the offer, regardless of whether the offer is accepted; and
  • No one will be compelled to apply for, or accept, an employee shareholder job.  There will be protection from dismissal or other detriment for existing employees who refuse to become employee shareholders.  Further, jobseeker’s allowance cannot be withdrawn if an employee shareholder job is refused.

Where an employee shareholder leaves a company or is dismissed, the company must buy back the shares at a reasonable price.

It seems that the government is keen to implement the new employee shareholder status despite many people reviewing the plan in a negative or mixed way.  It will be interesting to see how many businesses are willing to give up a share of their equity to benefit from employees with more limited employment rights.  Since employee shareholders will remain protected from automatic unfair dismissals and or discriminatory dismissals, then employers will still need to tread with caution before dismissing such individuals.

Further, there is still little guidance on how to assess a ‘reasonable price’ for the shares when the individual leaves the company; something which can be a complex issue, often requiring expensive professional expertise.

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