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:
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:
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.