Employee Rights For Sale As Employee Shareholder Legislation Comes Into Force
From 1 September 2013, new legislation introduced by the government allows company employees to become shareholders in a company, in return for waiving certain employment rights. Although various conditions must be met and both company and employee must agree to the status, any employee can become an employee shareholder.
The basics of the scheme are:
- The company must give the employee shares with a minimum value of £2,000. There is no maximum value.
- No monetary payment is made by the employee for the shares. However, in return, the employee gives up certain unfair dismissal rights, statutory redundancy pay rights, most flexible working rights and some rights in relation to time off for training.
- The shareholder will also be required to give 16 weeks’ notice should they want to return to work early from maternity, paternity or adoption leave. While the legislation states that employee may give up certain rights to become a shareholder, the employer is not prevented from offering more generous contractual rights than those in the legislation.
Full details of the scheme can be found on the HMRC website at the following link. Employee Shareholder Status
The government believes this new law will enable companies to recruit better quality employees to their business, while at the same time making individual employees feel that they have greater responsibility, increasing productivity to make sure the company goes well. Although the law offers previously unavailable opportunities to ambitious employees and innovative companies, it is still quite controversial.
For all its good intentions it presents various risks for employer and employee. A divided, unhappy workforce may develop when not all employees of similar levels become shareholders, which may have an adverse effect on productivity. Should anything go wrong at the company, the employee may find the value of the shares less valuable than any employment rights they relinquished in return for the shares.
Any company or employee interested in this new employments status should definitely research the matter fully before proceeding. It is in both parties’ interest to obtain robust advice to make sure everyone is getting the fairest deal under the arrangement.
If you are a business or employee requiring advice on Employee Shareholder contracts please contact our Employment Law Team
Amy Hallam
Head of Employment
0114 3496989
amy.hallam@brmlaw.co.uk
