New Employee Shareholder Employment Status Finally Set To Become Law
At the end of April 2013, the Growth and Infrastructure Act finally received Royal Assent, bringing an end to a turbulent few months of passing through Parliament, following initial proposals of a new “Employee Shareholder” status back in late 2012.
At the end of April 2013, the Growth and Infrastructure Act finally received Royal Assent, bringing an end to a turbulent few months of passing through Parliament, following initial proposals of a new “Employee Shareholder” status back in late 2012.
The House of Lords had been insistent on rejecting the proposal, and did so on two separate occasions, before finally agreeing to pass the measure after a further ‘concession’ was introduced which requires “Employee Shareholders” to have taken independent advice before being granted the status, the “reasonable cost” of which falls on the Employer.
Such advice is likely to come from a solicitor, barrister, advice centre or trade union official, and must be paid for regardless of whether the Employee ultimately acquires the new status or not.
It is unsurprising that concessions had to be made to the proposal, when considering comments such as those of Lord Adonis who had previously said about the measure, "when you have a totally mad idea like the one before us the best thing is not to test it out but to kill it at birth", whilst Lord Pannick said that the proposal "frustrates the very purpose of employment rights".
The offer of the new status also has to include a statement setting out the rights which the Employee would effectively be giving up, and the rights which are attached to the shares.
The new status will also be subject to a 7 day “cooling off” period from when the independent advice is given, in which employees can change their minds about what they are agreeing to.
Employees have to be offered a minimum of £2,000 worth of shares in return for giving up certain Employment rights, such as those relating to unfair dismissal and redundancy. The benefit to employees is that profits made on the sale of shares up to the value of £50,000, will not be subject to a charge being made to capital gains tax.
The Government intend to implement the proposal with effect from 1 September, though it is thought that it will be much further down the line before we start seeing employees readily taking up the new status, until reaction to the change is gauged.
However, as employers are able to only offer jobs to those willing to enter into the new status, there are some commentators who believe that the status could be ‘abused’ by some employers, at a time when jobseekers are unlikely to turn down the offer of employment.