New employee shareholder scheme introduced.
THE Growth and Infrastructure Act has created a new employee shareholder status this month, allowing employees the option to give up some of their employment rights in exchange for at least PS2,000 worth of shares and become "employee shareholders".
The status means an employee shareholder will be given shares worth at least PS2,000 and in return can be asked to waive: The right not to be unfairly dismissed. The right to a statutory redundancy payment. The right to request flexible working. ? The right to request training or under-take study. The employee shareholder would have to give 16 weeks' notice of the intention to return early from maternity or adoption leave, rather than eight weeks.
Any gains made on the first PS50,000 worth of shares acquired will be tax-free. There is no tax or National Insurance payable on the first PS2,000 worth of shares. Benefits such as jobseeker's allowance will not be affected if an individual does not wish to take a job on an employee shareholder basis and existing employees cannot be required to become employee shareholders.
Requirements for the status to be valid The employer has an obligation to provide a written statement to the individual setting out the full details of the loss of his employment rights, the shares and the rights attached to them including whether the shares are subject to any drag or tag along rights.
The employee must receive independent legal advice about the offer before entering into the contract.
The employer has to pay the reasonable costs of the legal advice - even if the employee does not accept the contract - which will be tax-free for the employee. There must be a seven-day 'cooling off' period from the day the advice is received.
Impact on business Businesses will have to take into account the cost of providing legal advice to an employee before entering into an employee shareholder contract.
Advantages for companies This scheme may make employees feel more committed to the business. It may increase trust between the parties and promote the growth of the business.
Concerns The Equality and Human Rights Commission has expressed concerns that the employee shareholder status may encourage discrimination by limiting the right to request flexible working.
Lorraine Heard is a partner in the employment team contact the Employment team at Bond Dickinson, tel: 0845 415 0000.
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|Publication:||The Journal (Newcastle, England)|
|Date:||Sep 3, 2013|
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