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A New Type of Share Scheme

Posted on: September 3rd, 2013 by Guy No Comments

On 1 September 2013 the UK Government idea for that Companies being able to offer employee-shareholder contracts, that will permit workers to give up some of their rights under UK employment law in return for shares came into force despite the sceptical comments the idea has faced.

At the Conservative Party conference in 2012 the Chancellor George Osborne announced that schemes will allow (but not force) workers to give up some employment rights in exchange for shares in the company that employs them.

Anyone can now apply to be an “employee shareholder”; under the new scheme, although no one can be forced to change their employment status and become an employee shareholder against their will. Employees must receive at least £2,000 worth of shares in their employer to give up their rights.

The Employment Rights that an employee shareholder will lose are:

  • Most unfair dismissal rights
  • Rights to statutory redundancy pay
  • The statutory right to request flexible working – except in the case of two weeks’ paternity leave
  • Some rights to request time off for training

Ever since the idea was first floated union leaders have been criticising the proposal, stating that it will strip workers of basic employment rights and could end up costing the taxpayer £1bn in lost tax on share grants.

The reason the scheme could turn into a tax loophole is that top employees who had no intention of exercising any of their employment rights anyway could obtain valuable company shares tax free. At the other end of the scale, employees could find they had given up rights such as redundancy pay in return for worthless company shares.

It may be some time before anybody takes up this option this option, which is likely only  to be attractive to a  may be attractive to a small minority of employees and employers.

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