Employee shareholders

The Growth and Infrastructure Act 2013 (“the Act”) which comes into effect from 1 September 2013, will introduce an employee ownership scheme under which employees will be able to relinquish some of their employment rights in exchange for shares in their employer’s business.

The Act permits an employer and employee to agree that in consideration of the individual becoming an ‘employee shareholder’ rather than just an ‘employee’, the company will 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.

Agreeing to employee shareholder status will entail the loss of the following employment rights:

  • The right not to be unfairly dismissed (except in health and safety cases, automatically unfair cases, or cases where the dismissal is discriminatory under the Equality Act 2010);
  • The right to a statutory redundancy payment;
  • The right to make a flexible working request, aside from those employee shareholders returning from parental leave, who will be restricted to making a formal request for flexible working to the period of 14 days beginning with their return to work;
  • The employee must give 16 weeks’ notice if they want to return early from statutory maternity, adoption or additional paternity leave;
  • No right to request time off for study or training.

Also, employees who refuse to become employee-shareholders will benefit from added protection against dismissal or other detriment as a consequence of any such refusal.

Any offer of employee shareholder status must include a statement explaining the employment rights that would be sacrificed and the rights attaching to the shares. Furthermore, and following concerns raised by the Law Society, each individual must receive advice about the offer from an independent solicitor, barrister, legal executive, union official or advice centre. The employer must meet reasonable costs incurred in receiving this advice, regardless of whether the offer is accepted. Finally, individuals agreeing to the offer will be entitled to a seven-day "cooling off" period from the day legal advice is received.

With over 30 years’ experience advising on all aspects of employment law, and with a team of specialist employment lawyers, Palmers can provide the expert advice needed to help employees make the right decision. For further assistance, please contact Karl Barnes or Lara Murray on 01268 24000 or alternatively via email at KBarnes@palmerslaw.co.uk or LMurray@palmerslaw.co.uk.