Thursday, 25 April 2013
Employee shareholders: coming to a reality near you
We've looked at the issue of employee shareholders before, and regular readers of this blog and our Twitter feed will know we have concerns about the implications for businesses and people. There's a plethora of information and opinion out there, but let's look at the current state of play.
Employee shareholders is an initiative favoured by Chancellor George Osborne to create a third employment status which would see individuals give up certain employment rights in return for shares in the business, valued at anything from £2,000 to £50,000.
In exchange they’ll lose their right to claim not just unfair dismissal but also redundancy pay, the right to request flexible working or time off for training, and they’ll be required to provide 16 weeks’ notice of their date of return from maternity leave instead of the usual eight.
The House of Lords has rejected the Clause twice, calling it variously "ill-thought out", "not conducive to growth" and "not just a dog's breakfast, but a messy dog's breakfast". Yesterday the Government made a further concession in the Growth and Infrastructure Bill and, last night, the Lords voted to accept it.
This means that Employee Shareholders will now pass into law, becoming a recognised employment option following Royal Assent, expected in the next 24 hours.
The latest concession that swung the vote in favour is this: if someone agrees they shall become an employee shareholder they must, prior to entering into the contract, seek advice from a relevant independent advisor (for example an employment law specialist, Citizen's Advice Bureau or trade union).
The employer will be liable for all reasonable costs involved in seeking this advice, even if the employee declines to accept the position. At this point, no trade union has explicitly stated that they will attach costs to providing such advice to members, but we await developments on this as it would obviously prove a useful revenue stream for unions.
If the employee does not receive independent advice before agreeing to become an employee shareholder, then the agreement is declared invalid, and they are considered to be an ordinary employee.
This latest concession follows earlier points agreed, including the assurance that the first £2,000 of shares will not attract tax, the provision of a seven day 'cooling off' period, during which any acceptance of employee shareholder status will not be legally binding and the requirement for employers to provide a written statement with comprehensive details about the shares issued, and the rights attached to them.
There is protection too for existing employees who refuse to switch to an employee shareholder contract and will receive protection from detriment, and jobseekers who will keep their social security benefits if they turn down a position with employee shareholder status.
We urge all employers to consider the position and seek advice before adopting these new, untried agreements when they come into play- don't be the guinea pig if you can help it!