A consultation on the Chancellor’s proposals to pass legislation that would allow employees to give up some of their employment rights in return for company shares ended yesterday.
The outline of the proposal is that employees will be able to take stakes worth between £2,000 and £50,000 in their respective employers’ companies in return for giving up some of their rights relating to unfair dismissal, statutory redundancy pay and flexible working.
New mothers who take part in the scheme will be required to give 16 weeks’ notice of a firm date of return from maternity leave instead of the usual eight weeks.
Staff taking up the shares-for-rights swap will become employee-owners. According to the Department for Business, Innovation and Skills (BIS), which is responsible for the Chancellor’s initiative, taking up employee-owner status will be optional for existing employees of the companies that offer it.
However, new employees may have no option but to join the employee-owner ranks if the plans go ahead. BIS says that employers participating in the scheme will have the option to offer “more generous employment conditions into the employment contract if they want to”. In addition, employees would be able to sell their shares free of Capital Gains Tax if the value of the shares increased.
However the plans may not be as advantageous to companies as they might initially sound, as firms would have to spend money having the shares professionally valued, not only for the purpose of initial acquisitions but for buying back leaver shares and regularly updating employees on the value of their shares.
Also, employers wishing to transfer existing employees onto the scheme will need to enter into compromise agreements in order to amend the employee contracts.