'Waive rights for shares' employment comes into force
- 1 September 2013
- From the section Business
A new employment status that allows workers to give up some employee rights, such as the ability to claim unfair dismissal, in exchange for shares has come into force.
Anyone can now apply to be an "employee shareholder", though no-one can be forced to change employment status.
Employees must receive at least £2,000 worth of shares in their employer to give up their rights.
However, there are signs of a lack of interest from businesses and employees.
Chancellor George Osborne first proposed the new status last year, suggesting owner-employee contracts would be ideal for staff at fast-growing firms.
"The take-up could be embarrassingly small," the BBC's business correspondent Joe Lynam said. "By late June, the government barely had a dozen enquiries from employers, while Labour and the unions are dead against the plan.
"Even lawyers fear it could create a two-tier workforce, with resentment between those workers who've taken a stake and those who refuse to relinquish some of their employment rights," he added.
In return for a stake in the company, an employee will give up some unfair dismissal rights apart from grounds of discrimination and health and safety, any rights to statutory redundancy pay, the statutory right to request flexible working and some rights to request training time-off.
"In addition, an employee shareholder will have to give 16 weeks' notice to their employer if they intend to return early from maternity, additional paternity or adoption leave," the Department for Business, Innovation and Skills said.
Employment lawyers told HR magazine they expect take-up to be "extremely low".
"The implementation of this legislation is taking Britain back towards pre-1963, before statutory employment rights were introduced," Gary Morton, of Riverview Chambers, told the magazine. "Employees will need to think about the risks of joining such a scheme."
Both the individual employee and the company must both agree that the individual will be an employee shareholder. The employee must also obtain advice from a relevant independent adviser and the company has to pay for that advice, whether the individual accepts the job or not.
The employee will not be liable for capital gains tax on the sale of up to £50,000 worth of shares received as an employee shareholder.
Companies can also claim some corporation tax deductions on the issuance of shares to employees.