Employee shareholder status enacted by parliament

Year Published: 2013

Following a game of parliamentary tennis the government has finally agreed to introduce employee shareholder status into the Growth and Infrastructure Bill, which was passed by parliament in April. Having previously rejected the proposal twice the House of Lords finally voted to accept the proposal for employee shareholder status to be introduced.

Under this arrangement an employee or new recruit can forgo certain employment rights in return for shares in the company. When initially proposed this scheme was subjected to scrutiny and as a result certain concessions have been implemented.

The most recent concession provides that an employee shareholder arrangement will be invalid unless, prior to entering into the contract, the individual has received advice from a relevant independent advisor such as a solicitor, the CAB or a Trade Union. The employer will also have to pay the reasonable costs of that advice regardless of whether the employee accepts the role.

If no advice is taken then the employee will not be a shareholder but an ordinary employee who retains all of their employment rights. Employers can choose to offer shares exclusively to new employees and not offer an opportunity of becoming an employee.

The further concessions in relation to this new arrangement are:

  • Existing employees can be offered the option to move to employee shareholder status however will be protected from any detriment if they refuse to move over
  • There will be a 7 day cooling off period during which the employee can withdraw their acceptance to the scheme and the status will not be binding in that period
  • The first £2000 of shares will be given free of income tax
  • Employers must provide the employee with the full details about their shares and the rights they have accordingly
  • Any job seeker who refuses an offer which attracts employee shareholder status will not forfeit their social security benefits.

A detailed review of how these arrangements are expected to work will be produced following this announcement in order for you to decide whether such arrangements are for you.

For further information on this and other employment law matters please our Employment team.

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