Launched in September this year, employee shareholder is a new employment status that allows workers to give up some of their statutory employment rights in exchange for shares in the company. Included in these relinquished rights are the right not to be unfairly dismissed and the right to a redundancy payment. The employee in return must then receive at least £2,000 worth of shares in his employer or parent company. Two thousand pounds worth of shares can be granted tax free by the employer whilst up to £50,000 worth of shares are granted free of capital gains tax (CGT) upon their sale. There is no obligation for businesses wishing to offer an employee shareholder contract to seek agreement from HM Revenue and Customs.
Income tax and NIC is not usually chargeable on the first £2,000 of share value received by an employee shareholder. Normal rules for the taxation of employment related securities apply to any value received in excess of £2,000. These special tax rules will not apply to an employee shareholder, or anyone connected to them, if they have a ‘material interest’ in the company – if they hold 25% or more of the voting rights in the company.
Kate Fretten, Employment Partner says, "The British Chambers of Commerce reports that both businesses and employees have shown very little interest in this initiative which the Government hoped would boost hiring and productivity."
Rights to be surrendered by the employee in order to qualify for shareholder status include:
- The right to claim unfair dismissal (unless the dismissal is automatically unfair or discriminatory)
- The right to receive statutory redundancy pay
- The right to request flexible working, study or training arrangements In addition employee shareholders must also give additional notice if they wish to return from certain types of leave – including 16 weeks notice in the case of early return from maternity, adoption or additional paternity leave.
There are many points to be considered if you are thinking of taking up this option with your company and if you would like to chat to our legal team about any of the above points please call us Kate or Paul in our Employment Team on 01202 499255