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Shares for rights contracts coming into force in September 2013

Employment Law & HR
BG Purple

Employee-shareholder contracts are finally set to become law after the Growth and Infrastructure Bill received Royal Assent on the 25th April 2013. The Bill faced a tumultuous journey through parliament after the House of Lords twice rejected the Bill because of the controversial employee-shareholder provisions.

The new status is designed to allow businesses to offer shares worth a minimum of £2,000 to employees, with the first £50,000 worth of shares being exempt from capital gains tax. In return, the employee sacrifices certain employment rights, such as the right to claim unfair dismissal, the right to a redundancy payment and the right to make a flexible working request.

A number of concessions were made by the government in order to get the Bill through the House of Lords and the following amendments were made:

- Jobseeker's allowance cannot be withdrawn if an employee shareholder job is refused.

- An offer of employee shareholder status must include a statement explaining the employment rights that would be sacrificed and the rights attaching to the shares.

- The individual must receive independent legal advice about the offer. The employer must meet reasonable costs incurred in receiving this advice, regardless of whether the offer is accepted.

- Individuals agreeing to the offer will be entitled to a seven-day "cooling off" period from the day legal advice is received.

The new employment status will come into force on the 1st September 2013, although it is anticipated that uptake of this particularly niche contract will be low.

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