New ‘Employee Shareholder’ Status Introduced

    View Author September 2013

    A reminder that the new employment status of ‘employee shareholder’ was introduced on 1 September 2013.

    Under the new employment status, employee shareholders will receive £2,000 or more of shares in the business (of which the first £50,000 will be exempt from Capital Gains Tax on any increases in value, and the first £2,000 exempt from income tax and National Insurance at allocation) in exchange for their forfeiting certain employment rights (primarily the right to claim unfair dismissal, except where the dismissal is automatically unfair or discriminatory, and the right to a statutory redundancy payment).

    Followers of our Employment Law Worldview Blog will know that the new employment status has featured several times, most recently David Whincup’s post on the final Parliamentary debates on the Growth and Infrastructure Bill.  Those debates resulted in a number of safeguards being introduced into the final legislation, including:

    • individuals must receive independent legal advice (paid for by the prospective employer) prior to entering into an employee shareholder agreement.
    • a 7-day cooling-off period during which the agreement is not valid.
    • employers must provide a written statement about the shares and the rights they carry.
    • existing employees are protected from detriment and dismissal if they refuse to switch to an employee shareholder agreement.

    The Government has issued guidance intended to assist employers wishing to make use of the new employment status, although given the overwhelming public indifference evidenced by the responses to the consultation process, it seems likely that employer take-up will be very limited.