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Insight

"Employee Owner" - name change

04/12/2012
Back in October, the Chancellor of the Exchequer, George Osborne, announced controversial plans to create a new legal status of  'employee owner'. Under these plans, employee owners would receive

Back in October, the Chancellor of the Exchequer, George Osborne, announced controversial plans to create a new legal status of  'employee owner'. Under these plans, employee owners would receive shares in their employer's company worth between £2,000 and £50,000 (exempt from capital gains tax) in exchange for giving up unfair dismissal rights, statutory redundancy pay, the statutory right to request training and certain statutory rights to request flexible working. They will also be required to provide 16, rather than eight, weeks' notice to their employer of an intention to return early from maternity or adoption leave.


Following a short consultation on the plans, the Government has now published its response, confirming how it intends to proceed. The key changes, many of which will be introduced through the Growth and Infrastructure Bill, are as follows:


• the Government has reflected on the employee owner name and considers it should be changed to better describe the status. The Government therefore intends to re-name it "employee shareholder";


• the Secretary of State will have the power to increase the minimum share value of £2,000;


• the upper threshold of £50,000 will be removed, to allow businesses to offer more shares under the scheme. The £50,000 cap relates only to the exemption from capital gains tax;


• the notice period for returning early from additional paternity leave will be changed to be in line with the notice period change for return from maternity and adoption leave;


• non UK-registered companies will be allowed to benefit from the employee shareholder status; and


• the Government will allow shares to be issued by both the employing company and its parent company, to ensure the scheme is sufficiently flexible to encourage widespread appeal.


The Government will provide employment status guidance for use by businesses, so they have a simple guide to the types of status available to them and what it means for their businesses. The Government has also stated that, in order to allow people to make informed choices about whether to accept the new type of contract, it will develop clear guidance for people that helps them work out the employment law and tax consequences of these contracts.


It is worth noting, however, that a number of concerns raised in the responses to the consultation have not been addressed in any detail (if at all) by the Government. There therefore remain significant questions as to the actual impact and practicability of the proposals. 

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