The Government's controversial proposal for a new status of 'employee shareholder' has been given the go-ahead. But, following pressure from the House of Lords, there have been some last minute amendments to the legislation.
The new employee shareholder status, contained in the Growth and Infrastructure Bill, will entitle employee shareholders to shares in their employer's company worth between £2,000 and £50,000 (exempt from capital gains tax) in exchange for giving up various rights, including unfair dismissal, statutory redundancy pay, the statutory right to request training and certain statutory rights to request flexible working.
As previously reported on this blog, despite the Chancellor's announcement in the Budget last month that there would be a tax break for employee shareholders, the House of Lords voted on the same day to delete clause 27 of the Bill, which would introduce the new employee shareholder status. In the past few days, the controversial proposal has been shuttling between the House of Commons and the House of Lords.
The House of Lords has now approved the amendments proposed by the Government. These include:
• a requirement that the individual be given a written statement of the particulars of the status of employee shareholder and of the rights which attach to the shares;
• a requirement that the individual receives advice from a relevant independent adviser as to the terms and effect of entering into the arrangement;
• a seven-day 'cooling off' period; and
• a requirement that any reasonable costs incurred by the individual in obtaining advice would be met by the company (whether or not the individual becomes an employee shareholder).
It has also been confirmed that jobseekers will not be forced to take an employee shareholder position.
The Growth and Infrastructure Bill has now been given Royal Assent (along with the Enterprise and Regulatory Reform Bill). Despite the House of Lords approving the last-minute amendments to the employee shareholder provisions, a number of concerns were expressed during the debates. Lord Bilimoria said of the employee shareholder scheme: "I can guarantee that it will not work, that it will not be taken up by business, that it has wasted a lot of parliamentary time and that it will waste a lot of legislation...This is not just a dog's breakfast; it is a mad dog's breakfast".
It remains to be seen whether this new form of employment status will appeal to employers or employees. Few employees will be keen to give up employment rights in return for the potential uncertainty and complexity of having shares in their employer's company. Employers may also be reluctant to offer employee shareholder arrangements, given that they will have to meet the cost of independent advice and employees will still retain many employment rights, including the right to claim discrimination and automatic unfair dismissal. Although the Government has been keen to press ahead with its proposals, only time will tell whether employee shareholder status is a viable option for either employers or employees.