At the start of this month "employee shareholder" schemes under the Growth and Infrastructure Act 2013 became available. Potential or current employees can be offered the chance to acquire shares in their employer on a favourable tax basis, in return for giving up some of their employment protection rights, including "ordinary" unfair dismissal rights. The Department for Business, Enterprise and Skills has published guidance for employers and employees.

The minimum value of the shares is £2,000 and the first £2,000 will not be subject to income tax or national insurance contributions and any gain on the first £50,000 worth of shares will not attract capital gains tax if they are sold.

Employee shareholder status is open to prospective and existing employees (and an employer can choose to offer a job to an employee solely on an employee shareholder basis). But a current employee cannot be forced into becoming a shareholder and there are safeguards for potential employee shareholders:

  • employees/job applicants must be given a written statement giving full details of the rights they are giving up and about the shares being offered (including what type of shares they are, what rights they carry, whether they can be sold or gifted and what happens to them if the shareholder leaves the company)
  • employers must fund independent legal advice about the terms and possible effects
  • there is an automatic seven day "cooling off" period after an offer to become an employee shareholder has been accepted.