Chancellor George Osborne recently announced proposals for a new type of employee ownership in which employees will sacrifice some of their future employment rights in exchange for shares in the employer.

Certain employment rights will be exchanged for shares worth between £2,000 and £50,000 and any growth in value of the shares will be exempt from capital gains tax.

Employment rights lost will include claims for unfair dismissal and redundancy pay, requests for flexible working, time for training and female employees will be obliged to give 16 weeks notice of their date of return following maternity leave, instead of the usual eight.

The share scheme will operate so that on an employee’s dismissal, an employer may buy back the shares at a reasonable price.

Not surprisingly there has been a mixed response from both employees and employers with concerns over the risk of a fall in value of the shares being voiced by employees.

Further concerns are that when failing companies are forced to make redundancies share values will in all likelihood be nil and the affected employee will therefore not have the previous protection of at least a statutory redundancy payment to provide a temporary buffer against the dismissal.

It is anticipated that legislation implementing these proposals will be published later this year coming into force from April 2013.

Due to the controversial nature of these proposals it is anticipated that there will be a number of stumbling blocks. We will keep you posted.