After the controversial parliamentary “ping pong”, the House of Lords has now accepted the clause in the Growth and Infrastructure Bill which introduces the new employee shareholder status in exchange for employees giving up certain employment rights.

The Bill received Royal Assent on 25 April 2013 and is expected to be implemented on 1 September 2013. Since we first reported the proposals, the government has made a number of concessions. These include:

  • The first £2,000 will be exempt from income tax and there will be a capital gains tax exemption for profits up to £50,000.
  • Those on job seekers allowance will not lose their benefit if they reject an employer shareholder job.
  • Employers must provide a written statement to the potential employee shareholder giving full details of the shares, the rights attaching to the shares, including voting and dividend rights, and the rights they are giving up.
  • The individual will be required to take independent legal advice before giving up his/her employment rights, with the employer meeting the reasonable costs for such advice regardless of whether or not the individual accepts the employee shareholder role.
  • Those who do agree to become employee shareholders will have a 7 day “cooling off” period to withdraw their agreement.
  • While employers can impose the new status on new staff, existing employees must not suffer detriment for refusing to change to an employee shareholder contract.

Despite these new safeguards, with the watering down of employment rights there is more potential for shareholder disputes and substantial High Court or county court costs. So it is not clear whether employers or employees will be better off with the new status quo. The government’s decision not to over-regulate this new employment status means much of the relationship will be left to negotiation between the employer and employee shareholder and as set out in the employee shareholder contract.