Give up employment rights in exchange for shares - consultation document

zzzLazyDaisy

Yesterday the government opened the consultation process on its proposals to introduce a new type of employee with few legal protections or rights.

Existing employees will be able to opt into the scheme if they choose, but employers will be allowed to insist that new employees join the scheme. For as little as £2000 worth of shares in the company, employees will give up mpst of their legal rights to unfair dismissal and redundancy, plus accepting other restrictions on existing rights. If the employee leaves or is dismissed the employer will be able to insist that the shares are sold back to the company at market rate valuation.

Consultation closes on 8th November, so not long if you wish to have your say. More info and response form here....

http://www.bis.gov.uk/Consultations/consultation-on-implementing-employee-owner-status?cat=open

colino

I really will be surprised if this gets past the consultancy stage. It is a cack-handed attempt to introduce hire/fire on demand by a poorly drafted piece of law. If you enter a business as one of these employee owners, aren't you likely to be highly desired by the existing owners and this legislation gifts you shares, free of CGT, of between £2k-£50k? Surely this will affect, positively, consultants taking up roles in high-growth start ups. They can set the ball rolling, get the shares and when the business is taking off, move on to the next enterprise and have a healthy stake in each.
Conversely if a business needs people and those people don't want to be employee owners, the business will have to drop this offer and give them straight contracts to get them.
I think this is just more distraction politics. "Look at this and wonder why were doing it and ignore the recession behind you".

LittleVoice

colino wrote: »

I really will be surprised if this gets past the consultancy stage. It is a cack-handed attempt to introduce hire/fire on demand by a poorly drafted piece of law. If you enter a business as one of these employee owners, aren't you likely to be highly desired by the existing owners and this legislation gifts you shares, free of CGT, of between £2k-£50k? Surely this will affect, positively, consultants taking up roles in high-growth start ups. They can set the ball rolling, get the shares and when the business is taking off, move on to the next enterprise and have a healthy stake in each.
Conversely if a business needs people and those people don't want to be employee owners, the business will have to drop this offer and give them straight contracts to get them.
I think this is just more distraction politics. "Look at this and wonder why were doing it and ignore the recession behind you".

Yes - if they don't have to surrender the shares on leaving the employment.

The employer would be allowed to include a clause in contracts requiring the
employee to surrender the shares when the employee left, was dismissed or made redundant.

Yorkie1

Haven't read the consultation but, if you can't sell the shares, and have to give them up when you leave, is all that you're getting the right to income from the shares - which as we know can be minimal if there's no dividends by choice or because the company isn't doing well enough?

And giving up a right to lots of protections, including various financial compensations if treated poorly by the employer?

Sounds like a nice balanced deal to me - but as I say I haven't read the detail.

LittleVoice

Yorkie1 wrote: »

Haven't read the consultation but, if you can't sell the shares, and have to give them up when you leave, is all that you're getting the right to income from the shares - which as we know can be minimal if there's no dividends by choice or because the company isn't doing well enough?

And giving up a right to lots of protections, including various financial compensations if treated poorly by the employer?

Sounds like a nice balanced deal to me - but as I say I haven't read the detail.

It is worth reading so that comments are informed by the document. It's not a hard read.

By the way the clause about giving up shares when leaving the employment is open for negotiation, it is not that the employer has to include such a clause.

zzzLazyDaisy

LittleVoice wrote: »

By the way the clause about giving up shares when leaving the employment is open for negotiation, it is not that the employer has to include such a clause.

In a way, that may be even worse!

Say you have £10,000 worth of shares in a medium sized company, and you have ten years service (fair enough we are talking further down the line here).

The company decides to terminate your contract. It chooses not to buy your shares back, and decides not to declare any dividends. You leave with a bunch of shares which may or may not be worth anything on the open market, and almost certainly a legal fight over the valuation.

I agree that there may be occasions when this scheme might work to the benefit of the employee, but (in my view) there will be many many more companies than employees who will benefit (and I am a corporate lawyer by profession - I should be on the side of the companies).