Shareholder contracts valid from today

cepheus

From today employers have a right to offer employees 'shareholder contracts' in which they offer 'shares' in the company in return for losing various basic employee rights. However, it appears these shares are not what they seem.

Among the rights lost are the right to training; the right for flexible working; protection against unfair dismissal; the right to redundancy payment:
An employee who is an employee shareholder does not have—
(a) the right to make an application under section 63D (request to undertake study or training),
(b) the right to make an application under section 80F (request for flexible working),
(c) the right under section 94 not to be unfairly dismissed, or
(d) the right under section 135 to a redundancy payment.

In return, the employer is supposed to give the employee between £2,000 and £50,000 (can be more, but tax protection is limited to £50k) of “shares”. However, these aren’t shares as we know them. The employer can decide whether these pieces of paper do or do not have the rights shares usually have:

• Voting rights.
• Rights to dividends.
• Rights to a share of surplus assets if the company is wound up.
• Right to be sold (the employer can place restrictions on who can buy the shares – e.g. they can only be sold back to the employer. And whether the shares have ‘drag along’ or ‘tag along’ rights when the company itself is being sold)

Quite apart from not having rights to vote, dividends, etc. this creates another key weakness for these ‘shares’. Because they have fewer rights than real shares they can’t be valued against real shares. So they are worth pretty much whatever the employer says they are worth when he takes them back (at the time of your sacking).

In short, what do you call a share that has no votes, no dividends, and can only be sold to whomever the employer says? Answer: bog-roll.

colino

The point of the new contracts is to simplify HR in growing companies and the people working under them will contribute more to the growth of the company. "Ordinary" employees can't be forced into the contracts retrospectively and its pretty unlikely a new ordinary employee would be offered this at all.