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Shares for rights.. yet more red tape!

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The Chancellor has taken the opportunity presented by the Autumn Statement to flesh out the details of the ‘shares for rights’ scheme which he first trailed back in October at the Tory Party Conference.

Commented David Ludlow, Head of Employment Law with Barlow Robbins adding; “the new status of ‘employee shareholder’ is being introduced ostensibly to give staff a stake in the companies they work for and to give employers greater flexibility in the contracts they can offer. The new ‘employee shareholders’ will have fewer employment rights to other employees in exchange for a minimum of £2000 of shares in the business. “The scheme will be voluntary for new hires, and employers can effectively offer it on a take it or leave it basis. However for new recruits on benefits, the issue is slightly different because they will lose benefits like Job Seeker’s Allowance for up to three years, if they do not accept the offer without good reason. “One area of concern is that there appears to be no mechanism, let alone a requirement for employees to take legal advice before taking on this new type of employment status which requires them to forego ordinary unfair dismissal, redundancy payment and the right to request flexible working rights. This is probably good news for employers, indeed some have described it as “no fault dismissal by another name” but until the new scheme is fully understood employers and employees would be well advised to seek guidance. “It will be interesting to see whether employers extend offers to new and existing employees in a way which indirectly discriminates against certain groups of people, as many commentators have already predicted. Even if an employer does use the opportunity of appointing people with ‘employee shareholder’ status in a way which affects one group or another disproportionately, employers will be able to justify the different treatment if it is an objective and proportionate way of achieving a legitimate business goal.

“There is the prospect of organisations having workforces made up of different types of employees or workers, which could become an administrative burden. At a time when businesses are crying out for a reduction in ‘red tape’, the Government is keen to avoid the paradox of imposing more regulations on employers whilst supposedly giving them more freedom, and they intend to issue Guidance to explain the differences between the increasingly different types of employment status.”

Mark Lucas, Corporate Partner at Barlow Robbins, adds: “The Government has clearly done some work on the tax issues arising from the introduction of ‘shares for rights’. What is not yet clear though is how the Government expects employee shares to dovetail with the interests and rights of other shareholders regarding things like voting and dividends. And what happens to the shares when the employment relationship ceases? “It is interesting that the Government will now provide that the shares must be fully paid up and issued free of charge to the employee shareholder’. This should result in more genuine participation by employees, which is a good thing, but we remain concerned about forfeiting rights without advice and there are still a number of details to be ironed out.

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