Government response to “employee-owner” status contracts

The Government consultation on the possibility of employee-owner status was launched in October, and although only a few weeks were given for responses from businesses and employment/HR organisations, the results are now in.

It appears from reading the consultation report itself that there seems to be little appetite for these contracts, but the Government seemed to be ploughing ahead. It appears to be a case of “No-one thinks this is a great idea but we like it so we’re going to do it” as compared with the Leveson inquiry which is more along the lines of “Everyone thinks this is a great idea, but we don’t so we aren’t going to do it.”

The principle is that employers could offer shares in the business to staff in exchange for waiving some of their employment rights.

“Employee-owners” could receive shares of between £2,000 and £50,000 in return for giving up specified employment rights.

Following the consultation the Government still appears keen to bring this new status in, with the following modifications:

–       No longer “employee-owner” contracts but “employee-shareholder” contracts

–       Setting out explicitly that the share should be paid-up and free for employees

–       Allowing flexibility to raise the minimum threshold of £2,000 and removing the upper limit on shares (£50,000)

–       Permitting shares in non-UK registered companies and parent companies

These modifications will be included in the Growth and Infrastructure Bill, and the Government will provide further guidance on the employment law and tax consequences of these contracts. We look forward to this further clarification with interest.