House of Lords Accepts Employee-Shareholder Scheme

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On 24th April, the House of Lords finally, at the third time of asking, accepted the Government’s proposal to introduce employee-shareholder contracts.  The Government had to make a number of concessions following the Lords blocking the relevant provisions in the Growth and Infrastructure Bill.   The proposal is to introduce employee-shareholder contracts under which employees will receive shares in the Company of between £2,000 and £50,000 which will be exempt from capital gains tax in return for giving up certain specified employment rights.  The implementation date is expected to be 1st September, 2013.   The House of Lords twice voted to remove these provisions from the Growth and Infrastructure Bill and the Government responded by making a number of concessions including:
  • benefits such as job seeker’s allowance will not be affected if an employee does not wish to accept an employee-shareholder position;

  • there will be day-one unfair dismissal rights and protection against detrimental treatment for refusing to agree to an employee-shareholder contract;

  • there will be a requirement for employers to provide a written statement of the particulars of employee-shareholder status and the rights attached to the shares which must stipulate the specified employment rights that will be lost;

  • there will be a “cooling off” period of seven days during which an employee’s acceptance of an offer to become an employee-shareholder will have no effect; and

  • an employee-shareholder agreement will only be valid if the employee receives independent legal advice prior to entering into it, the cost for which will be borne by the employer.


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