Employee-Owner Contracts Update – Government Response

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On 18th October, 2012, the Government commenced consultation on its proposals to introduce employee-owner contracts which has now concluded. The proposal was to introduce a new type of contract of employment whereby employees would receive shares in the business in exchange for waiving a number of employment rights. The Government’s response was issued this month with a number of modifications to the original proposals which include:
  • Renaming employee-owner contracts “employee-shareholder” contracts
  • Shares will be fully paid up and free to employee owners
  • The Secretary of State will be given power to increase the minimum threshold of £2,000 on the value of shares that must be offered with the upper limit on shares proposed of £50,000 to be removed, although this limit will still apply for exemption from capital gains tax
  • The rules can be applied to non-UK registered companies and parent company shares
  • The requirement to give notice to return early from additional maternity or adoption leave to additional paternity leave to 16 weeks.
We still await guidance on the employment law and tax consequences of these new contracts. If you fancy reading more, the Government’s response can be found on the BIS website.

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