Shareholder Status Implementation, HR Headlines

Despite widespread criticism of the proposal during the course of 2013, the new employment status of 'employee shareholder' came into force on 1 September 2013. Employees are now able to obtain shares in their employer company in return for sacrificing certain of their employment rights. This new status has been introduced as part of the Growth and Infrastructure Bill. This new regime will not apply to existing employees but it can form the basis upon which an employer is prepared to take on future employees.

Employee shareholders who give up statutory rights including unfair dismissal protection, statutory redundancy payments and the right to have flexible working requests considered will now be granted at least £2,000 worth of shares, which are exempt from capital gains tax, in their employer or its parent company. These employees will, however, still benefit from the full range of discrimination protection and be protected against dismissals that are automatically unfair including where the principle reason is whistleblowing.

It is still early days to assess the impact but initial indications suggest that the new status is unlikely to be taken up by most employers. It may, however, become a useful tool in structuring remuneration packages for senior executives given the favourable tax treatment on the shares.