Manchester HR Consultant, Jane Carroll Advises on Equity Linked Employment Contracts.
Bolton, Lancashire (PRWEB) July 11, 2013 -- “Are the upcoming Employee Shareholder contracts going to be a success with employers or employees?” asks Jane Carroll, partner at Manchester HR Consultants, Personnel Solutions.
The House of Lords has finally approved the Government's proposal of introducing a third tier of employment status, known as ‘Employee Shareholder’ (alongside ‘employee’ and ‘worker’), as set out in clause 27 of the Growth and Infrastructure bill.
The UK government proposes to implement the new scheme on the 1st September 2013.
Under the new proposals, employees are given the option of entering into a new form of equity linked employment contract.
This type of contract will be awarded in exchange for surrendering certain employment rights.
“Employees who accept these new types of contracts will effectively become part owners of the business who employs them” says Jane from the Manchester HR firm, Personnel Solutions.
An employee will become a ‘part owner’ by receiving shares in the company typically valued between £2,000 and £50,000.
There are tax benefits for the employee as the shares awarded will not be subject to tax or NI contributions.
If the shares are sold, sale proceeds of up to £50,000 will not be subject to capital gains tax.
Employees will have to give up certain basic employment rights in return for shares, including those in relation to unfair dismissal, redundancy and certain statutory rights to request flexible working and time off for study or training.
Employees, however, will still be protected from ‘automatic’ unfair dismissals, such as those relating to discrimination and ‘whistle-blowing’.
A number of concessions have been made by the government to secure the vote from the House of Lords. These include:
There will be a seven day 'cooling off' period during which any acceptance of employee shareholder status will not be binding.
The individual must have received independent legal advice from a lawyer, The Citizen’s Advice Bureau, law centre or union prior to entering into an employee shareholder contract.
Without the legal advice, the employee will be classed as an ‘ordinary employee’.
Employers will be liable to pay the legal costs for the employee having taken such advice.
Existing workers will be protected from detriment if they refuse to switch to an employee shareholder contract.
Any jobseeker who refuses an offer with employee shareholder status will not forfeit their social security benefits.
Employers must provide detailed information to the individual with details of the shares and the rights they are surrendering.
”Will the new scheme be effective?” asks Jane Carroll from the Manchester HR Company, Personnel Solutions.
“It seems unclear as to how popular the scheme will be with both employers and employees. Whilst employers may see potential cost savings resulting from reduced employment rights, in practice these could be limited as employees can still bring other claims such as wages and discrimination” Jane from the Manchester HR Services providers added.
“Employers will need to consider the administrative burden and legal costs of implementing the new scheme” said Jane.
“How will the shares be valued and what happens if the valuation is incorrect?” asked Mrs Carroll of the Lancashire based HR Consultants, Personnel Solutions.
“Employers will need to consider whether and at what price shares can be bought back (if an employee leaves). Valuation issues may prove complex and costly” advised Jane.
“Employers will need to consider which employees will be interested in the scheme. Giving up employment rights may not be attractive to certain employees, especially in today’s tough economic times” advised Mrs Carroll.
“Perhaps the scheme will be most popular with senior employees, who may be keen on the tax advantages and less concerned about retaining their current employment protection. In my opinion junior staff are less likely to find the new contracts as attractive” added Jane.
“There may be some uptake with businesses comfortable dealing with share valuations and who are already using share schemes to reward staff. I think many employers may find that giving shares in return for reduced employment rights unattractive because of to the time and costs involved in implementing the new scheme” said Jane.
Jane Carroll, Personnel Solutions, http://www.solutionsforhr.co.uk/, 01204 888897, [email protected]
Share this article