New “Shares for Employment Rights Swap” Proposal may prove a Flop

The Chancellor of the Exchequer’s new idea for so-called employee-owners looks, on paper, to give businesses options as to what terms to employ people on. Well, probably not really, says Shaun Underhill a partner at Winchester based solicitors Shentons: “The proposals will, in theory, allow firms to offer employees free shares in the business in return for giving up some employment rights. However, we suspect that the new employee-owner status will simply create a potential legal minefield, and deter the great majority of firms from going anywhere near the issue.”

Under the scheme an employee can be granted up to £50,000 worth of shares free of capital gains tax, in return for agreeing to be employed under a new contract of employment, forgoing unfair dismissal and redundancy rights, as well as losing the right to request time off for training or flexible working. One further proposal is to double, to 16 weeks, the period of notice an employee must give of a settled date to return to work following maternity leave. Shaun Underhill: “We think we’ll need to advise people to approach this with caution. It doesn’t seem to offer the employee very much, given current annual capital gains tax exemptions, and it doesn’t look like being attractive to many companies, as there will be upfront and on-going costs, such as professional advice, as well as creating more red tape.”