Companies of any size will be able to use this new kind of contract, but it is principally intended for fast growing small and medium sized companies that want to create a flexible workforce. Under the new type of contract, employees will be given between £2,000 and £50,000 of shares that are exempt from capital gains tax. In exchange, they will give up their UK rights on unfair dismissal, redundancy, and the right to request flexible working and time off for training, and will be required provide 16 weeks’ notice of a firm date of return from maternity leave, instead of the usual 8. Owner-employee status will be optional for existing employees, but both established companies and new start-ups can choose to offer only this new type of contract for new hires. Companies recruiting owner-employees will continue to have the option of inserting more generous employment conditions into the employment contract if they want to. Legislation to bring in the new owner-employee contract will come later this year so that companies can use the new type of contract from April 2013. The Government will consult on some details of the contract later this month. Last week we reported in CIPP News about a new type of contract for “owner-employees” who would give up a substantial portion of their employment rights in return for a shareholding. We have not yet been given any detail as to how these employment contracts would work in practice but Emplaw Online have noted some interesting difficulties that employers could face. How happy will entrepreneurs be to give away shares in their business? It’s not just ownership –shares give rights to votes on important matters. Companies would have to buy back shares if employees are dismissed at a “reasonable” price. Share valuation is not an easy process and often leads to disputes. Would employees who leave voluntarily get to keep their shares? They may as well, if they have no market value. How happy would the company to be left with minority shareholders (who can enforce their rights in court, at much greater expense than in employment tribunals) Many very small employers aren’t actually incorporated at all What will happen to situations where dismissal is automatically unfair (for example for attempting to enforce your right to be paid the national minimum wage) – will those rights be signed away as well? What would happen to owner-employees if the business is sold, and what will happen to their shares? Will they be transferred to work in the new business? If so will they left with shares in a company which has sold all of its business? Employees who have signed away most of their rights will be tempted, if unfairly sacked, to look for other claims under, for example, discrimination law or whistleblowing provisions. Read the full press release from HM Treasury/BIS. ‘OWNER-EMPLOYEE’ CONTRACTS 17 October 2012
Some food for thought from Emplaw but as ever the devil will be in the detail!
EMPLOYEE OWNERS - WHAT DO YOU THINK?
CIPP Policy News Journal
12/04/2013, Page 319 of 362
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