Employee shareholders 


On 1 September 2013, the government launched a new employment status, known as Employee Shareholder status, under powers contained in the Growth and Infrastructure Act 2013 and the Finance Act 2013, under which employees swap important employment rights for shares in the employer’s business.


The “shares for rights” scheme requires participating employees to forfeit a number of statutory employment rights in return for shares valued between a minimum of £2,000 and a maximum of £50,000. These rights include:


• the right to claim unfair dismissal (excluding automatically unfair and discriminatory dismissal); 


• the right to a statutory redundancy payment; 


• the right to request flexible working; 


• the right to request time off to train; and


• participating employees who want to return early from maternity or adoption leave must give 16 weeks’ notice instead of the usual eight (see Chapter 9). 


The scheme contains many potentially abusive features. For example, the shares can be in private limited companies, for which there is no external market; they are not guaranteed equal voting rights or dividends; there is no guarantee that the shares will increase or even hold their value, and the TUC has warned that some individuals may trade employment rights for worthless shares. 


The proposals met with widespread opposition, including from employer organisations such as the Chartered Institute of Personnel and Development (CIPD). The TUC believes the scheme will be used by wealthy executives to avoid taxes. 


Since employers are allowed to make job offers conditional on new joiners accepting work on an “employee ownership” basis, there is also a risk that future employees may be forced to exchange basic employment rights for worthless shares. One of the benefits of the scheme for employers is the opportunity to “buy out” employment rights cheaply at the start of employment relationship, rather than in a more expensive settlement agreement at the end.


Employees have a seven-day cooling off period in which to change their mind, and must take independent legal advice. 


In a written parliamentary answer in March 2015, the Treasury confirmed that take up of the proposal has been very low. HMRC had agreed just 350 share valuations in connection with employee-shareholder status — well short of the 6,000 companies projected by the Department for Business, Innovation and Skills (BIS) as likely to take up the new type of contract. 


Calls for the scheme to be scrapped have come not just from unions but also from commercial organisations that promote employee share-ownership, who complain of the negativity associated with a proposal that requires employees to give up statutory rights, and the potential for confusion with other conventional and established schemes (source: Personnel Today magazine, 9 March 2015). 


As the TUC noted at the time: “Employment rights should not be for sale. Employers do not want to buy them, and employees will not want to sell them.”