After going back and forth several times between the House of Commons and the House of Lords in a game of parliamentary ping-pong, the Growth and Infrastructure Act 2013 received Royal Assent yesterday.
Individuals can now become ‘employee shareholders’ and give up rights to redundancy payments, unfair dismissal rights and other rights in exchange for receiving at least £2,000 worth of shares in their employer’s company.
The first £2,000 of shares will not attract income tax and any gains on the first £50,000 of shares will be free from capital gains tax.
However the government has had to make a number of concessions in order to get the Act passed. The key concession is that employees will have to see an independent solicitor to ensure that they understand the rights that they are giving up in return for shares, in the same way as when employees enter into compromise agreements. The employer must pay for this advice whether the employee accepts the offer or not.
There are also other safeguards for employees, such as a 7 day cooling off period and a requirement for employers to set out in writing the rights that the employee shareholder will give up and the rights that will attach to the employee’s shares.
Employers can decide to only offer job applicants employee shareholder status. However individuals will not lose any job-seeker benefits if they refuse an offer of employment as an employee shareholder. In addition, existing employees cannot be subjected to any detriment or dismissed for refusing to become employee shareholders.
The government intends that employee shareholder status will come into force on 1 September 2013 so watch this space…
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