George Osborne has announced proposals for employees to waive employment rights in exchange for shares

The Chancellor’s plans for a new kind of employment contract would give rise to ‘owner-employee’ status. Under this arrangement, employees would give up some of their employment rights, such as protection against unfair dismissal, redundancy, flexible working and time off for training, for shares in their employer worth between £2,000 and £50,000. If any gain is made on these shares by the employee then they would be exempt from Capital Gains Tax.

For existing employees the owner-employee status would be optional. However, any new employees taken on by established companies and start-ups would, if the company decides to implement the new arrangement, be required to sign an ‘owner-employee’ employment contract.

There will now be a period of consultation over these proposals. It is anticipated that the legislation will be published later this year and that the provisions will come into force from April 2013. There has been much discussion in the legal employment sector over this proposal and its implications for both employer and employee, largely because so many questions remain unanswered as to how the share scheme will work in practice. Take, for example, the prospect of an employer suddenly being in a position of having a substantial number of minority shareholders within the company. There will be many unintended consequences of removing statutory rights from employees let alone potentially being in breach of EU law if some of the suggested provisions are enacted.

For more information about employment law matters, please contact a member of our Employment team.