Employee Shareholder Scheme

Employee Shareholder Scheme.

In an effort to encourage employees to be more committed to their employer and employers committing to employees, a new employee shareholder scheme started on 02/09/13 allowing employees to give up employment rights in exchange for shares in the company.

 The Employee Shareholder Scheme Explained

• Employees can give up their rights to unfair dismissal
• Employees give up rights to flexible working hours
• Employees give up rights to ask for staff training and staff training leave
• Employees give up their rights to statutory redundancy pay.  Redundancy pay calculations are usually worked out as a minimum of multiple of pay, the number of months you have worked for your employer and your age.  Tax free redundancy payments are capped at £30,000.   

You do not have to  give up all these rights, it is up to the employer to set any qualification criteria for an Employee Shareholder Scheme based upon including none, some or all of the above rights.

Benefits to Employees of Employee Shareholder Scheme

In exchange, the scheme offers:

• A minimum shareholding in the employer company at £2,000.  It can be more than this.
• There is no taxable benefit in kind for the employee.
• There is no capital gains tax liability when selling shares if originally acquired at a valuation of £50,000 or less.

Benefits to Employers of Employee Shareholder Scheme

• Employers can right off the share transfer as a business expense against corporation tax.
• Increased employee commitment to the firm and its success.
• Reduced redundancy risk and costs.
• Reduced risk of sickness.
• Reduced training costs.
• Attract high calibre staff.

The employee shareholder scheme is a trade-off between employment rights and those employees committed to the success of the business.

We suggest the scheme is designed to attract higher quality workers who are committed to growing successful businesses and those with the potential for success.

As a by-product, employment risks are reduced on the employer and hopefully, sickness rates and employment tribunal costs will lower.

European employment laws are complex and biased towards employee protection.  We believe Britain is moving ever steadily towards “owner/manager” businesses and self-employment.  Success relies on the commitment of all parties working within a business.  This scheme is clearly designed to encourage those people that are committed to work, or take little or no time off and want to participate in growth.

For advice and help on starting an Employee Shareholder Scheme, contact the team.