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The Department for Business, Innovation and Skills has launched a consultation on the proposed shares-for-rights work contract announced last week by the chancellor, George Osborne. Comments should be sent no later than 8 November.
The document states Employment Rights Act 1996 will be amended to create a third employment status, in addition to employee and worker: employee owner.
Such individuals will have the same rights as current employees, except for unfair dismissal (apart from where this is automatically unfair or relates to anti-discrimination law), certain rights to request flexible working and training, and statutory redundancy pay. They will also have to give longer notice to return from maternity leave or adoption leave.
Employers that choose to operate the new employment status will be able to offer their staff members fully paid-up shares worth between £2,000 and £50,000.
All types of shares will be eligible and allowed to carry rights to dividends, voting rights, or rights to a share in the company’s assets if it is wound up. Employers may also apply restrictions on the shares, as with employee share scheme arrangements.
The employer will be allowed to include a clause in contracts that requires the employee to surrender the shares when he or she leaves the firm. To ensure employees are protected, the government will require that the employer buys back shares at a reasonable value when they are surrendered.
Shares will be valued according to their unrestricted market value at the time they are awarded. Depending on the design of the forfeiture and buy-back requirements, and the tax requirements, a further valuation of the shares may be needed.
Employees should not be required to give up rights to take part in an employee share ownership scheme.