Workers' rights?
The Government thinks owning shares makes employees feel more involved in the business, which leads to happier and more productive workers – so happy that they will be willing to give up key employment rights in return. Do you want to offer your workers that choice?
To get the free shares, the employee must sign an 'employee shareholder' contract under which they forgo all of the following rights:
- compensation for unfair dismissal, apart from when this is automatically unfair or relates to anti-discrimination law;
- request time off for studying or training;
- request flexible working; and
- statutory redundancy pay.
Employees must also give 16 weeks' notice (instead of 8 weeks) when returning from maternity or adoption leave.
In return the employee must be issued with at least £2,000 (and up to £50,000) worth of shares in the employing company. When the individual sells those shares any gain arising is completely exempt from capital gains tax. But the first £10,900 of any gains made per year is exempt from capital gains tax anyway.
Shares worth £2,000 can be awarded to an employee free of income tax and NIC. Any value above £2,000 is taxable and is subject to income tax and NIC.
You can't take advantage of this scheme to award free shares to yourself or family members if you already control 25% or more of the company.
Please talk to us if you are interested in implementing this scheme, as the tax and employment law aspects are complicated. Also the employees will need to take independent advice before signing away their employment rights.