Government Responds to Consultation on New Employment Status

The Government has published its response to a consultation on plans to introduce a new kind of employment status – ‘employee owner’. Under the proposals, employee owners would relinquish some of their UK employment rights in exchange for rights of ownership in the form of shares in the business they work for. The scheme is principally intended for use by fast-growing small and medium-sized companies that want to create a flexible workforce.

Firstly, having reflected on the term employee owner, it has been decided that ‘employee shareholder’ better describes the proposed new status.

In response to concerns that individuals could lose important employment protections and that the system could be abused by employers to gain tax advantages, the Government reiterated that the new status will be voluntary.

In addition, amendments have been introduced to the Growth and Infrastructure Bill, the legislation which underpins the new status, to clarify the nature of the shares awarded, remove specific risks of liability on the employee owner, and ensure that shares are issued free of charge to them. Other changes include:

  • enabling the Secretary of State to increase the minimum share value of £2,000;
  • removing the upper threshold of £50,000 – to allow businesses to offer more shares under the scheme, but not raising the £50,000 exemption from CGT;
  • changing the notice period for return from additional paternity leave to 16 weeks so it is consistent with change in the notice period for return from maternity and adoption leave;
  • allowing non UK-registered companies to benefit from the status; and
  • allowing shares to be issued by both the employing company and its parent company to ensure the scheme is sufficiently flexible to encourage widespread appeal.

The original consultation can be found on the Department for Business, Innovation and Skills website.