Growth and Infrastructure Act 2013
This Act, passed in April 2013, introduces a new type of employee ownership arrangement known as “Employee Shareholders” under which employees give up some of their employment rights in exchange for shares in the employer. It is expected to come into being on 1st September 2013. However, this is a controversial plan which had a bumpy ride through Parliament, having been rejected by the House of Lords twice. The Government has had to introduce concessions to get it passed.
The new form of employment appears to be quite complex and the amended Act now insists that an agreement that someone shall become an employee shareholder is invalid unless, prior to entering into the contract, the individual has received advice from a relevant independent advisor. It is important to note that the employer has to pay the reasonable costs of that advice that would be incurred by the prospective employee - whether or not the employee then accepts the role.
If the employee does not receive independent advice before agreeing to become an employee shareholder, then s/he will be an ordinary employee.
The other main terms include the following:-
• there will be a seven day 'cooling off' period, during which any acceptance of employee shareholder status will not be binding;
• employers must provide a written statement with full details about the shares and the rights they carry;
• any jobseeker who refuses an offer with employee shareholder status will not forfeit their social security benefits;
• the first £2,000 of shares will not attract income tax;
• existing workers will be protected from detriment if they refuse to switch to an employee-shareholder contract.
It remains to be seen how popular the contracts will become. Watch this space!
Posted on 19 Nov 2016