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Employee Shareholders and Unfair Dismissal

6 September 2013: On the 1st September 2013 it became possible for employers to take on staff using the new ‘Employer Shareholder’ status, which may be quite attractive to new tech companies.

 

In return for being given fully paid up shares (but not necessarily with voting rights or the right to dividends) in the company of at least £2,000, the Employee Shareholder gives up the right to claim unfair dismissal, the right to statutory redundancy pay, and the right to claim flexible working. In return the Employee Shareholder will be able to sell the Shares free of Capital Gains Tax (subject to certain provisions) and benefit from certain other tax breaks.

 

However the Employee Shareholder can still claim automatic unfair reasons (incl dismissal for the assertion of  a statutory right), where dismissal is based on discriminatory grounds and in relation to health and safety. Other rights that are preserved include SSP, SMP etc, statutory notice, the NMW.

 

Amongst other things the Employer must give the individual a written statement of the particulars of the status of employee shareholder and the individual must obtain advice from a relevant independent adviser on the terms and effect of the written statement, and there is then a cooling off period of at least 7 days after that advice before the individual can accept. The company is required to pay for that advice whether the individual accepts the job or not.

 

If you’re joining the new Google, this might be a very attractive proposition. If you’re joining one of the many start-up’s that never make it big, it might be a less alluring prospect.  For employers, the scheme will not be straightforward to set up and companies will need to take legal and financial advice. It remains to be seen whether there will be any significant take-up of the scheme.

 

See also: HMRC’s employee shareholder guidance & www.gov.uk/employee-shareholders

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