Employee shareholder (née employee owner) consultation response publishedAdd To My Clippings Alt Text

The Department for Business, Innovation and Skills (BIS) has now published its response to its consultation on the government’s employee owner proposal (full response available here). This represents a speedy turnaround for a government consultation as it comes just less than a month after the final public submissions were made. We have previously commented in the Journal on the original proposals and the consultation paper.

The consultation acknowledges that a number of respondents indicated that they did not think that the take up would be high amongst employers, and that there was still a great deal of concern as to how the proposal will work in practice (particularly from businesses and their professional advisers). In fact, only three out of the 184 respondents to the consultation said that they would take up the new status! However, it is clear that the government remains committed to making this proposal a reality.

Although the consultation does leave a number of questions unanswered we do now know a little more. The headline developments are:

  • The ‘employee owner’ title has been dropped in favour of ‘employee shareholders’ which the government feels is a more accurate description
  • The Secretary of State at BIS will have the power to increase the minimum value of shares that someone must receive to qualify for employee shareholder status from the current level of £2,000
  • Employers will be able to grant employee shareholders more than the previous upper limit of £50,000 worth of shares if they wish to (although only £50,000 will be exempt from CGT)
  • The notice period for returning from additional paternity leave for employee shareholders will be raised to 16 weeks to make it consistent with the provisions regarding maternity leave
  • Non-UK companies will be able to use employee shareholder status
  • Employee shareholders may receive shares in the parent company of their employer (although not a subsidiary) rather than their actual employer
  • The government has committed itself to ‘reorganising’ its guidance on employment statuses (including the existing statuses of worker and employee) in light of the introduction of employee shareholder status, so as to provide clear guidance to employers and employees on the implications of the proposal
  • Employee shareholders who dispute that they have been issued with shares worth the minimum £2,000 will be able to challenge their employment status in an Employment Tribunal
  • The employer will be able to require employee shareholders to forfeit their shares in contractually agreed circumstances (e.g. gross misconduct) as long as the forfeiture provisions do not reduce the value of the shares granted to below £2,000
  • The government has pledged to look into ways of reducing the income tax and national insurance contributions arising from the granting of shares to employee shareholders

We expect further changes and clarifications as the proposal makes its way through parliament.

The government appears to be sticking to an implementation date of April 2013, in which case it is likely that the proposals will be published in their final form early next year - so watch this space.

 

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