Prepare for employee ownership

The Government is expected to introduce its controversial plans for employee ownership of businesses in April. This proposal would see employees receive shares in a company – with shares worth between £2,000 and £50,000 exempt from capital gains tax.

The Government believes this will be a ‘helpful provision for those companies and individuals who want to participate in a mutually beneficial arrangement’ and create further flexibility in the UK labour market.

However, in return, employees must give up certain employment rights including elements of unfair dismissal, flexible working time and training, and statutory redundancy pay. They will also need to give longer notice to return from maternity or adoption leave.

Opponents to the plans have pointed out that removing employment rights has a negative effect for both businesses and employees – employees could be less keen to take a job in the first place as the new status is new and untested.

Unions have warned that the move could mean such contracts are forced on potential staff who, in the current economic climate, may feel like they have no choice but to take such employment, giving up many of their employment rights in the process.

Businesses themselves have questioned how practical the contracts are, and there are even doubts as to whether employee ownership will come about in the first place.

The nature of the proposals mean they will be most useful for smaller businesses, but with the ever-increasing amount of red tape, some fear that these plans could be a step too far.

Many businesses in the region may be affected by these proposals, and should seek early advice from their employment advisers to prepare for what could be major changes to the way staff are employed. By Chris Boyle, head of Employment at Napthens solicitors.