The Chancellor of the Exchequer has announced the introduction of a new type of employment contract, known as an ‘owner-employee’ contract. This new contract will allow workers to be able to swap employee rights for shares in the company they work for.
The proposal by George Osborne will enable new owner-employees to exchange some of their UK employment rights for rights of ownership in the form of shares in the business they work for; any gains on these will be exempt from capital gains tax. Workers could be given shares by their employer worth between £2,000 and £50,000. In return the workers would be asked to give up their rights in respect of claiming unfair dismissal, redundancy payments and making requests for flexible working and time off for training. Additionally they would be required to provide 16 weeks’ notice of return from maternity leave, instead of the usual 8.
Osborne told the Conservative party conference in Birmingham that the new “employee-owner” status would be optional for existing employees but existing companies and new start-ups could choose to offer only this type of contract for new staff, making it a compulsory condition of employment.
Osborne also told the conference, in a fairly tongue-in-cheek announcement: “Workers: replace your old rights of unfair dismissal and redundancy with new rights of ownership. And what will the government do? We will charge no capital gains tax at all on the profit you make on your shares. Zero percent capital gains tax for these new employee-owners. Get shares and become owners of the company you work for. Owners, workers and the taxman, all in it together. Workers of the world unite.”
Legislation to bring in the new owner-employee contract will come later this year so that companies can use the new type of contract from April 2013. Further discussions by the government on the finer details to this new type of contract will take place later this month. Will this be a win-win for workers and employers? Watch this space to see the impact these new contracts have on the workplace and indeed the longer term impact on employment litigation.
Read more in the government’s Press Release