Employment – Guidance on the New Employee Shareholder Status

The government has published guidance on employee shareholder status, which came into force on 1 September 2013.  With this new status, employees can give up rights such as the right to claim unfair dismissal or redundancy pay, in return for shares in their employer’s company.

The government had a job bringing the new status about.  There was some bad press and then a defeat in the House of Lords, so the government had to include some employee protections, such as a requirement for employees to receive independent legal advice.

We are not convinced there will be much of an uptake, for a number of reasons:

  • Employers will have to pay for the legal advice, whether an individual accepts the job or not
  • At least £2k of shares have to be awarded
  • Employers would need to think about the wider picture, what would happen to the shares if the employee left?   This may mean having to adopt new articles of association incorporating share transfer provisions

The guidance sets out how employers can set up schemes and is also helpful for would-be employee shareholders https://www.gov.uk/employee-shareholders

Sarah Winter
Senior Solicitor – Corporate & Commercial and Employment Law