Member Article

‘Don’t rush in’ call over new employment status

Businesses are being warned not to rush into new ‘owner-employee’ contracts that allow staff to give up some of their employment rights for shares in the business.

The new owner-employee status came into effect on September 2 and gives employees the right to be an ‘employee shareholder’, though no-one can be forced to change employment status.

Employees must receive at least £2,000 worth of shares in their employing business to give up their rights, such as the right to claim for unfair dismissal.

However, Roger Spence, an employment lawyer at Harrison Drury solicitors says businesses need to tread with caution.

He said: “The early indications are that take up of this scheme, from both employers and employees, is going to be very low. However, any businesses thinking of giving up shares to ease the burden of employment law need to consider the bigger picture.

“Even where employees have given up some basic rights, the employment law landscape is still fraught with danger and businesses can still fall foul of discrimination laws and rules surrounding health and safety and pay.

“As well as causing confusion, business groups have also voiced fears the legislation could lead to businesses inadvertently creating a ‘two-tier’ workforce, with those unwilling to give up employment rights harbouring resentment for those who have done so and are sharing in the financial success of the business.”

Chancellor George Osborne first proposed the new status last year, suggesting owner-employee contracts would be ideal for staff at fast-growing firms.

In return for a stake in the company, an employee will give up unfair dismissal rights apart from automatically unfair dismissals, and dismissals on the grounds of discrimination and health and safety, any rights to statutory redundancy pay, the statutory right to request flexible working and rights to request training time-off.

Both the individual employee and the company must both agree that the individual will be an employee shareholder. The employee must also obtain advice from a relevant independent adviser and the company has to pay for that advice, whether the individual accepts the job or not.

This was posted in Bdaily's Members' News section by Harrison Drury .