The government recently put forward a set of proposals to apparently make it easier for employees to be fired but in return for which they could buy parts of the business.


This proposal in my opinion is off the wall. This is not a political observation I vote by secret ballot but a considered critique of the pitfalls associated with is idea.

Employee share ownership is not new there have been several schemes introduced to broaden share ownership and to make it easier and more tax efficient for employees to own part of business. Never before have they been asked to make a Faustian pact by giving up their employee rights in return for some shares which may or may not have some value.

The particular concerns which I have and have been identified elsewhere are

It creates a new employment status so you now have

  • employee owners
  • full or part time or fixed term employees or
  • workers –for more information about employee status see my website

 Employee owners are offered

  • Shares in a company worth between £2000 and £50,000
  • Shares can be of any class or right
  • Shares can be restricted
  • Employees can be required to surrender shares on leaving being dismissed or made redundant
  • Employer will have to buy back surrendered shares ’at a reasonable value’
  • Gains on shares will be exempt from CGT

In return for which the employee owners will have to surrender

  • The right to a statutory redundancy current maximum £12900
  • The statutory right for to request flexible working except on returning from parental leave.

This could raise claims for indirect discrimination on behalf of working mothers and carers.

The employee owner will now have to give 16 weeks notice to return early from maternity leave rather than the 8 weeks at present

The employee owner gives up the right to claim unfair dismissal except for discrimination issues.

In addition there are the following unresolved issues for employee owner status

  • Income tax and NICs
  • Who will pay for the share valuation

Employee owners who believe they are unfairly dismissed without cause will now have to resort to whistleblowing or discrimination claims

People are being offered shares which may or may not have some value which can only be realised when they leave in return for giving up their right to claim unfair dismissal as Damon Runyon would say go figure

There are more efficient ways to gain employees loyalty and now that 2 years are required for an unfair dismissal claim it is not clear what benefits this new proposal brings anyone. I would like to believe that following the consultation this proposal will be withdrawn or just quietly lost somewhere and new proposals brought forward to encourage employees active participation in the growth and development of their organisations.

Michael Newman