Will you share with your employees?

From April all employers will have the opportunity to share their profits with their employees via the Employee Shareholders Scheme. The intention of the scheme is to encourage small and medium sized to take on staff. Under the scheme employee shareholders will become a new employment status and will mean that in exchange for shares in the company, employees will give up certain legal rights.

Employees will give up the right to make a claim for unfair dismissal, statutory redundancy pay, the right to request flexible working and also the statutory request in relation to study or training. In addition they will need to give 16 weeks notice to return early from additional maternity leave where at the moment it was currently at 8 weeks.

Employees must be given at least £2,000 in shares and the benefits to the employee are that the shares will be exempt from capital gains tax up to a maximum threshold of £50,000.

For employers, it may be an attractive option as two of the most significant employment rights, namely the right to claim unfair dismissal and statutory redundancy payments are being signed away. Automatic unfair dismissals such as being dismissed on the grounds of discrimination or whistle blowing will remain protected.

The big question however is how many employers are prepared to share their profits with their employees and how many employees will actually be advised to give up their employment rights. It is unlikely that the Employee Shareholders Scheme will be attractive to many small employers. Employees who think that they may have a say in the running of the company should be cautious of employers creating shares without a vote. Overall it looks as though this is going to be an unattractive proposition to employers and employees alike.