The idea looks fairly simple, for a gift of a minimum of £2,000 worth of shares the employee signs away his or her rights to claim unfair dismissal and any right to a redundancy payment, of course, as with all these ideas nothing is that easy.
There are a set of rules governing the employee shareholder arrangement and a new set of terms and conditions needs to be supplied to the potential employee. There are six conditions that need to be met and the business and the employee share responsibility for meeting these conditions;
Under the employee shareholder scheme the employee is still entitled to statutory sick pay, statutory maternity or paternity pay, minimum notice periods, time off for emergencies, TUPE protection, National Minimum Wage, paid annual leave, rest breaks etc. He is also protected from dismissal for one of the automatically unfair reasons – discrimination, whistleblowing etc. This is not an exhaustive list of rights. The rights that he or she loses are the right to claim unfair dismissal (apart from auto unfair reasons as above) and the right to redundancy pay, although bizarrely the employee must be included in any redundancy collective consultation.
The new written statement becomes quite detailed and as well as the normal section 1 ERA elements there must also be information on;
Once all this has been done the potential employee must take advice from a relevant independent adviser, in the same manner as taking advice on a compromise agreement. The employee must pay the reasonable cost of this advice. However this is still not the end of the story as the employee then has to wait for a seven day ‘cooling off’ period before he or she can start employment as an employee shareholder.
It would appear that the only real benefit for an employer occurs when the employee shareholder has been with the company for an extended time. The rights that are being given up or sold do not come into effect until the employee has two years’ service anyway, so before that the business is simply giving away £2,000 worth of shares. Perhaps an employee shareholder will have more interest in the business because they have shares, but are £2,000 worth of shares likely to be that big a draw for potential employees to want to give up their rights for?
One particularly interesting element of the scheme is that anyone on job-seekers allowance will not lose their right to the benefit if they refuse to accept a job on an employee shareholder agreement. It is nice to see that the government has 100% faith in the concept.
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