Kirkpatrick & Hopes - Succession Planning Accountants

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Employee Owners’ contracts

George Osborne’s announcement of this new employee share scheme has caused a lot of controversy and critics say it is just an attempt to roll back employees’ rights.

Under the scheme, which is due to start in April 2013, employees get £2k – £50k worth of tax-free shares in exchange for reduced employment rights (relating to unfair dismissal, redundancy, flexible working hours, training and maternity leave notice etc.). If an ‘owner-employee’ leaves or is dismissed, the company is not able simply to take the shares back but is able to buy them back at a ‘reasonable price’ .

Nothing has been said, as far as I can see, about the possibility of paying these employees some of the pay or bonuses in the form of dividends. This is a very grey area of tax law and I hope that this new scheme will force the government or the tax man to clarify the rules so we can advise clients with more certainty.

My feeling, like most business owners and employers, is that employment rights are far too extensive for most small businesses, and create a real barrier to entrepreneurial activity. At some point these rights had to be reined in and it seems to me that this is a fair trade off. If Employee Owners are able to save National Insurance by being paid dividends, this will further compensate for the loss of employments rights.

The other point that strikes me is that employers who would want to give their employees shares are generally not the sort of employers who would abuse their workers’ right or mistreat them in any way. My experience is the opposite of this – they are generally much more considerate than the average employer. This should provide some reassurance to new Employee Owners.

Would this new scheme make a difference to your willingness to offer shares to employees? Please post a comment with your views.

Andrew Gray

 

 

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