Legislation Update: Employee Shareholder Status

The controversial proposal to create a new tier of worker has resurfaced despite the majority of the House of Lords recently voting against the proposals relating to employee shareholders. The House of Commons have voted in favour of creating a new “Employee Shareholder” status by reinstating clause 27 of the Growth and Infrastructure Bill.

An employee shareholder will receive shares worth at least £2,000 in their employer Company, in exchange for giving up certain employment rights, including the right to claim unfair dismissal and the right to a statutory redundancy payment.

The first £2,000 of shares will be tax free and any monies not exceeding £50,000 on those shares will be exempt from capital gains tax when the shares are sold. It is viewed by some commentators as a “bully’s charter” and a way of enabling employers to avoid costly compromise agreements by effectively “buying out” employment rights at the outset.

The House of Lords had voted for the removal of clause 27 due to concerns over employees being encouraged to give up their employment rights, as employers are often in a better negotiating position than employees. Despite there being little enthusiasm for this change from employers or employees, the Coalition government seem determined to introduce employee shareholder contracts, which they believe will benefit individual employees as well as the wider economy.


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