News story

Employee owner plans to boost growth

Government introducing new laws, including an optional ‘employee-owner’ status for companies to offer their workers.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

18 Oct 2012

As part of a package to support growth, a consultation has been published today. It sets out plans for a new employment status called an ‘employee owner’.

This will give workers a financial stake in their firm’s growth and success through tax-free shares.

The move follows the Chancellor’s announcement on 8 October and will provide companies with a new option to increase the flexibility of how they hire people and help their companies grow.

Under the new employment status, employee owners will have a different set of employment rights and they will be given shares in the company of between £2,000 and £50,000. Any increase in value of these shares will not be subject to capital gains tax.

Business Minister, Jo Swinson, said:

“We know that engaged employees are more productive and motivated. This scheme increases the options for business and brings greater flexibility to companies and employees in determining their employment relationship.

“By responding to the flexible needs of fast growing companies, it will help them take people on, providing a real incentive for employers and employees.”

Find out more about the proposals and have the chance to submit your views on the consultation. It will close on 8 November 2012.

Employee Owners

Employees taken on this way will have all of the rights associated with other employees except for:

  • Unfair dismissal rights (apart from automatically unfair reasons and where dismissal is based on discriminatory grounds).
  • Rights to redundancy pay.
  • Certain statutory rights to request training.
  • The statutory right to request flexible working.
  • Employee owners will have to give more notice to if they want to return from maternity or adoption leave early.

It will be entirely voluntary for the employer to offer the new status - and for an individual to choose to accept it.

An employer will be able to choose the new status and still choose to offer more rights to their staff (e.g. the right to request flexible working or higher levels of contractual redundancy pay).

Companies of any size will be able to use this new kind of contract, but it is intended for fast growing small and medium sized companies that would benefit most from a flexible workforce.

The consultation sets out the proposal in detail and asks for views on how the government can implement it. This consultation is focused on both employment law and company law issues. The Treasury will be consulting on the tax matters separately.

Legislation to bring in the new employee owner contract will be introduced today via the Growth and Infrastructure Bill, with the aim of companies being able to offer the new type of contract from April 2013.

Published 18 October 2012