Jacqueline McCluskey: Impact of staff shareholder legislation

Much has been made of Chancellor George Osborne’s new employee shareholder legislation, but its impact is yet to be fully understood.

While some have criticised the rights-for-equity scheme, saying it is unlikely to even get off the ground, others have said it offers potential benefits to employers and employees alike.

In its most basic terms, the new law will mean employees of a business can swap selected employment rights for equity in their employer. Rights that can be exchanged include the right to claim ordinary unfair dismissal and the right to a statutory redundancy payment.

The advantage for employees is the capital gains tax saving on their sale of the shares.

While it is not clear whether large employers are desperately keen to take advantage of this, it does present a different sort of opportunity to smaller organisations.

The legislation will give small and medium-sized enterprises (SMEs) the ability to offer employees equity in their organisation, which could prove attractive for those able and willing to take the risk. This may be of interest to high-growth SMEs in which prospective employees can see potential.

Beware of the process

However, SMEs and other employers should be aware of the process of implementing this ownership model.

Firstly, any employee considering an offer must receive advice from an independent solicitor, legal executive or union official before any deal can be agreed.

From an employer’s perspective, they have to foot the bill for the employee receiving this advice, whether or not they decide to take the equity.

Finally, any employee that agrees to take on the equity will have a seven-day cooling-off period.

Although the costs and process may put some employers off embracing the legislation, it may also be another string to the bow of SMEs trying to attract top talent.

Jacqueline McCluskey is an employment partner at HBJ Gateley