You will have seen the Chancellor of the Exchequer, George Osborne's plans to introduce a new form of employment contract: the 'owner-employee' contract.
The proposal is that the contract will allow employees to be given between £2,000 and £50,000 of shares in the business they work for, to be exempt from capital gains tax, in return for a "waiver" or discharge of their UK rights on unfair dismissal, redundancy, time off for training, and the right to request flexible working. They will also require such employees to give 16 weeks' notice of return from maternity leave rather than automatically returning at the end of additional maternity leave, or before then with at least the 8 weeks required at present.
It is stated that the contracts will be introduced in late 2012, and companies will be able to start using them from April 2013. The use of these new contracts will be open to companies of all sizes, although the intention is that they will be used primarily by small and medium sized companies looking to use a flexible workforce. Although existing employees will be able to choose whether or not to adopt employee-owner status, companies will be able to choose to offer only 'owner-employee' contracts to new employees.
Reactions to the announcement have been mixed. While some commend the attempt to involve employees as stakeholders in businesses, critics have denounced the obligation on new employees to accept an 'owner-employee' contract as a condition of recruitment. Many query whether these contracts will deliver the "flexibility" suggested. With many start up businesses failing, it has been noted that shares may prove worthless compensation for the surrender of rights.
It is not unusual for employees to have a stake in the business as this is a common way to incentivise employees and encourage growth of the business. Companies and employees will of course need to consider the dynamics of those arrangements and ensure that appropriate corporate and constitutional documents are in place to deal with them.
We expect more debate to follow.
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