Goodbye to employee shareholder status

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Yesterday Philip Hammond hammered the final nail in the Employee Shareholder Status coffin. Introduced in 2013 as the brainchild of George Osborne, the idea was a simple trade off: give up employment rights (unfair dismissal, redundancy) for company shares with tax benefits, writes John Hassells, head of employment at KBL LLP.

The Beechcroft report published in October 2011 recommended a fire-at-will approach to unfair dismissal law that would have enabled employers to terminate without having to give a reason, subject to paying a defined level of compensation. At the time the direction of movement was towards removal of employment rights; making it easier for employers to dismiss. But removal of unfair dismissal rights completely was not going to be popular. Enter stage left employee shareholder status.

Many commentators saw the employee shareholder proposals as an alternative way to achieve the same end result: removal of important employment law rights. The initial employee shareholder proposals would have enabled employees to switch from an ordinary employee to an employee shareholder without taking any legal advice, resulting in a loss of the right to claim unfair dismissal or redundancy pay. The concern was that the scheme could open up a whole new job market, with work only being offered on an employee shareholder basis.

Amid widespread criticism of the plans the House of Lords forced through amendments requiring employees to take independent legal advice on employee shareholder offers at the cost of the employer, even if the offer was not taken up. This added cost meant employee shareholder status was rarely offered; becoming the preserve of a few high-earners using it for tax planning purposes.

In the Autumn Statement yesterday, the Government confirmed the tax benefits of the employee shareholder status will end for arrangements entered into on or after 1 December 2016.

Some might say that if the aim was always to make it easier to dismiss without unfair dismissal risks, there is no longer a need to remove those rights in a world of employment tribunal fees, zero-hours contracts and self-employment. In the gig economy who needs employee shareholders?

John Hassells
A senior employment solicitor with circa 15 years experience advising employers and senior executives. Commercial. Pragmatic. Creative. Tel: 07468 531 625.

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