Government launches consultation on ‘owner-employee’ contracts

The Government has launched a consultation into its controversial plan to allow employers to offer tax-free shares to staff in exchange for sacrificing some of their employment rights.

Business minister Jo Swinson today set out the details of the proposal, by which the Government intends to make it easier for fast growing small and medium-sized companies to hire staff, although employers of any size would be ble to utilise the new contracts.


Staff with the new “owner-employee” status would not be able to claim unfair dismissal, which is available to most employees after two years’ service.

However, they could bring cases for automatically unfair dismissal, meaning that staff fired for whistleblowing or taking maternity leave, for example, could still bring claims.

Staff on the contracts would also give up their right to statutory redundancy pay, the right to request flexible working and the right to request time off to train, and would have to give more notice to their employer if they intended to return from maternity or adoption leave early.

Due to EU legislation, employees would still be entitled to the right to request flexible working within four weeks of their return from parental leave.

In return for giving up some of their rights, employees would be given between £2,000 and £50,000 worth of shares in their company, which would be exempt from capital gains tax.

Swinson said that the scheme will increase the options for businesses when employing staff.

“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,” she said.

Geoffrey Mead, partner at law firm Eversheds, however, questioned how useful the proposal will be for employers.

He said: “Employee owners will have all the rights of employees but for those mentioned. However, even the waiver of the right to claim unfair dismissal is limited.

“Employee owners will still be able to bring an unfair dismissal claim from day one of their employment if the reason for the dismissal is one of the automatically unfair reasons. They will also have a right to bring a claim if they allege that their dismissal was discriminatory. This may well create difficulties for the unwary employer.”

Full details of the proposal and the Government’s consultation can be found on XpertHR.

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