Notwithstanding an overwhelmingly negative response to its consultation, the Government has announced that it intends to press ahead with plans to introduce “employee shareholders”.

The basic premise of the scheme is that employers issue fully paid up shares to employees with a real, minimum value of at least £2000. In return, the employee forfeits the right to certain employment rights, in particular the right to claim unfair dismissal.

The Government has said that they do not intend to issue further regulations pertaining to the scheme, as they are concerned that this would negatively impact on existing share schemes and the flexibility of employers
and potential employee owners to negotiate arrangements. They have, however, promised further clear guidance regarding the status for both companies and individuals.

Whilst the scheme is expressed to be voluntary, the Government has made it clear that jobseekers refusing to accept a job offered on this basis will lose their entitlement to benefits, so the scheme may only be voluntary on a take it or leave it basis.

How helpful this scheme will be to employers remains doubtful. Employees will retain the right to bring certain claims such as discrimination, and it is widely assumed that such claims will rise if the right to claim unfair dismissal is removed.

Further, the Government has stipulated that any dispute over the value of the shares will be dealt with by the employment tribunals, a body which has no experience in the valuation of shares.

Quite what the value of the scheme to employers will be is unclear. Whilst share ownership may engender a stronger sense of loyalty, there are already such share schemes in existence. It is unlikely the overall number of
claims may fall and the unlucky employer may find themselves embroiled in a lengthy and complex share valuation dispute.

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