Osborne unveils ‘employee-owners’ legislation to give workers tax-free shares in employer

Chancellor George Osborne has outlined details relating to owner-employees and opened the door to tax-free gains.

A new form of employment contract entitled an owner-employee framework has been introduced by the coalition government to boost business growth and employee retention.

Under the terms of the new legislation, ’employee-owners’ will exchange some of their UK employment rights for rights of ownership in the form of shares in the business which employs them.

Osborne says that any gains on these shares will be exempt from capital gains tax.

Furthermore, businesses of any size will be able to utilise the new form of contract but the government adds that it is principally aimed at growing small and medium sized companies (SMEs) that have a desire to create a ‘flexible workforce’.

The details of the framework mean that employees will be given between £2,000 and £50,000 of shares. In return, workers will surrender their UK rights to a range of previous perks including unfair dismissal, redundancy and the right to request flexible working and time off for training.

As well as those exchanges, employees will also now be required to provide notice of 16 weeks relating to the date of return from maternity leave, up from the previous eight weeks that currently exists.

The government says that the status will be optional for existing employees but adds that both established companies and new start-ups can choose to offer only this new type of contract for new hires.

Firms hiring ’employee-owners’ will continue to have the option of adding more lucrative employment conditions into an offered contract.

Legislation to bring in the new employee-owner contract will come later in 2012, with companies able to use the new type of contract from April 2013. The government will then consult on some details of the contract later this month.

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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Employee Ownership