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Controversial shares-for-rights scheme comes into effect

The Government’s new shares-for-rights scheme allows employees to relinquish certain rights – such as redundancy pay and the ability to claim unfair dismissal – in exchange for shares in the company in which they work. 

 

The scheme – which has come into force this week – offers members of staff the right to become an “employee shareholder”, owning shares worth between £2,000 and £50,000. In exchange, rights including flexible working hours will be waived. Employees must receive at least £2,000 worth of shares before they give up their rights, and no employee will be forced to change employment status.

 

The Department for Business, Innovation and Skills confirmed that an employee shareholder will also have to give “16 weeks’ notice to their employer if they intend to return early from maternity, additional paternity or adoption leave.”

 

There is already said to be a distinct lack of interest from both employees and businesses in the new scheme, which was first proposed by Chancellor George Osborne last year. Mr Osborne suggested at the time that the scheme would be ideal for employees working at “fast-growing” companies.

 

BBC business correspondent, Joe Lynam, said that fears were rife that the scheme “could create a two-tier workforce, with resentment between those workers who’ve taken a stake and those who refuse to relinquish some of their employment rights.”

 

Meanwhile, TUC general secretary, Frances O’Grady, slammed the scheme, saying: “This is another attempt to squeeze workers’ living standards…Workers may be forced to become employee owners in order to find jobs could end up giving up basic rights such as redundancy pay for worthless company shares.”

 

Both the employee and the company must agree in order for the employee to become a shareholder. Advice must also be taken from an independent adviser, for which the company must pay, whether or not the employee does decide to become a shareholder. The shares will be exempt from capital gains tax when they are sold on, up to the value of £50,000 and firms will also be able to claim certain levels of corporation tax deductions on the shares awarded to employees.

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